Stop paying yesterday’s tax on tomorrow’s infrastructure

You ever look at an invoice and think, “Where the hell did that come from?”

That’s the Universal Service Fund (USF). One line item. No control. And suddenly you’re paying 38% more on key parts of your stack.

In Q4 2025, the Federal Communications Commission set the USF contribution factor at 38.1%. That’s not a typo. It’s the highest it’s ever been. And if you’re running enterprise comms, you’re feeling it where it hurts: SIP trunks, UCaaS voice, contact center minutes. Anything that still smells like legacy voice.

Here’s the kicker: the USF is funded mostly by voice, but the money’s going to broadband.  Schools. Libraries. Rural clinics. All good causes. But the tax? It’s squarely on you. We’re taxing one service to subsidize another, and that disconnect just keeps growing.

The math is broken. And you’re paying for it

Since 2001, the USF revenue base has shrunk by 69% (FCC data). Over that same period, the fee rate has jumped more than 400%.

That’s not funding innovation. That’s draining dollars you need for cloud, AI and security.

It’s like trying to fund 5G with fax machines. It doesn’t work.

The math is simple and brutal: when you keep drawing from a smaller and smaller pool of voice revenues, the rate has to climb to fill the gap. Voice keeps dropping. Broadband keeps growing. But only one side pays.

Where it hits

Here’s what most IT leaders miss: USF isn’t abstract policy. It’s a line-item tax that lands squarely in your operational budget. And the differences are more definitional than sensible.

For instance, are you a mobile provider? For any voice interactions, you’ll find yourself taxed. However, competitors supplying predominantly data won’t need to contribute on the same level. The same definitional difference applies to SD-WAN providers.

Broadband providers too largely escape making any contributions. Which, given the changes in technology over the past 20 years, not only scarcely makes sense, it is now entrenched as a known competitive, bottom-line advantage.

That means the more your business leans on traditional or hybrid voice, the more you pay. You’re subsidizing the future with the past.

And because most providers pass USF through directly, you can’t control it. You can forecast power costs, bandwidth, software spend — but not a quarterly rate that swings like a tech stock.

Back-of-napkin impact

I don’t want to get too math-heavy, but some simple back-of-the-napkin calculations I find can help make the issue a little more real.

For instance, if you are a mid-sized provider of communication services:

• 8,000 UCaaS seats @ $12/seat, with ~20% of the seat price for assessable voice = $19.2K/month
• 1,000 contact center agents, 2K minutes/month @ $0.01/min = $20K/month
• USF-eligible base = $39.2K/month

If roughly 60% of that traffic is interstate, your USF assessment looks like this:

• At 36%: $8,470/month
• At 38%: $8,940/month

That’s over $25,000 per quarter just by breathing.

Now, run those same numbers if broadband were in the base. The factor drops below 4%, according to the USForward report by Carol Mattey and The Brattle Group’s economic analysis.

Same usage. Smarter system. Big savings.

That’s what a modernized funding model looks like — sustainable, predictable, fair.

Why broadband belongs in the base

USF’s mission today is broadband. The money goes to connect rural communities, schools, libraries and clinics. So why are we still taxing like it’s 2005?

Economists call broadband inelastic. This means demand doesn’t drop when prices change. According to Brattle Group, broadband’s price elasticity is around –0.08, which makes it the rational foundation for a shared cost system. You spread the burden wider, you lower the rate and you stop punishing the very technology that built the modern enterprise.

The irony is that on the distribution side, USF already funds broadband deployment. The FCC made that shift more than a decade ago. It’s the contribution side that’s stuck in time. We modernized how we spend it, not how we collect it. That’s like upgrading your data center but leaving the power grid on dial-up.

Additionally, adding broadband to the base would level the playing field and drive greater innovation. Including these providers would not only lower the typical rate paid by many providers currently from ~25-30% to closer to single-digit percentages, but it would also dissuade providers from architecting their networks in a way that specifically circumvents something it is meant to promote: The provision of the world’s best internet and connectivity to all Americans.

What about ‘taxing big tech’?

You’ve probably heard the idea of assessing “edge providers” — the streaming, search, cloud and advertising platforms that generate the bulk of internet traffic. The FCC has estimated that including those revenues could expand the base by $2.3 trillion and nearly zero out the fee.

Maybe that’s worth discussing. But it’s a long road. It requires Congress, years of rulemaking consensus across industries with wildly different revenue models.

There is bipartisan attention on this issue. The Universal Service Fund Working Group — led by Senator Ben Ray Luján (D-NM) and Senator Deb Fischer (R-NE) — is working hard to build momentum behind a legislative fix. That’s encouraging. But congressional interest alone won’t move the ball.

The industry has to meet them halfway. We need carriers, cloud providers and enterprises to coalesce around a clear, workable solution — like broadband inclusion — to give lawmakers something they can actually act on.

Enterprises and community members alike can’t afford to wait for a perfect bill or another multi-year study. Broadband inclusion is ready now. Technically, economically and operationally. It could be implemented within the existing framework and stabilize costs in months, not years.

What you can do this quarter

The beauty of this potential shift is that it isn’t abstract. Broadband providers already report and bill under the USF. So there is no reinvention needed. And it’s money that could fund innovation, automation, resilience or talent — instead of dwindling into a line-item surcharge that no one can defend.

So what can we do as industry members to help build more fairness and modernity into the fund to ensure it is still functional in a decade’s time? There are a few simple and practical steps we can all take right now.

1. Ask your vendors for a USF breakdown. What’s assessed, how it’s calculated and how much is being passed through.
2. Check your bundles. Ensure allocations between voice and data reflect real usage, not worst-case assumptions.
3. Model two scenarios for your fiscal year: status quo (factor between 34–40%) and reform (<4%).
4. Join the ask. Push your industry associations to back broadband inclusion now.
5. Tell your story. Policymakers listen when enterprises explain how a “universal” program is hitting operational budgets and slowing modernization.

A smarter path forward

We rely on universal connectivity the way we rely on electricity. It’s infrastructure, not a luxury. But the way we’re funding it belongs in a museum.

This isn’t about politics. It’s about sanity, savings and common sense.

Modernize USF contributions to match what the FCC already did years ago on the spending side. Put broadband in the contribution base. Stop taxing yesterday’s tech to pay for tomorrow’s infrastructure.

Let’s get it done. Before the next billing cycle hits.

This article is published as part of the Foundry Expert Contributor Network.
Want to join?