DA 25-1026 Released: December 15, 2025 Proposed First Quarter 2026 Universal Service Contribution Factor CC Docket No. 96-45 In this Public Notice, the Office of Managing Director (OMD) announces that the proposed universal service contribution factor for the first quarter of 2026 will be 0.376 or 37.6 percent.1 Rules for Calculating the Contribution Factor Contributions to the federal universal service support mechanisms are determined using a quarterly contribution factor calculated by the Federal Communications Commission (FCC or Commission).2 The Commission calculates the quarterly contribution factor based on the ratio of total projected quarterly costs of the universal service support mechanisms to contributors’ total projected collected end-user interstate and international telecommunications revenues, net of projected contributions.3 USAC Projections of Demand and Administrative Expenses Pursuant to section 54.709(a)(3) of the Commission’s rules,4 the Universal Service Administrative Company (USAC) submitted projections of demand and administrative expenses for the first quarter of 2026.5 Accordingly, the projected demand and expenses are as follows: Dollars in Millions Administrative Prior Period Contribution USF Programs Demand Expenses Adjustment Requirement Schools & Libraries $628.68 $19.76 $0.49 $648.93 Rural Health Care $173.56 $7.41 $0.14 $181.11 High Cost $1,075.70 $16.26 -$86.51 $1,005.45 Lifeline $274.25 $18.09 -$67.06 $225.28 TOTAL $2,152.19 $61.52 -$152.94 $2,060.77 1 See 47 C.F.R. § 54.709(a). 2 See id. 3 See 47 C.F.R. § 54.709(a)(2). 4 See 47 C.F.R. § 54.709(a)(3). 5 See Federal Universal Service Support Mechanisms Quarterly Fund Size Projections and Contribution Base available at www.usac.org/fcc-filings. USAC Projections of Industry Revenues USAC submitted projected collected end-user telecommunications revenues for January 2026 through March 2026 based on information contained in the Telecommunications Reporting Worksheet (FCC Form 499-Q)6. Accordingly, the total projected collected interstate and international end-user telecommunications revenues for the first quarter 2026 is as follows: $7.604471 billion Adjusted Contribution Base To determine the quarterly contribution base, the FCC decreases the first quarter 2026 estimate of projected collected interstate and international end-user telecommunications revenues by the projected revenue requirement to account for circularity and decrease the result by one percent to account for uncollectible contributions. Accordingly, the quarterly contribution base for the first quarter of 2026 is as follows: Adjusted Quarterly Contribution Base for Universal Service Support Mechanism = (First Quarter 2026 Revenues - Projected Revenue Requirement) * (100% - 1%) = ($7.604471 billion - $2.060770 billion) * 0.99 = $5.488264 billion Unadjusted Contribution Factor Using the above-described adjusted contribution base and the total program collection (revenue requirement) from the table above, the proposed unadjusted contribution factor for the first quarter of 2026 is as follows: Contribution Factor for Universal Service Support Mechanisms = Total Program Collection / Adjusted Quarterly Contribution Base = $2.060770 billion / $5.488264 billion = 0.375487 Unadjusted Circularity Factor USAC will reduce each provider’s contribution obligation by a circularity discount approximating the provider’s contributions in the upcoming quarter. Accordingly, the proposed unadjusted circularity factor for the first quarter of 2026 is as follows: Unadjusted Circularity Factor for Universal Service Support Mechanisms = Total Program Collection / Projected First Quarter 2026 Revenues = $2.060770 billion / $7.604471 billion = 0.270995 6 USAC Filings of Quarterly Contribution Base at 5. 2 Proposed Contribution Factor The Commission has directed OMD to announce the contribution factor as a percentage rounded up to the nearest tenth of one percent.7 Accordingly, the proposed contribution factor for the first quarter of 2026 is as follows: 37.6% Proposed Circularity Discount Factor The Commission also has directed OMD to account for contribution factor rounding when calculating the circularity discount factor.8 Accordingly, the proposed circularity factor for the first quarter of 2026 is as follows: 0.2719909 Conclusion If the Commission takes no action regarding the projections of demand and administrative expenses and the proposed contribution factor within the 14-day period following release of this Public Notice, they shall be deemed approved by the Commission.10 USAC shall use the contribution factor to calculate universal service contributions for the first quarter of 2026. USAC will reduce each provider’s contribution obligation by a circularity discount