USF Definition


A fund established in the United States to support the concept of universal service, as first described in the Communications Act of 1934. The USF traditionally was intended to subsidize the cost of providing service to high-cost areas, defined as areas where the cost of providing service is at least 115 percent of the national average.Thereby, the USF ensured that even the most remote, sparsely populated, and impoverished areas of the United States had access to good quality basic voice telephone service at reasonable cost. In effect, it was a national cost-averaging scheme designed for the benefit of society.The USF extended over time to support the provisioning of lifeline service to those end users who cannot afford the cost of basic telephone service.The Telecommunications Act of 1996 codified the USF, extending its benefits to subsidize Internet access to schools and libraries, and telecommunications networks to link rural health care providers to urban medical centers in order to provide access to advanced diagnostic and other medical services. Under the direction of the Federal Communications Commission (FCC), the National Exchange Carrier Association (NECA) governs the USF, which actually is administered by the Universal Service Administrative Company (USAC), a NECA subsidiary. USAC accepts the collected funds from the local exchange carriers (LECs) and interexchange carriers (IXCs).The LECs collect USF fees from both IXCs and subscribers.Those fees are embedded in the access charges to the carriers, and generally are billed to subscribers as a separate line item.The LECs net out their approved USF requirements, retain a percentage as reimbursement for billing and administrative costs, and pass any remaining monies to USAC. Cellular providers contribute to the USF, usually on the basis of an average assumed percentage of interstate and international traffic. Voice over Internet Protocol (VoIP) providers also contribute to the fund for VoIP to PSTN calls; peer-to-peer VoIP-to-VoIP calls remain untaxed. In the United States, each of the individual states also has a USF, or something similar. Many other countries do, as well. For example, Australia formally established a Universal Service Obligation (USO) in 2001 and South Africa established the Universal Service Agency (USA) in the Telecommunications Act of 1996. See also access charges, cellular radio, Communications Act of 1934, FCC, IXC, LEC, lifeline service, NECA, PSTN, Telecommunications Act of 1996, universal service, USAC, and VoIP.

Webster's New World Telecom