The USF contribution factor is the quarterly percentage the Federal Communications Commission requires telecommunications carriers to pay on their interstate and international end-user revenues to fund the Universal Service Fund. For the second quarter of 2026, the FCC set the factor at 37.0 percent, meaning carriers owe 37 cents on every dollar of qualifying revenue.1Federal Communications Commission. Proposed Second Quarter 2026 Universal Service Contribution Factor The percentage resets every three months, and most carriers pass it through to customers as a line item on phone and internet bills.
What the Fund Pays For
The Universal Service Fund collected roughly $8.45 billion in authorized support in 2025. That money moves through four programs: the Connect America Fund, which subsidizes broadband buildout in rural and high-cost areas; Lifeline, which discounts phone or internet service for low-income households by $9.25 a month, or up to $34.25 on Tribal lands;2Federal Communications Commission. Lifeline Support for Affordable Communications E-Rate, which discounts connectivity and networking costs for schools and libraries by 20 to 90 percent depending on poverty level and location;3Federal Communications Commission. E-Rate – Schools and Libraries USF Program and the Rural Health Care program, which funds broadband for clinics and hospitals in remote areas.
The statutory basis is 47 U.S.C. § 254, added by the Telecommunications Act of 1996, which directs the FCC to build “specific, predictable and sufficient” funding mechanisms and requires interstate telecommunications carriers to contribute on an equitable basis.4Office of the Law Revision Counsel. 47 USC 254 – Universal Service The contribution factor is how that requirement gets converted into dollars each quarter.
How the Factor Is Calculated
The Universal Service Administrative Company, a nonprofit that runs the fund’s day-to-day operations, does the arithmetic. Each quarter, USAC projects total dollar demand across the four programs and estimates the total revenue base from which contributions will be collected. Dividing demand by base produces the proposed factor.5Federal Communications Commission. Contribution Factor and Quarterly Filings – Universal Service Fund (USF) Management Support
USAC submits the projection to the FCC. If the Commission takes no contrary action within fourteen days, the proposed factor takes effect and a Public Notice announces the new percentage. When program costs rise faster than revenue, the factor climbs. When revenue grows or spending stabilizes, it can fall.
Why the Factor Keeps Rising
The long-term direction has been sharply upward. In 2015 the factor hovered around 16 to 17 percent. By 2019 it sat between 20 and 25 percent. In 2022 it crossed 33 percent for the first time. Q1 2026 came in at 37.6 percent, and Q2 2026 settled at 37.0 percent.5Federal Communications Commission. Contribution Factor and Quarterly Filings – Universal Service Fund (USF) Management Support
The main driver is a shrinking revenue base. As consumers move away from traditional phone service, the pool of interstate telecommunications revenue that carriers report gets smaller, but program costs have not fallen at the same pace. A higher percentage gets applied to a smaller base to cover roughly the same spending. That structural squeeze is why the factor has climbed even when program budgets hold steady.
Who Has to Pay
Federal rules require every carrier that provides interstate telecommunications to the public to contribute. That covers traditional wireline and wireless phone companies, interconnected VoIP providers, prepaid calling card providers, paging services, satellite providers, and resellers of interstate services, among others.6eCFR. 47 CFR 54.706 – Contributions The obligation is based on a percentage of the company’s interstate and international end-user revenues, reported to USAC through FCC Forms 499-A and 499-Q.7Universal Service Administrative Company. Forms to File
The De Minimis Exemption
Small providers whose annual USF contribution would be less than $10,000 qualify for the de minimis exemption. For 2026, that threshold works out to annual interstate and international end-user revenue of $37,175 or less.8Universal Service Administrative Company. De Minimis Qualifying providers do not have to file Form 499-Q or pay contributions directly to USAC. One exception matters: interconnected VoIP providers must still file the annual Form 499-A regardless of size.9eCFR. 47 CFR 54.708 – De Minimis Exemption
The Limited International Revenue Exemption
Carriers whose business is overwhelmingly international may qualify for the Limited International Revenue Exemption. Eligibility requires that quarterly interstate revenue make up less than 12 percent of combined interstate and international revenue. If the carrier qualifies, USAC calculates the contribution using only interstate revenue.10Universal Service Administrative Company. Limited International Revenue Exemption (LIRE) USAC evaluates eligibility at the holding company level, so if the parent’s interstate share hits 12 percent or above, none of the affiliates qualify.
How the Charge Shows Up on Your Bill
Most carriers recover their contribution by adding a line item to customer bills, usually labeled “Federal Universal Service Charge” or something similar. The FCC does not require carriers to pass the cost through, but almost all do. It is technically a carrier cost-recovery charge, not a government tax, though the distinction has little practical meaning for the customer paying it.
Federal regulations cap the charge. The line item cannot exceed the current quarterly contribution factor applied to the interstate telecommunications portion of the customer’s bill.11eCFR. 47 CFR 54.712 – Contributor Recovery of Universal Service Costs From End Users For Q2 2026, that ceiling is 37.0 percent of qualifying charges. A carrier that charges more than the factor allows risks audit and enforcement action.
If you think a carrier is exceeding the cap, you can file an informal complaint through the FCC’s Consumer Complaint Center at consumercomplaints.fcc.gov. The provider has 30 days to respond in writing to both you and the Commission.
The Supreme Court Ruling That Preserved the Mechanism
The contribution scheme nearly ended in 2024. That July, the Fifth Circuit Court of Appeals held that the funding structure violated the nondelegation doctrine, reasoning that Congress had handed its taxing power to the FCC, which in turn handed it to a private corporation, with no meaningful limits on how much could be collected.
The Supreme Court reversed on June 27, 2025, in FCC v. Consumers’ Research. The Court held that the word “sufficient” in 47 U.S.C. § 254 supplies an intelligible principle, setting both a floor and a ceiling: the FCC cannot raise less than what universal service programs need, and cannot raise more. The Court also found USAC’s role permissible because the FCC retains final authority over the contribution factor at every step.12Supreme Court of the United States. FCC v. Consumers Research, No. 24-354 The ruling ended the immediate legal threat. It did nothing to change the arithmetic that keeps pushing the factor higher.