The FUSF tax on your phone bill isn’t actually a tax. It’s the Federal Universal Service Fund charge, a regulatory fee that telecommunications carriers owe to a federal program and almost always pass through to customers as a line item. The money subsidizes phone and internet service in rural areas, low-income households, schools, libraries, and rural healthcare facilities. For the first quarter of 2026, the rate is 37.6% of a carrier’s assessable interstate revenue, dropping slightly to 37.0% for the second quarter.1Federal Communications Commission. USF Contribution Factor – 1Q20262Federal Communications Commission. Proposed Second Quarter 2026 Universal Service Contribution Factor
The distinction between a tax and a regulatory fee matters. The Treasury doesn’t collect this money as general revenue. The telecommunications industry pays it into a dedicated fund, and it goes out only to specific connectivity programs. The Supreme Court confirmed that legal classification in June 2025, ruling that the contribution scheme is a regulatory fee collected by a self-financing agency and does not violate the Constitution’s nondelegation doctrine.3Supreme Court of the United States. FCC v. Consumers’ Research, No. 24-354
Where the Money Goes
The Universal Service Administrative Company (USAC) distributes the fund under FCC direction across four programs, with total disbursements of roughly $8.45 billion in 2025.4Universal Service Administrative Company. USAC 2025 Annual Report
- The Connect America Fund, the largest piece, pays for building and maintaining broadband and phone networks in rural and remote areas where private carriers can’t justify the cost. The goal is keeping rural rates roughly comparable to urban ones.5Federal Communications Commission. Universal Service for High Cost Areas
- Lifeline gives eligible low-income households up to $9.25 per month off phone or broadband service, or up to $34.25 per month on qualifying Tribal lands.6Federal Communications Commission. Lifeline Support for Affordable Communications
- The E-Rate program gives schools and libraries discounts of 20% to 90% on internet access and networking equipment, based on the poverty level of the area they serve. The FCC set the E-Rate cap at $5.2 billion for fiscal year 2026.7Federal Communications Commission. E-Rate – Schools and Libraries USF Program
- The Rural Health Care Program subsidizes telecommunications and broadband connections for healthcare providers in rural areas, supporting telemedicine and other remote services.8Federal Communications Commission. Rural Health Care Program
All four programs sit on the statutory foundation of 47 U.S.C. ยง 254, part of the Telecommunications Act of 1996.9Federal Communications Commission. Universal Service
Who Actually Owes the Fee
Your carrier does. Every telecommunications carrier providing interstate and international service must contribute to the USF based on a percentage of end-user revenue from those services. That includes landline companies, wireless carriers, and interconnected VoIP providers like cable companies that offer phone service.10Federal Communications Commission. Contribution Methodology and Administrative Filings
The FCC allows carriers to recover the cost from customers, but does not require it.11Federal Communications Commission. Understanding Your Telephone Bill In practice, nearly every major carrier passes it through, usually labeled “Universal Service Fee,” “Federal Universal Service Charge,” or something similar.
There’s a hard ceiling on what a carrier can charge you. Under 47 CFR 54.712, the USF line item on your bill cannot exceed the interstate telecommunications portion of your bill multiplied by the current contribution factor.12eCFR. 47 CFR 54.712 – Contributor Recovery of Universal Service Costs From End Users Collecting more than the carrier’s actual obligation is a billing violation. Carriers also cannot charge USF fees on services fully supported by Lifeline.11Federal Communications Commission. Understanding Your Telephone Bill
How Much You Actually Pay
The 37.6% rate applies only to the interstate portion of your service, not the whole bill. Purely local service revenue generally sits outside the federal contribution base, though some states run parallel programs with their own separate charges.
So even though the percentage looks steep, the dollar amount comes off a smaller slice of your charges. For most wireless customers, the fee lands somewhere between a few dollars and about $5 to $7 per month depending on the plan. Broadband internet access revenue is not part of the contribution base at all, so any pure internet portion of your bill is not assessed, even though much of the fund’s spending goes toward building broadband infrastructure.
Why the Rate Keeps Going Up
Twenty years ago the contribution factor was around 6%. It climbed through the teens and twenties over the following decades and has been above 30% since 2022.13Federal Communications Commission. Contribution Factor and Quarterly Filings – Universal Service Fund Management Support The math driving the increase is simple. Program spending has been roughly stable or growing, while the revenue base the fee is assessed on has been shrinking for years as consumers and businesses move spending from traditional phone service to broadband. Broadband dollars don’t feed the fund, so the same expenses come out of a smaller pool, and the percentage climbs.
The FCC sets the factor quarterly. USAC submits projected funding needs, the FCC divides that by projected assessable revenue reported by contributing carriers, and the resulting percentage takes effect for the next quarter.13Federal Communications Commission. Contribution Factor and Quarterly Filings – Universal Service Fund Management Support
What to Do if the Charge Looks Wrong
Call your carrier first and ask for a breakdown showing how the USF line item was calculated against the interstate portion of your bill. Compare the ratio to the current contribution factor. If the number doesn’t add up, or the carrier can’t explain it, the FCC accepts billing complaints through its Consumer Inquiries and Complaints Center. Filing a formal complaint means the FCC serves your complaint on the provider and tracks it. You can file online or by phone at 888-225-5322.14Federal Communications Commission. Consumer Inquiries and Complaints Center
Is the Fee Going Away
Not soon. The Fifth Circuit ruled the contribution mechanism unconstitutional in 2024, but the Supreme Court reversed that decision on June 27, 2025, holding that Congress gave the FCC sufficient guidance and that the agency retained meaningful decision-making authority, using USAC only for non-binding administrative advice.3Supreme Court of the United States. FCC v. Consumers’ Research, No. 24-354 The fund’s legal footing is settled. Its financial structure isn’t.
Reform proposals have been circulating in Congress because the current model isn’t sustainable at the pace the factor is rising. The Lowering Broadband Costs for Consumers Act of 2025, introduced in both chambers, would direct the FCC to expand the contribution base to include large broadband providers and edge providers like major online platforms. Other proposals would fund the USF through spectrum auction revenue or direct congressional appropriations.15Congressional Research Service. The Universal Service Fund and Related FCC Broadband Programs The FCC does not currently have authority to assess contributions on broadband revenue without new legislation. Until Congress acts, expect the line item to keep growing as the traditional telecom base continues to shrink.