approximating the provider’s contributions in the upcoming quarter.11 USAC includes contribution obligations less the circularity discount in invoices sent to contributors. Contribution payments are due on the dates shown on the invoice. Contributors will pay interest for each day for which the payments are late. Contributors failing to pay contributions in a timely fashion may be subject to the enforcement provisions of the Communications Act of 1934, as amended, and any other applicable law. In addition, contributors may be billed by USAC for reasonable costs of collecting overdue contributions.12 The FCC also emphasizes that carriers may not markup federal universal service line-item amounts above the contribution factor.13 Thus, carriers may not, during the first quarter of 2026, recover 7 See Federal-State Joint Board on Universal Service, 1998 Biennial Regulatory Review – Streamlined Contributor Reporting Requirements Associated with Administration of Telecommunications Relay Service, North American Numbering Plan, Local Number Portability, and Universal Service Support Mechanisms, Telecommunications Services for Individuals with Hearing and Speech Disabilities, and the Americans with Disabilities Act of 1990, Administration of the North American Numbering Plan and North American Numbering Plan Cost Recovery Contribution Factor and Fund Size, Number Resource Optimization, Telephone Number Portability, Truth-in- Billing and Billing Format, CC Docket Nos. 96-45, 98-171, 90-571, 92-237, 99-200, 95-116, 98-170, Order and Second Order on Reconsideration, 18 FCC Rcd 4818, 4826, para. 22 (2003) (Second Order on Reconsideration). 8 Id. 9 The proposed circularity discount factor = 1 + [(unadjusted circularity discount factor – 1) * (unadjusted contribution factor / proposed contribution factor)]. The proposed circularity discount factor is calculated in a spreadsheet, which means that internal calculations are made with more than 15 decimal places. 10 See 47 C.F.R. § 54.709(a)(3). 11 USAC will calculate each individual contributor’s contribution in the following manner: (1-Circulatory Factor) * (Contribution Factor*Revenue) 12 See 47 C.F.R. § 54.713. 13 See 47 C.F.R. § 54.712. 3 through a federal universal service line item an amount that exceeds 37.6 percent of the interstate telecommunications charges on a customer’s bill. In addition, under the limited international revenues exception (LIRE) in section 54.706(c) of the Commission’s rules, a contributor to the universal service fund whose projected collected interstate end- user telecommunications revenues comprise less than 12 percent of its combined projected collected interstate and international end-user telecommunications revenues shall contribute based only on projected collected interstate end-user telecommunications revenues, net of projected contributions.14 The rule is intended to exclude from the contribution base the international end-user telecommunications revenues of any entity whose annual contribution, based on the provider’s interstate and international end- user telecommunications revenues, would exceed the amount of its interstate end-user revenues.15 The proposed contribution factor exceeds 12 percent, which the FCC recognizes could result in a contributor being required to contribute to the universal service fund an amount that exceeds its interstate end-user telecommunications revenue. Should a contributor face this situation, the contributor may petition the Commission for waiver of the LIRE threshold.16 For further information, please contact Daniel Daly at (202) 418-1832, in the Office of Managing Director. 14 See 47 C.F.R. § 54.706. 15 See Federal-State Joint Board on Universal Service, Sixteenth Order on Reconsideration, CC Docket No. 96-45, Eighth Report and Order, CC Docket No. 96-45, Sixth Report and Order, Docket No. 96-262, 15 FCC Rcd 1679, 1687-1692, paras. 17-29 (1999) (Fifth Circuit Remand Order). 16 Generally, the Commission’s rules may be waived for good cause shown. 47 C.F.R. § 1.3. The Commission may exercise its discretion to waive a rule where the particular facts make strict compliance inconsistent with the public interest. Northeast Cellular Telephone Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990) (Northeast Cellular). In addition, the Commission may consider considerations of hardship, equity, or more effective implementation of overall policy on an individual basis. WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969); Northeast Cellular, 897 F.2d at 1166. Waiver of the Commission’s rules is therefore appropriate only if special circumstances warrant a deviation from the general rule, and such deviation will serve the public interest. Northeast Cellular, 897 F.2d at 1166; 47 C.F.R. § 54.802(a). 4