FCC Opens Review of Universal Service Administration, Questions USAC’s Future
The agency questions USAC’s processes, expenses, governance structure and long-term role as the Universal Service Fund’s administrator.
WASHINGTON, July 20, 2026 – The Universal Service Fund’s back-office operations are at the center of a Federal Communications Commission regulatory debate.
The FCC is launching its first comprehensive review of the Universal Service Administrative Company’s operations since designating USAC as the permanent administrator of USF programs in 1998. The private, not-for-profit corporation oversees more than $9 billion in broadband subsidies annually. Now, in a draft proposed rulemaking, released Thursday, the FCC is explicitly asking whether that structure remains appropriate.
Up for consideration at the FCC’s Aug. 6 open meeting, the proceeding follows a public inquiry into USAC operations and comes as the FCC undertakes what it has described as a “top-to-bottom review” of the Universal Service Fund.
In April, the FCC’s Wireline Competition Bureau and Office of the Managing Director sought public comment on USAC’s operations after stakeholders raised concerns about delays, administrative costs, audit practices, and board governance.
FCC reopens fundamental questions about USAC's role
The most consequential issue raised in the proceeding may be the future of USAC itself.
The nonprofit has administered the USF under FCC oversight, processing applications, collecting contributions from telecommunications providers, distributing support across the High Cost, E-Rate, Rural Health Care, and Lifeline programs, and carrying out numerous administrative responsibilities established by FCC rules.
Now the FCC is asking whether that arrangement should continue.
The proposal seeks comment on whether the FCC should continue relying on a permanent outside administrator, whether some administrative functions could instead be performed by FCC staff, and whether a future administrator should be selected through a competitive request-for-proposals process.
The FCC also asked whether eligibility should continue to be limited to nonprofit organizations or whether other organizational structures should be considered.
Audit proposals could have consequences for program participants
The FCC is proposing changes that could expand USAC’s audit authority.
One proposed change would make explicit in FCC rules that USAC can audit not only telecommunications carriers and USF contributors, but also the organizations that receive support directly – including schools, libraries and rural health care providers.
USAC already conducts these reviews through the Beneficiary and Contributor Audit Program, but the FCC says updating its rules would clarify the administrator’s authority and ensure that audits cover all types of USF participants.
The FCC is also considering a change to how audit findings could translate into financial recoveries.
Under the FCC’s proposal, USAC would have clearer authority to use statistical sampling: reviewing a representative group of transactions, identifying an error rate, and applying that rate to a larger pool of funding.
For example, instead of reviewing every invoice submitted by a program participant, auditors could examine a smaller sample of invoices, determine that a certain percentage contained errors, and use that percentage to estimate how much funding should be recovered overall.
The FCC is seeking comment on what safeguards should accompany this approach, including whether recipients should be able to challenge the statistical methods used by auditors and whether extrapolated recoveries make sense in programs where individual funding decisions can vary significantly.
The FCC asked whether smaller USF recipients should face fewer random audits, by including a possible exemption for organizations receiving smaller amounts of funding.
Another proposed change involves what happens after USAC determines that funding should be recovered.
Today, when a recipient challenges a recovery decision through an appeal, the recovery is generally paused while that appeal moves forward. The FCC is asking whether it should instead adopt a “pay-and-dispute” system, under which recipients would repay disputed funds first and seek reimbursement if they ultimately prevail.
Performance metrics and operational deadlines
Beyond audits, the FCC proposed a series of operational reforms intended to make USAC more transparent and responsive.
Among the proposals is a requirement that USAC publicly report turnaround times and other performance metrics for key administrative processes. The FCC says greater visibility into processing times could improve accountability and help applicants better understand how long decisions typically take.
The notice also raises the question of whether the FCC should establish formal deadlines, or shot clocks, for certain USAC activities, including application reviews and other administrative decisions. Several stakeholders advocated for such timelines during the FCC’s earlier inquiry into USAC operations, arguing that predictable review periods would improve planning and reduce uncertainty.
The FCC also repeatedly seeks comment on whether artificial intelligence could help improve USF administration. Among the potential applications it identifies are reviewing funding requests, assisting with audits and appeals, responding to stakeholder inquiries, and reducing administrative processing times.
FCC examines administrative costs
Cost reduction is another major theme running through the proceeding.
The FCC asked whether USAC's operating budget should be subject to a formal cap, and if so, whether that cap should be tied to inflation, overall program disbursements, or another benchmark.
The FCC also seeks comment on whether limits should apply to particular spending categories, including information technology, contractor expenses, outreach activities, and audits.
Board governance under review
The proceeding proposed the most significant examination of USAC’s governance structure since the organization was established.
The FCC asked whether the current 20-member Board should be reduced to 13 members and whether the composition should shift away from stakeholder representation toward directors selected for expertise in areas such as financial management, auditing, grant administration, procurement, information technology, and corporate governance.
Currently, nearly all Board members represent specific constituencies participating in Universal Service programs. The FCC asked whether that model continues to serve the public interest or whether a greater share of independent directors would strengthen oversight.
The FCC also sought comment on whether consultants participating in Universal Service programs should be eligible to serve on the Board and whether the Board’s existing program-specific committees should be replaced with committees focused primarily on governance, risk management, and audit oversight.
As part of its cost-cutting review, the FCC proposed eliminating a rule requiring all USAC Board meetings to be held in Washington, D.C., suggesting that greater flexibility for virtual meetings could reduce travel expenses.
