FCC to Fix Its Phone Subsidy Bureaucracy—with More Comments?
Published Date: 8/31/2026
Proposed Rule
Summary
In this document, the Federal Communications Commission (Commission) seeks to improve the administration of the Universal Service Fund (USF or Fund) by seeking comment on four areas related to USF administration: current USF administration processes, i.e., the processes used by Universal Service Administrative Company (USAC) to administer the USF and the Commission's oversight of those processes; the structure of USF administration, that is, USAC's role and responsibilities related to USF administration; operating costs associated with USF administration; and the impact of USAC's Board of Directors on USF administration.
Analyzed Economic Effects
5 provisions identified: 2 benefits, 3 costs, 0 mixed.
Pay‑and‑Dispute Model for Recoveries
The FCC seeks comment on requiring beneficiaries and service providers to pay USAC recoveries even if they file an appeal, similar to the USF contributions pay‑and‑dispute process. Currently, a party has 60 days to appeal USAC audit findings to the Commission; under a pay‑and‑dispute model, payment could be due notwithstanding an appeal once there is a relevant Bureau or Commission-level decision.
Audits Extended to Non-Carrier Beneficiaries
The FCC proposes to amend 47 CFR §54.707 to explicitly give USAC audit authority over non-carrier beneficiaries such as schools, libraries, and health care providers. If adopted, those organizations would be subject to the same USAC compliance audits and potential recoveries that carriers currently face.
Statistical Extrapolation for Recoveries
The FCC proposes to codify use of statistical extrapolation for audit recoveries, using samples with a 90–95% confidence level and a 4–6% margin of error to estimate total improper payments and calculate recoveries. Codified extrapolation could make recoveries larger and faster by applying findings from the sample to the full population of disbursements.
De Minimis Audit Exemption Considered
The FCC is considering a de minimis exemption from random audits for USF recipients that receive less than a certain dollar amount of support per year. The NPRM asks commenters what dollar threshold should qualify recipients for such an exemption and whether the amount should accumulate across programs.
Potential Cap on USAC Administrative Budget
The FCC seeks comment on whether USAC's annual operating budget should be subject to a cap. The NPRM notes that USAC's total operating expenses in 2025 were $266,603,608 and that operating expenses represented 3.06% of operating expenses plus disbursements in 2025. A cap could limit administrative spending funded by contributors and their customers.
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Key Dates
Department and Agencies
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