On April 15, the Federal Communications Commission's Wireline Competition Bureau and the Office of the Managing Director released a public notice seeking input on potential reforms to the operations and management of the Universal Service Administrative Company (USAC). USAC is a subsidiary of the National Exchange Carrier Association (NECA), and is the private not-for-profit corporation created to serve as the administrator of the FCC's Universal Service Fund (USF). 

USAC’s function is purely administrative. As the USF administrator, USAC’s operations are prescribed by FCC regulations and subject to FCC oversight. USAC has no authority to make policy, interpret unclear provisions of the statute or rules, or interpret the intent of Congress, and USAC must seek guidance from the Commission when the Act or rules are unclear. A Memorandum of Understanding (MOU) operationalizes the FCC-USAC relationship. The current MOU was signed quite recently—on October 17, 2024—which makes the FCC's questions about modifying it somewhat pointed.

Previously, Senator Ted Cruz (R-TX) asked the U.S. Government Accountability Office to review several aspects of USAC’s governance. The resulting report, Administration of Universal Service Programs Is Consistent with Selected FCC Requirements, examined USAC’s efforts to 1) establish and report on its goals, 2) manage its operating budgets in accordance with selected FCC requirements, including trends in its expenditures, and 3) maintain an ethics policy consistent with FCC requirements. In the July 2024 report, GAO found that USAC's practices were consistent with applicable FCC requirements.

Each year, USAC is responsible for billions of dollars earmarked to close the digital divide. All telecommunications companies contribute to USF based on interstate and international revenues as estimated by USAC and approved by the FCC. USAC collects all USF contributions and distributes these funds to participants in USF's four support programs.

1. The largest is the High Cost program, which provides support to eligible telecommunications carriers (ETCs) to deliver affordable voice and broadband service in rural areas that would otherwise be unserved or underserved.
2. The E-Rate program ensures that schools and libraries across the U.S. are connected to information and resources through the internet.
3. The Lifeline program lowers the monthly cost of phone and internet service for eligible low-income households.
4. The smallest program is Rural Health Care, which supports healthcare facilities by bringing telehealth to rural areas through expanded connectivity.

In 2025, USAC oversaw the distribution of nearly $8.5 billion in USF support and spent about $266.6 million to administer those programs. USAC's annual operating expenses have decreased by more than $100 million since 2023. According to USAC, much of the drop reflects the wind-down of the COVID-era emergency programs (Affordable Connectivity Program, Emergency Connectivity Fund), not just core USF administration efficiencies.

USAC History

After the passage of the Telecommunications Act of 1996, the FCC expanded the universal service support mechanisms to ensure the delivery of affordable telecommunications for all Americans, including low-income consumers, rural health care providers, and schools and libraries, and appointed NECA the temporary administrator of these mechanisms. In 1998, the FCC designated USAC, a subsidiary of NECA, as the permanent administrator of the USF programs and directed it to organize into a single entity responsible for administering all of the universal service support mechanisms, including billing, collection, disbursement, and certain additional common functions, in order to increase efficiency and establish clear lines of accountability

Although not mentioned in the FCC's new proceeding, a group called Consumers' Research challenged the constitutionality of the USF contribution structure in court, arguing that Congress and the FCC had improperly delegated authority—including to a private entity, USAC—in violation of the nondelegation doctrine. The United States Court of Appeals for the Fifth Circuit agreed, but in June 2025, the Supreme Court reversed the lower court's decision 6-3, upholding the USF structure and finding that USAC's role in providing non-binding financial projections does not amount to an unconstitutional delegation of authority. [Consumers' Research continues to press on with court challenges, picking up on a dissent in the ruling that argues the Telecommunications Act impermissibly delegates Congress’s taxing power by failing to set a tax rate or meaningful cap on collections.]

USAC is currently without a permanent CEO. Radha Sekar, who led the organization since 2018, departed in August 2025. CFO Michelle Garber has been serving as interim CEO while a search for a permanent replacement continues.

