Last month, we summarized the FCC's draft Notice of Proposed Rulemaking, Maximizing Efficiencies in Universal Service Administration (WC Docket No. 26-173). The FCC adopted that item on August 6, 2026, and released the final version on August 7. The bulk of what we wrote last month still holds. This update covers what changed between the draft and the adopted item.

The Vote

Chairman Brendan Carr and Commissioner Olivia Trusty each issued separate statements. Both are supportive; there is no dissent.

Chairman Carr puts the Universal Service Fund's size at roughly $9 billion a year and frames this action as "the next step" in the FCC's broader top-to-bottom review of the USF, explicitly linking the adopted questions to input the FCC received both from the April USAC Reform Public Notice and from the Commission's separate "Delete, Delete, Delete" deregulatory docket.

Commissioner Trusty directly addresses the question we raised last month about the Supreme Court's decision in FCC v. Consumers' Research (606 U.S. 656 (2025)), which the draft NPRM never cited. Commissioner Trusty writes that the ruling "reaffirmed an important principle"—that while USAC performs administrative functions, the FCC alone is responsible for the policy decisions Congress entrusted to it. It's still true that the body of the adopted item doesn't cite the case. But a commissioner has now put on the record, in this proceeding, the constitutional stakes that are implicit in the NPRM's careful language about USAC's "purely administrative" role.

New Questions Added to the NPRM

The adopted item expands on the draft in several places.

1. Publishing USAC's appeal decisions. A new pair of paragraphs asks whether USAC should be required to make its written decisions resolving stakeholder appeals publicly available on its website, and whether those decisions should be required to cite the Communications Act, FCC rules, or Commission precedent. The FCC notes that USAC already provides such citations as a matter of practice; the question is whether to make it a formal requirement. This wasn't in the draft we summarized in July, and it's directly relevant to the "Speed and Transparency" section of our earlier coverage—publicly available appeal decisions would let schools, libraries, and providers see how USAC has ruled on comparable issues before filing their own.

2. Coordinating outreach between USAC and service providers. A new question asks whether USAC's outreach and information requests to an applicant undergoing review or audit should also loop in that applicant's service provider, and vice versa—for example, allowing an applicant to designate a service provider to be copied on correspondence to speed up information gathering.

3. A stakeholder communication channel during audits. The audits section now asks whether the FCC should direct USAC to establish a channel for stakeholders to ask clarifying questions about requests for additional information during an audit.

4. Auditor training. A new closing paragraph in the audits section asks whether USAC's auditors—internal staff or third-party contractors—receive adequate training, and if not, what additional training (including on federal funding oversight generally) should be required.

5. FCC staff capacity. The "Structure of USF Administration" section adds two direct questions the draft didn't ask: whether FCC staff have "sufficient expertise and capacity" to handle portions of USF administration in-house, and how bringing functions in-house would affect the Commission's own budget.

A Loosened—and More Open-Ended—Extrapolation Standard

This is the most consequential substantive change for audited entities. The draft fixed the statistical standard for extrapolated recoveries at a 95 percent confidence level and a 5 percent margin of error. The adopted item instead proposes a range—a 90–95 percent confidence level and a 4–6 percent margin of error—and adds an entirely new paragraph asking whether the FCC should go the other direction and require an even more protective standard (as strict as 99 percent confidence, 1 percent margin of error) to give auditees greater assurance that estimated recoveries reflect actual improper payments. Two further new paragraphs ask how USAC should select a representative sample for the E-Rate, Rural Health Care, and Lifeline programs specifically, including how to handle observations that aren't statistically independent—such as, the FCC notes, Lifeline subscriptions within the same household over time.

For readers tracking the audit-and-recovery provisions we flagged last month as the highest-stakes section of the NPRM: the exact number that will determine how aggressively USAC can extrapolate a recovery from a sample is now explicitly up for comment, not fixed.

A Narrower Question on Replacing USAC

The draft asked whether a Request for Proposals (RFP) process should be used to select a new administrator or contractors if USAC is replaced. That specific RFP question is gone from the adopted item. In its place, the FCC asks more generally about the advantages and disadvantages of selecting a new administrator, minimum qualifications for candidates, and "the optimal agreement duration, including any option years." The underlying question—should USAC remain the administrator at all—is unchanged; the adopted text is simply less specific about the mechanism for choosing a replacement.

What Did Not Change

The following elements of our July summary are unchanged in the adopted item:

• The Board reduction from 20 to 13 members remains a question, not a proposal—as does the composition split between stakeholder representatives and independent experts.
• Whether to cap USAC's operating budget, and by what mechanism, remains a question. The 2025 figures we cited—$266,603,608 in operating expenses, 3.06 percent of operating expenses plus disbursements—are unchanged.
• Adopting pay-and-dispute across all USF programs remains a question rather than a proposal, and the FCC's supporting citation for the current appeal-stays-recovery practice is the same E-Rate order we cited last month.
• Eliminating the Board's three programmatic committees (High Cost and Low Income; Schools and Libraries; Rural Health Care) remains a question, now paired with a new one about creating an FCC-appointed committee to oversee USAC's internal administration.
• The two firm proposals we highlighted last month—extending USAC's audit authority to non-carrier beneficiaries, and removing the Washington (DC) meeting requirement for the USAC Board—are both still formal proposals in the adopted item, with the rule text unchanged.
• The USF contribution base and contribution factor remain entirely outside this proceeding's scope, as they were in the draft.

What Happens Next

Publication of the adopted item does not set the deadline for filing comments in this proceeding. Comments will be due 30 days after publication in the Federal Register, with reply comments due 60 days after. The proceeding remains "permit-but-disclose" under the FCC's ex parte rules; presentations to commissioners or staff must be filed in WC Docket No. 26-173 via the Electronic Comment Filing System.

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