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The Federal Communications Commission (FCC or Commission) released a Notice of Proposed Rulemaking (NPRM) seeking comment on a comprehensive review of the administration and oversight of the Universal Service Fund (USF) and the Universal Service Administrative Company (USAC).

Bottom Line

While the NPRM does not propose changes to USF program eligibility or support mechanisms directly, it seeks comment on the current USF administration processes, the structure of USF administration, operating costs associated with USF administration, and the impact of USAC’s Board of Directors on USF administration. Stakeholders participating in the High Cost, E-Rate, Lifeline, Rural Health Care, or contribution programs should monitor this proceeding, as the Commission is considering significant changes to USAC’s operational processes, governance structure, audit functions, and administrative expenditures.

Background

Since 1998, USAC has served as the permanent administrator of the USF under FCC oversight. The Commission notes that despite numerous changes to USF programs over the past several decades, there has not been a comprehensive review of USAC’s structure and administration since USAC was established.

The NPRM follows an April 2026 Public Notice, which sought feedback on potential reforms to USAC operations and governance. In response, commenters raised concerns regarding USF administrative inefficiencies, lengthy review processes, audit procedures, transparency, and board governance. The Commission is now seeking broader comment on potential reforms designed to improve USF administration.

NPRM

Program Governance

The FCC seeks comment on strengthening the administration, management, and oversight of the USF.

Efficiencies in USAC Operations

The FCC is seeking comment on which USAC processes should be streamlined to improve transparency, accountability, and cost-effectiveness, and on the operational practices that may create unnecessary burdens for USF participants or lead to inconsistent administration of the programs. The Commission is seeking comment on several questions related to USAC operations, including whether: (1) USAC should provide greater transparency into its operational procedures and decision-making processes; (2) the Commission should direct USAC to make written decisions resolving appeals publicly available on its website; (3) whether changes should be made in the general USAC outreach process to applicants; (4) whether USAC should be required to cite specific statutory provisions, Commission rules, and precedent when issuing appeal decisions; and (5) whether the operational inefficiencies could be improved using artificial intelligence.

Speed of Operations

The NPRM seeks comment on ways to improve the timeliness of USAC reviews and decision-making. Stakeholders previously suggested that USAC adopt formal shot clocks and processing deadlines for various requests, appeals, and duplications. The Commission proposes to require USAC to publicly report turnaround times or other metrics regarding unresponsiveness to add transparency around decision-making. The FCC is interested in whether delays in processing create compliance burdens or impede deployment of supported services.

Audits and Recoveries

The FCC seeks comment on ways to improve the efficiency of audits of USF program beneficiaries and ways to ensure it can recover all improperly disbursed funding. Specifically, the Commission questions whether it should consider revisions to its rules to standardize its audit processes to create uniformity across the programs, whether audit transparency can be improved, and whether the Commission should adopt a de minimis exemption to random audit requirements such that USF support recipients receiving less than a certain amount of support per year would be exempt from random audits.

The Commission proposes to amend section 54.707 of its rules to explicitly include non-carrier beneficiaries (i.e., schools, libraries, health care providers) within USAC’s audit authority.

Operating Costs of USF Administration

The NPRM also examines the operating expenses associated with administering the USF. The Commission asks whether USAC’s budget should be subject to a cap and whether there should be guidelines or limits on what percentage of the budget can be spent on specific resources. The Commission seeks comment on whether current expenditures are reasonable, whether greater visibility into administrative costs would benefit contributors and beneficiaries, and if opportunities exist to reduce costs through modernization or process reforms.

Structure of USF Administration

The FCC seeks comment on whether the current structure of USF administration remains appropriate nearly three decades after USAC became the permanent administrator and on the utility of maintaining a permanent administrator of the USF. The Commission questions whether there is any benefit to having the Commission handle specific functions of USF administration. Should the Commission decide to retain a permanent administrator, the Commission asks if the administrator should continue to be USAC.

USAC’s Board of Directors

The Commission seeks comment on whether the composition and selection process for USAC's Board of Directors (USAC Board) should be revised, including whether the number of USAC Board members should be reduced. The Commission requests comment on various ways to ensure that USAC Board members, who represent the companies and organizations most likely to benefit from USF support, can avoid conflicts of interest.

The Commission notes that commenters in the prior proceeding suggested that USAC Board members should be chosen based on their expertise in areas such as financial management, auditing, risk management, information security, and program administration, rather than relying primarily on stakeholder-representative positions.

Comments are due September 30 and reply comments are due October 30. If you are interested in filing comments, please let us know. 

Please contact Jill Canfield at [email protected] or Ryan Gillcrist at [email protected] for more information.