On June 27th, 2025, the Supreme Court voted 6-3 to affirm the constitutionality of the Universal Service Fund (USF), a roughly $8B federal program created by Congress under the Telecommunications Act of 1996 and administered by the FCC. This decision comes after several years of legal challenges questioning whether the program, primarily funded via telephone service fees, constituted an illegal tax.

The USF is composed of four programs, including the High Cost Program, the Lifeline Program, the Schools and Libraries Program (aka “E-Rate”), and the Rural Health Care Program. Collectively, these programs expand network access in underserved areas, helps partially cover the cost of internet and voice services for qualifying low-income households, help fund internet connectivity in public schools and libraries, and support voice and broadband in rural hospitals. They are a vital source of funding for underserved communities and critical infrastructure.

However, with traditional telephone adoption in rapid decline – falling to just 25% of US internet households in 2025, down from 46% in 2020, as per Parks Associates consumer survey data – the funding for the USF is also drying up. Policymakers, including Congress and the FCC, are seeking alternative funding mechanisms. Now that the USF’s legality is affirmed, they are free to move forwards.

Policymakers have suggested a number of different proposals for future funding. Proposals include expanding the contribution base to include broadband revenues, assessing fees on big tech companies (“edge providers”) that comprise a significant portion of data traffic and benefit from internet infrastructure, as well as funding via the regular congressional appropriations process. Other policymakers have proposed permanently extending the now-defunct Affordable Connectivity Program by integrating it into the USF.

The USF has evolved several times in the nearly 30 years since it was enacted, and it is headed for another evolution. And, with only 25% of US internet households now receiving telephone service, it must evolve in order to meet the needs of Americans for the next 30 years.

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