Understanding the Universal Service Fund


illustrationDSLReports.com – To understand the origins of this tax, you have to go back to the Communications Act of 1934. One goal of this legislation was to provide universal phone service at a reasonable price to all people of the United States. In the 1930s, only 40% of U.S. households had telephones. To accomplish the goal of universal service, phone companies charged higher long distance rates than needed to spread the financial burden for providing universal service.

If you have a cell phone, landline, or VoIP line in the United States you pay a percentage of your total bill into the USF every month. This percentage is known as the quarterly USF Contribution Factor. The monthly fee is collected from you by your carrier, forwarded to the USAC, and then the USAC distributes the funds to its four programs:

  1. Low Income (Lifeline/Linkup)
  2. Schools and Libraries (E-Rate)
  3. Rural Health Care
  4. High Cost

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