USAC Reform

In the new proceeding, the FCC is seeking public input on strengthening USAC’s internal processes and improving its management structure to increase efficiency in the administration of USF programs. The FCC is also asking if its oversight framework for USAC implements best practices, including standards for accountability and transparency.

1. Administration

The FCC is looking at the current state of USAC operations and any ways the administration of the USF should be reformed or made more efficient. The FCC asks stakeholders to address a list of questions, including:

• What improvements to USAC are appropriate, and how can the FCC effectuate these improvements? Would these improvements require changes to the FCC’s rules?
• How can the FCC create additional efficiencies in USAC administration?  
• Which areas or processes are most in need of streamlining today?  
• Are there past examples of new efficiencies in USAC operations or operations of other organizations that could serve as a model for USAC?
• What challenges are there to reforming the processes administered by USAC, and how should these challenges be addressed?

2. Operations and Internal Management

The FCC is also considering what changes are needed to USAC operations and internal management processes to maximize efficiency, transparency, accountability, and operational speed. In this proceeding, the FCC asks stakeholders to address the following questions:

• Are there USAC processes that cause undue delay or burden on program participants? 
• Could changes in the FCC’s oversight of and guidance to USAC increase responsiveness for program participants and stakeholders, such as shot clocks or clear deadlines for USAC action? 
• Are there any other improvements to USAC’s structure or processes that would benefit the USF programs?  If those improvements require changes to the Commission’s rules, which rules should be updated to improve efficiency, transparency, and accountability in the administration of the USF?

3. Improving Efficiency

Recipients of USF funds are subject to both random and risk-based compliance audits as well as other investigations and similar reviews to confirm compliance with program rules, which result in monetary recoveries for the USF when appropriate. The FCC is seeking comment on improving the efficiency of USAC’s role in the recoveries of USF funds and audits of USF program beneficiaries, and ways to ensure that the FCC is able to recover all improperly disbursed funding subject to recovery. The FCC is asking commenters' input on the following questions:

• Are there changes the FCC should make to streamline USAC’s audit and recovery processes to improve efficiency?
• Should the FCC direct USAC to streamline processes for audit-related recovery letters, non-audit-related recovery letters, and appeal decision letters to create uniformity across the programs?
• What should be the appropriate length of time after the issuance of an audit finding for the FCC to recover funds improperly disbursed to support recipients?  
• Should the timing of a support recovery for improperly disbursed funds be impacted by an administrative appeal?
• Should the FCC modify its rules and USAC’s audit procedures to codify the use of statistically valid sampling and extrapolation methodology for support recovery across all USF programs?¹
• When there are either known or highly suspected instances of alleged misuse of funds, failure to comply with program rules, or other potential waste, fraud, or abuse of funds, are there practices and policies that the FCC should consider adopting, consistent with federal law, beyond our existing mechanisms to combat waste, fraud, and abuse?  
• Are there practices and policies used by other federal agencies to quickly mitigate against potential acts of misconduct, and prevent waste or misuse of federal funds that the FCC should consider adopting?

4. Improving Audits

Each year, USAC must retain an independent auditor to examine its operations and books of accounts to determine whether it is properly administering the USF. 

• What changes, if any, should be made to the USAC annual audit to make it more efficient and cost-effective?  
• Are there ways to make USAC’s administration more cost-effective?
• Should there be any modifications to the MOU between the FCC and USAC?  
• Should the MOU require a proposed annual budget from USAC for each year?

5. USAC Board

USAC's Board of Directors oversees the organization's activities. USAC's board consists of 20 directors; one of them is the USAC CEO, and the other 19 are nominated by different stakeholder groups with interests in the USF, including contributors, beneficiaries, and consumer groups.² The Chairman of the FCC reviews the nominations submitted by industry and non-industry groups and selects each member of USAC’s Board. If an industry or non-industry group does not reach consensus on a nominee or fails to submit a nomination for a position on the Board, the Chairman of the FCC can select the representative for the group.

The Board of Directors may, in the performance of its duties, appoint or delegate authority to a committee of the Board of Directors to review or act on matters put before it.

The FCC seeks comment on the composition of USAC’s Board of Directors and on preventing USAC Board member conflicts of interest.

