In its August meeting, the FCC adopted a Notice of Proposed Rulemaking titled Maximizing Efficiencies in Universal Service Administration Company (USAC) that looks at changing the rules governing USAC, the Universal Service Administration.
USAC is a non-profit corporation that was formed by the FCC after passage of the Telecommunications Act of 1996, which created the Universal Service Fund. The FCC decided to create USAC to administer the fund in order to shield the day-to-day operations of the USF from politics and the changes that always come after a change in administration. USAC has a single purpose, which is to operate the Universal Service Fund under guidelines established by the FCC and approved by the FCC.
The Universal Service Fund has been somewhat controversial since its formation. However, most of the controversy comes from the direction that the FCC gives to USAC. For example, USF is funded by fees levied against interstate revenues for voice services. Over the years, as the amount of voice services has dropped, the percentage of the fee levied against voice has increased. But this can’t be blamed on USAC since the FCC determines who should pay into the fund. There are many critics who don’t like the programs funded by the USF. But again, these programs were established by the FCC and not by USAC.
Chairman Brendan Carr issued a separate statement that said, “It has been nearly three decades since the FCC designated USAC—the Universal Service Administrative Company . . . In all of that time, there has never been a comprehensive review of USAC’s functions or organization.”
That’s not entirely true. In May 2023, Senator Ted Cruz asked the General Accountability Office (GAO) to examine USAC to see if the company is properly administering the USF. The GAO audit gave high grades to USAC.
The NPRM is a comprehensive review of USAC. The NPRM considers the following:
- It asks for public comments on ways the agency can be more efficient.
- The NPRM asks if there should be changes in the USAC appeal process when USAC accepts or denies challenges from USF recipients.
- It asks if USAC should have a shot clock for some processes to force a decision to be made within a set amount of time.
- Probably the most important part of the NPRM, and the likely reason for this docket, is a lot of questions to the public and proposed changes in the way that USAC audits USF recipients, and how the company handles fraud. Over the years, USAC and the FCC’s Enforcement Bureau have uncovered instances of fraud in the E-Rate, Rural Health, High-Cost, and Lifeline programs.
- The NPRM asks if there should be an operational cost cap. It cites the company’s operating budget for 2025 at more than $266 million.
- USAC uses subcontractors, and the NPRM asks for public comment on whether the subcontractors are knowledgeable.
- The NPRM asks if there are better ways for USAC to report its annual results to the FCC.
- The NPRM asks if the number of USAC board members should be reduced from the current size of 20 members, and if meetings must be held in Washington, DC rather than virtually.
The USAC audit is part of the FCC’s overall examination of the Universal Service Fund. The agency is separately examining individual components of USF like E-Rate, the High Cost Fund, and Lifeline.