Concept of ‘Universal Service Obligation’ was introduced by Rowland Hill in 1837 with his postal reforms. The postal reforms included uniform rates across the United Kingdoms (UK) and prepayment by sender via postage stamps. Universal Service was the key objective of the Universal Postal Union.

By some accounts, Theodore Vail, the President of AT&T, first used the term ‘Universal Service’ in the company annual report in 1990. He described ‘Universal Service’ by writing that the telephone system should be universal, interdependent and intercommunicating, affording opportunity for any subscriber to any exchange to communicate with any other subscriber of any other exchange.

In India, the New Telecom Policy 1999, provided that the resources for meeting the Universal Service Obligation (USO) would be raised through a ‘Universal Access Levy’ (UAL), which would be a percentage of the revenue earned by the operators under various licences. The Universal Service Support Policy for provision of telecom facilities in rural and remote areas of the country came into effect from 01.04.2002. The Indian Telegraph (Amendment) Act, 2003 giving statutory status to the Universal Service Obligation Fund (USOF), was passed by the parliament in December 2003. The rules for administration of the fund known as Indian Telegraph (Amendment) Rules, 2004 were notified on 26.03.2004. As per the Indian Telegraph Act 1885 (as amended in 2003 and 2006), the fund is to be utilised exclusively for meeting the Universal Service Obligation

The Universal Service Obligation (USO) Fund was established with fundamental objective of providing access to "Basic" telegraph services to people in remote and rural areas at affordable and reasonable prices. Subsequently, the Indian Telegraph (Amendment) Act, 2006 was notified on 29.12.2006 to repeal the term "Basic" wherein the scope of USO Fund was widened to provide access to telegraph services (including mobile services, broadband connectivity and ICT infrastructure creation) in rural and remote areas.

The Universal Service Obligation (USO) Fund is headed by the Administrator, USO Fund who is appointed by the Central Government, for the administration of the fund. It is an attached office of the Department of Telecommunications (DoT), Ministry of Communications.