USAC (the Universal Service Administration Company) was recently in the news when the U.S. Court of Appeals for the Fifth Circuit ruled that the FCC’s administration of the Universal Service Fund (USF), and particularly the use of USAC to be unconstitutional.

USAC is a non-profit corporation formed by the FCC when the Telecommunications Act of 1996 created the USF. The FCC decided to create USAC to administer the fund in order to shield the day-to-day operations of the USF process from politics and the changes that always with a change in administration. USAC has a single purpose, which is to operate the Universal Service Fund under guidelines established by the FCC.

The relationship between USAC and the FCC has been under fire many times over the years. In May 2023, Senator Ted Cruz asked the General Accountability Office (GAO) to examine if USAC is properly administering the $8 billion annual USF. The GAO recently issued a report that gave high grades to USAC.

The Universal Service Fund has been somewhat controversial since its formation. However, most of the controversy comes from the directions 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. In this blog I have leveled a lot of criticism against some aspects of the CAF II and RDOF programs that have provided subsidies to improve rural broadband. But again, these programs were established by the FCC and not by USAC.

One controversy that had legs for many years was that the Lifeline program, which provides a $9.25 monthly subsidy to low-income households to help cover telephone or broadband bills, was paying out a lot of fraudulent claims. USAC instituted a system that verifies each month if somebody is eligible for the discount, and the controversy largely melted away. There have been complaints that ISPs have jacked up the cost of broadband or equipment being provided to schools and libraries that is paid from the USF E-Rate subsidy.

GAO undertook a broadband audit of USAC. They looked to see if USAC was operating within the guidelines established by statutes or by FCC directives. GAO looked at USAC’s budgetary process that included looking at day-to-day operations of a wide range of processes like how USAC sets fees and how it operates the many different programs funded by the USF.

The GAO gave USAC a clean bill of health. The report says that the processes at USAC align with the directives and requirements imposed by the FCC and to external auditors who routinely audit USAC. The GAO approved the process for setting goals and for reporting the use of funds to the FCC. GAO found that USAC’s budgetary process and tracking expenditure followed FCC guidelines. GEO also said that USAC was following its ethics policies.

This should quiet criticism against USAC for a while. There will always be critics of some of the aspects of the Universal Service Fund – and that includes me from time to time. But that criticism shouldn’t spill over to attacks on USAC, which seems to be doing a good job of the daily work of making USF work.