In June 2025, the U.S. Supreme Court ruled that the $9 billion annual Universal Service Fund (USF) fee is not an unconstitutional tax. Essentially, it affirmed that Congress’ delegation of authority to the FCC to assess contributions for the fund is constitutional.
The ruling is expected to clear the way for the telecom industry to focus on expanding networks that deliver emerging broadband services to drive the U.S. economy.
Background of the USF
Created under the Communications Act in 1934 and enhanced by the Telecommunications Act of 1996, the USF was established to provide communications services to rural regions and low-income households. The program supports several initiatives:
-
E-Rate for schools and libraries.
-
Lifeline program for low-income homes.
-
Healthcare Connect Fund for rural hospitals and healthcare facilities.
According to Strand Consult, an estimated 100 million consumers use USF for internet access.
Importance of the Landmark Victory
The Supreme Court ruling represents a win for ongoing support of rural broadband initiatives beyond the reach of other federal programs, such as the Rural Digital Opportunity Fund (RDOF) and Broadband Equity Access and Deployment (BEAD) program.
If the Supreme Court had ruled that the USF was unfairly levied by the FCC, “then many of those programs supported through USF funds would likely have gone away or would now have to be funded entirely by the individual states and counties,” said Jeff Heynen, vice president of broadband access and home networking at Dell’Oro Group.
Current Funding Model and Challenges
Telecommunications providers currently pay a percentage of their revenue into the USF and typically pass that along to consumers as a line item labeled “Universal Service Fee” on monthly invoices.
Had the lower court ruling not been overturned, consumers and small businesses might have faced limited access to current services and emerging broadband offerings considered essential for participation in the modern economy.
Industry trade groups, investors and experts broadly welcomed the ruling. They seek to expand the USF to provide a wider menu of broadband services to more people. One such group is the Telecommunications Industry Association (TIA), a trade group that represents more than 400 industry members.
“TIA remains committed to working with our members, policymakers and partners to modernize and strengthen USF for the future of connectivity,” said Dave Stehlin, CEO of TIA, in prepared comments.
Roslyn Layton, executive vice president at Strand Consult, emphasized the outdated nature of USF’s funding model.
“Funding this critical program through consumers’ telephone bills is outdated and unsustainable,” she said. “The USF — largely unchanged for 30 years since email dominated and streaming was nonexistent — needs modernization.”
Expanding Revenue Sources: Big Tech
The leading proposal is to expand the fund’s incoming revenues by assessing Big Tech firms — often called edge providers — that benefit from the subsidized networks. These include Google, Apple, Netflix, TikTok, Microsoft, Amazon and Meta, which the FCC does not currently oversee.
One bipartisan effort in this realm is the Lowering Broadband Costs for Consumers Act (S. 1651), sponsored by Senators Mark Kelly, D-Arizona, and Markwayne Mullin, R-Oklahoma. The act proposes shifting the funding burden from consumers to the largest USF beneficiaries — specifically enterprises generating over 3% of U.S. network traffic and earning at least $5 billion in revenue.”
If passed, the legislation would require the FCC to conduct a rulemaking within 18 months of passage to establish equitable, nondiscriminatory contributions from these edge providers. The bill limits the FCC’s authority for this specific reform to ensure a focused approach.
The Fair Share Debate
U.S. telcos and European counterparts have spearheaded efforts to require Big Tech companies to pay for the substantial network capacity they use. While any regular contribution would exceed what edge providers currently pay for USF-subsidized links to rural areas in the U.S., similar Fair Share efforts in Europe have faced strong resistance from the technology companies.
According to a Strand Consult report, “Middle Mile Economics: How streaming video entertainment undermines the business model for broadband,” in rural networks, every $1 of Big Tech’s streaming subscription revenue correlates with $0.48 in unrecovered broadband network costs.” The report indicated that up to 80% of broadband network resources and 90% broadband network costs are tied to the top eight internet brands.
Speak Your Mind