FCC seeks comment on Universal Service Fund administration overhaul

The Federal Communications Commission (FCC) has opened a proceeding to overhaul how the Universal Service Fund (USF) is administered, publishing a Notice of Proposed Rulemaking (NPRM) in the Federal Register of August 31, 2026. The agency seeks public comment on four areas of USF administration — current processes, program structure, operating costs, and the role of the Universal Service Administrative Company (USAC) Board of Directors — with the stated goal of curbing waste, fraud and abuse. Comments are due on or before September 30, 2026, and reply comments by October 30, 2026.

The NPRM, adopted August 6 and released August 7, 2026, appears as WC Docket No. 26–173; FCC No. 26–52 (FR ID 364115) and proposes amendments to 47 CFR Part 54. It follows the USAC Reform Public Notice (DA 26–367) released April 15, 2026, and responds to stakeholder feedback. The FCC is required by Section 254 of the Communications Act of 1934 to ensure affordable telecommunications for high-cost areas, low-income consumers, schools, libraries and rural health providers, and it notes that no major review of USAC has been conducted since the company was named permanent administrator in 1998.

Audits, recoveries and fraud safeguards

The FCC proposes to strengthen audit and recovery tools, including codifying USAC’s ability to calculate recoveries by extrapolating from a statistically representative sample of an auditee’s disbursements, with a 90–95 percent confidence level and a 4–6 percent margin of error. It also seeks comment on a de minimis exemption from random audits for recipients of small support amounts, and on a pay-and-dispute model under which beneficiaries would repay improperly disbursed funds even while an appeal is pending.

• In 2025, the Bureau issued six orders affirming USAC audit findings, saving ratepayers over $9 million.
• The FCC proposes amending § 54.707 to explicitly extend USAC’s audit authority to non-carrier beneficiaries such as schools, libraries and health care providers.
• The agency asks whether artificial intelligence (AI) could reduce turnaround times and costs in application review, audits and appeals.

Operating costs and program structure

The FCC is weighing whether USAC’s budget should be subject to a cap. In 2025, USAC’s total operating expenses were $266,603,608, equal to 3.06 percent of operating expenses plus disbursements. The agency also questions whether the Commission should retain a permanent administrator, bring some functions in-house, or consider other candidates, and whether the USF’s move to the U.S. Treasury should be reflected in updated rules.

Board of Directors and governance

The FCC proposes reducing the USAC Board of Directors from 20 to 13 members, and seeks comment on conflicts of interest, board composition, staggered three-year terms, and term limits. It cites the GAO 2024 USAC Report (released August 22, 2024), which found that the current structure, in which members represent USF contributors and beneficiaries, creates the appearance of conflicts of interest. The agency also proposes eliminating the requirement that board meetings be held in Washington, DC, and creating committees focused on audits and governance.

The proceeding affects telecom carriers and consumers nationwide, since USF costs are ultimately borne by contributors and their rate-paying customers. The FCC’s contact for the docket is Stephanie Minnock of the Wireline Competition Bureau (202–418–7400).

Source: Federal Register, Vol. 91, No. 167, August 31, 2026, Proposed Rules, p. 55826 (official reference: WC Docket No. 26–173; FCC No. 26–52; FR ID 364115).