Over the past 26 years, the Universal Service Fund — a federal subsidy pool collected monthly from American telephone customers — has spent close to $9 billion a year to give Americans better phone and internet connections, wiring rural communities in Arkansas, inner-city neighborhoods in Chicago, and public libraries and schools across the country.
Now it faces the biggest crisis of its existence, and Congress appears paralyzed in the effort to fix it.
The fund, paid for with a surcharge on phone bills, could be America’s most important tool going forward to fix the so-called digital divide, the huge split in opportunity between Americans who have fast internet access and those who don’t. Such access is a bipartisan issue, benefiting both red-state rural communities and blue-leaning urban neighborhoods.
But despite support from both influential Republican and Democratic politicians, the fund now faces significant court challenges, thanks to lawsuits by conservative activists who claim it’s an unconstitutional tax. Many observers think at least one of the cases has a chance of convincing some judges to kill the fund.
Congress, which created the USF as part of its last landmark telecom law rewrite in 1996, could stop any potential shutdown by fast-tracking legislation securing the fund’s role and its constitutionality, funding sources and missions. But the roadblocks to any kind of deal on Capitol Hill are already looming. It has become the center of a Washington lobbying war between Big Tech and the leading telecom firms, both of which want the other to foot the bill. And partisan politics are seeping in, too, with some Republicans starting to attack the fund as an icon of government waste.
“This Congress, it’s not clear to me they could legislate anything — I haven’t seen it,” said Blair Levin, a veteran FCC official who served in senior agency posts across multiple Democratic administrations, and has been watching the issue as a market analyst for the firm New Street Research.
Some lawmakers, at least, insist it’s top of mind. “All attacks on the Universal Service Fund concern me,” said Sen. Ben Ray Luj?n (D-N.M.), who chairs the Senate Commerce Subcommittee on Communications, Media, and Broadband, and has started a Senate working group to save the fund. “I can’t imagine there are groups out there that want to strike down a program that is providing support to make connectivity more affordable.”
There are. In 2021 and 2022, a nonprofit called Consumers’ Research, founded in 1929 to champion conservative causes against the administrative state (and, in recent years, the concept of “wokeness” in corporations), filed largely identical lawsuits in multiple federal courts alongside a handful of other activists and an Ohio-based telecom company. The suits target the unusual way the fund is run. Since its inception in the 1990s, the USF money has been administered by a nonprofit entity called the Universal Service Administrative Company, which reports to the FCC but operates separately from the agency.
The Consumers’ Research suit argues that USF fees are actually taxes — and that the fund’s 1996 setup was unconstitutional because it wrongly gives the agency power to levy taxes, then allows it to delegate management to an outside entity.
