USF Contribution Factor Expected to Rise to 37.4 Percent

WASHINGTON, Dec. 5, 2024 – Federal fees on local phone bills are expected to rise yet again in the first quarter of 2025.

The Universal Service Fund’s contribution factor is set to rise to 37.4 percent early next year up from 35.8 percent in the current fourth quarter of 2024, according to data gathered from the Universal Service Administrative Company’s projection of USF revenue for the first quarter of 2025 by New Street Research.

This means that the Federal Communications Commission will collect 37.4 percent of end-user revenues from voice providers to support the $8.1 billion USF program, which subsidizes broadband access and infrastructure in rural communities, schools, health centers and libraries nationwide.

The FCC adjusts the USF contribution factor on a quarterly basis every year, generally increasing the requirements every quarter.

According to New Street Research, policymakers who view the contribution factor as unsustainable are unlikely to act before the Supreme Court has ruled in a case challenging the constitutionality of the USF’s funding mechanism

“The Beltway types will likely react to the [USF contribution] news, with a new round of an old game that resembles the schoolyard pastime of hot potato, at least until the second half of next year,” New Street Research Policy Advisor Blair Levin said in a Wednesday client note. “We don’t expect any material action by Congress or the FCC until there is (...) a decision by the Supreme Court on the legal parameters governing the USF framework.”

Levin also cited uncertainties over the $42.45 billion Broadband Equity, Access, and Deployment Program as a contributing factor to the delays. The Trump administration has promised changes to the program as soon as the administration takes office Jan. 20, 2025.