Conservative Group Files Another Legal Challenge to Universal Service Fund

WASHINGTON, October 6, 2023 – The conservative nonprofit Consumers’ Research brought another legal challenge against a major broadband subsidy program on Monday.

The Universal Service Fund spends about $8 billion each year to fund four internet subsidy programs for low-income households, schools, libraries, and healthcare providers. While it is now used to provide discounted broadband, it has been funded since 1996 by fees attached to monthly phone bills from voice providers.

Consumers’ Research is continuing an offensive against the program, with three additional pending suits alleging the Universal Service Fund is unconstitutional. Their most recent petition centers on the Federal Communications Commission’s September approval of the fund’s contribution factor – used to determine the money landline companies will pay into the fund – for the last quarter of 2023.

Along with other petitioners, the group is asking the Fifth Circuit to review the approval, taking a chance to raise again issues it has put forth in its other suits. Its main allegation is that in establishing the USF, Congress gave the FCC unfettered authority to collect a tax. The FCC further abused that authority by delegating the collection and administration of the fund to a non-profit under the commission’s control, the petition alleges.

In March, the Fifth Circuit denied a similar petition from the group, ruling both that Congress gave the commission sufficient guidance on how to run the fund and that the FCC has enough control over USAC to delegate responsibilities to the entity.

But the court agreed in July to rehear the case with a full five-judge panel, instead of the three who initially ruled on the matter. Oral arguments took place on September 19. The court has not yet issued a ruling.

The Sixth Circuit issued the group a denial in May, using similar reasoning to the Fifth Circuit’s first ruling.

Consumer’s Research has cases pending in the Eleventh and D.C. Circuits.

A senate working group is exploring potential changes to the USF’s contribution base The FCC has been looking to update to a more sustainable model – like contributions from broadband providers and tech companies – as voice revenues decline, but has left it to Congress to give the commission explicit authority to do so.