USF Not Immediately Impacted by Fifth Circuit Ruling: FCC Official

NASHVILLE, July 30, 2024 – The Federal Communications Commission's Universal Service Fund won’t be immediately disrupted in the wake of a Fifth Circuit decision that found the fund’s contribution scheme unconstitutional, an agency official said on Tuesday.

“It’s business as usual,” Elizabeth Cuttner, a legal advisor to FCC Chairwoman Jessica Rosenworcel, said of the fund. “We’re taking a very close look and taking it seriously, but nothing in our day-to-day has changed.” 

The opinion created a split last week with other federal courts, making Supreme Court intervention likely.

Rosenworcel signaled an intent to appeal, saying the agency would “pursue all available avenues for review.” 

The court remanded the original proceeding back to the FCC. A conservative nonprofit had asked the agency to review a contribution factor, the percentage of interstate voice revenue telecoms pay into the fund each quarter.

Set up by the Telecommunications Act of 1996, the USF spends about $8 billion annually on subsidy programs that fund internet discounts for schools, libraries, healthcare centers, in addition to supporting rural broadband infrastructure.

Industry groups and nonprofits were both displeased with the decision – USTelecom called the ruling “a severe blow” to narrowing the digital divide.

Analysts at New Street Research predicted the Supreme Court would side with the FCC in an appeal, noting the high court has nixed other Fifth Circuit decisions that would have upended existing precedent. 

Lawmakers have been working to modernize the fund for more than a year. There’s wide agreement that shrinking voice revenues are an unsustainable source of funding for increasing rural broadband needs, but legislation widening that contribution base has proven a complex task and has yet to materialize.