Composition

The FCC asks stakeholders to weigh in on the following questions about the composition of USAC's Board of Directors.

• What changes to USAC’s Board of Directors could the FCC consider to promote more efficient administration of USF support?
• Should the composition of the Board be modified to include new stakeholders or independent directors?  
• Are there any areas of expertise that are not represented on the USAC Board?
• Should the size of the USAC Board be changed?
• Should there be changes to the USAC Board nomination and selection process?
• Under what circumstances may the FCC Chairperson remove a Board member prior to the end of their term? [Note: The question of Board member removal is particularly timely as the Trump administration has moved to assert greater executive control over independent agencies and their appointed officials. Can USAC Board members—appointed by the FCC Chairperson—be removed at will?]
• Should the FCC’s rules establishing Divisions and Committees of the USAC Board be modified?

Conflicts

USAC maintains a written ethics policy, called the Statement of Ethical Conduct, and it maintains separate policies for its Board and for its employees. For board members:

In addition to USAC’s ethics policy, USAC has several requirements for its Board and employees, including:

• Acknowledging the ethics policy. USAC requires all employees to sign the policy each year. By contrast, a USAC executive told us that by agreeing to serve on the Board, directors acknowledged and accepted their responsibilities and agreed to comply with the provisions within the Board’s ethics policy.
• Completing ethics training. USAC requires the Board and its employees to complete annual ethics training, which emphasizes the importance of conducting USAC business in an ethical manner. USAC tracks completion in its learning management system using third-party software.
• Awarding contracts. The USAC Board and employees may not award any noncompetitive contracts to a USAC affiliate or to an entity with a representative serving on the USAC Board.
• Disclosing financial interests and potential conflicts. USAC requires the Board and its employees to annually disclose personal and familial financial interest in entities with which USAC has a relationship (e.g., USF beneficiaries or recipients, or a party to legal action against USAC). 

The USAC-FCC MOU prohibits USAC’s Board members from having “any organizational or personal conflicts of interest or the appearance of a conflict of interest in any aspect of the management of the USF, including the USF programs, and the operations of USAC."

In the current proceeding, the FCC asks:

• What changes should the FCC make to strengthen and improve its oversight regarding potential conflicts of interest for USAC Board members?
• Should FCC rules, and not just USAC’s ethics policy, require USAC Board members, when acting in their capacity as Board members, to represent the interests of the USF, and not just the Board members’ personal employer or constituency?

How to Participate

Although the FCC released this public notice and launched this proceeding on April 15, comments from stakeholders are due May 15, 2026. The FCC has not established a deadline for reply comments.

Comments may be filed using the FCC’s Electronic Comment Filing System (ECFS) in dockets 96-45 and 97-21. 

Notes

1. When auditors cannot feasibly review every transaction, they examine a representative sample and extrapolate the findings to the full population of disbursements. The FCC is asking whether this methodology—already used in some USF programs—should be standardized across all four programs. The question matters because extrapolation can significantly magnify the size of a recovery demand: if an auditor finds a 10% error rate in a sample, USAC may seek to recover 10% of all disbursements to that recipient, not just the ones actually reviewed.

       2. Three directors represent incumbent local exchange carriers (ILECs) made up from the following:

• One for Bell Operating Companies (BOCs),
• One for ILECs other than BOCs with annual operating revenues over $40 million, and
• One for ILECs other than BOCs with annual operating revenues less than $40 million.

Two directors represent interexchange carriers (IXCs) (i.e., long distance companies) made up from the following:

• One for IXCs with over $3 billion in annual operating revenues, and
• One for IXCs with less than $3 billion in annual operating revenues.

Three directors represent schools that are eligible to receive discounts.

One director represents libraries that are eligible to receive discounts.

One director represents Tribal Communities.

Two directors represent rural health care providers that are eligible to receive discounts.

Seven directors, each representing one of the following:

• Wireless providers,
• Competitive local exchange carriers,
• Cable operators,
• Information service providers,
• Eligible consumers,
• State telecommunications regulators, and
• State consumer advocates.

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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