- The FCC must now decide how to proceed with USF
- It might bring administration of the program in-house or seek action from Congress
- It’s not clear why Consumers’ Research, the non-profit so vehemently opposed to USF, has such a beef against the program
In a blow to the future of the Universal Service Fund (USF), yesterday the U.S. Court of Appeals for the Fifth Circuit held that the Federal Communications Commission (FCC) lacked specific congressional authority to establish the Universal Service Administrative Company (USAC).
Even though the U.S. Supreme Court has already ruled on the constitutionality of the USF, yesterday’s ruling relates to the legality of USAC, the third-party entity that administers USF. The two matters are related, yet distinct, legal questions.
The FCC said the court’s order would not take effect for at least two months, giving the agency time to consider its options, according to Reuters. That means the ruling does not immediately shut down USAC or stop USF payments.
The FCC must now decide how to respond.
Telecom policy analyst Blair Levin told Fierce that the FCC could request an en banc, which is a court hearing where a case is considered by a larger group of judges, rather than the smaller panel that normally hears appeals. And the FCC is likely to ask for a longer stay than just two months.
If yesterday’s ruling stands, the FCC will have a couple of options.
Levin said the FCC could bring all of the administrative functions for USF in-house.
Alternatively, the FCC could ask Congress to approve the USAC. He thinks it’s feasible that Congress could do this and put the whole issue to rest. “Look, in 30 years of USAC's existence, how many members of Congress have complained about it?” he asked. “It's not a partisan issue. It's just a kind of a technical thing.”
What’s the deal with Consumers’ Research?
Consumers’ Research is the non-profit group that filed the lawsuits against USF and USAC. No one quite knows why the group has such a vendetta against USF or, for that matter, E-Rate.
The group seems opposed to regulatory schemes in general. “It is not at all clear what problem they thought they were solving. It is not like industry was calling for this, and it was not like consumers were calling for this,” Levin said.
However Levin did say that it is appropriate for FCC Chairman Brendan Carr to re-examine all the elements of universal service in light of all the changes in the marketplace and technology. And he also acknowledged that USF has a very high contribution rate, which is a burden on consumers who pay into it.
Former FCC Commissioner Mike O’Reilly told Fierce: “The Court decision reiterates the real need to fix the broken administration of USF, including who is responsible for what, installing proper accountability, and instilling some basic programmatic discipline. People ignore this to their own peril, as challenges are likely to continue. Indeed, efforts to change USF must include major administrative and distribution reforms, rather than figuring out how to impose harmful new taxes.”
Industry reaction
In response to yesterday’s ruling, Mike Romano, CEO of NTCA–The Rural Broadband Association said, “NTCA strongly disagrees with the court’s decision. The court’s holding that Congress never authorized the FCC to establish the USAC flies in the face of the fact that Congress explicitly ratified USAC’s existence as an instrumentality of the government just several years ago.”
He also said the “decision inflicts unnecessary uncertainty on small broadband providers who relied on these programs when investing in networks in deeply rural areas.”
Joey Wender, executive director of the Schools, Health & Libraries Broadband (SHLB) Coalition, said the group was disappointed by the decision.
“SHLB is reviewing the decision with our legal counsel and will work with the FCC and other stakeholders to determine how best to respond to this decision to ensure the Universal Service Fund can continue its important work.”
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