USF Contribution Factor Set at 37.0% for Q2 2026

By Blake Reed

Last week, the Federal Communications Commission announced the proposed Universal Service Fund (USF) contribution factor for the second quarter of 2026. The new rate will be 37.0 percent — a slight decrease from the 37.6 percent that applied in Q1 2026 and below the recent high of 38.1 percent in Q4 2025.

Even at this level, nearly 37 cents of every dollar from interstate end-user telecom revenues will support the USF. This continues to function as a significant hidden surcharge on phone and broadband bills for millions of American households.

The Universal Service Fund collects roughly $8–9 billion annually to bankroll four subsidy programs: Lifeline for low-income households, E-Rate for schools and libraries, Rural Health Care, and the High Cost/Connect America initiatives to expand rural broadband. Telecom carriers pay this percentage of their qualifying revenues into the fund and typically pass the cost on to customers via a line item on their bills.

The FCC calculates the factor quarterly based on projected program demands and administrative costs divided by the adjusted contribution base (interstate and international end-user revenues, with adjustments for circularity and uncollectibles). For Q2 2026, the projected base is around $7.55 billion, with total requirements leading to the 37.0% rate after rounding — as detailed in Public Notice (DA-26-218A1) released March 16, 2026. Historical and current factors are tracked on the FCC’s Contribution Factor page and summarized by USAC.

The USF surcharge has grown into one of the largest add-ons on communications bills during a period when many families face rising costs elsewhere. As traditional wireline and long-distance revenues decline (with more traffic shifting to wireless and internet-based services that contribute less or differently), the burden falls more heavily on remaining contributors — often resulting in higher rates rather than program reforms. Critics argue the fund suffers from inefficiencies, fraud risks, and outdated structures, but proposals to expand its scope could push rates even higher.

The drop to 37.0% reflects some easing in projected demand across programs, offering minor relief. Still, this remains an extraordinarily high contribution factor, historically speaking. Without structural changes — such as tighter eligibility or congressional modernization — the factor risks climbing again, potentially consuming an even larger share of monthly bills.

The modest decline is a small positive sign that the system can adjust downward when projections allow. But at 37%, it underscores the urgent need for accountability and reform to ensure that this program does not unnecessarily burden everyday consumers.

To view the full FCC Public Notice announcing the Q2 2026 contribution factor (DA-26-218A1), click here.