A recent federal court ruling could upend billions in telecommunications funding for schools, libraries, low-income people, rural areas, and places where the cost of providing phone and internet service is high. One politically conservative policy-hawk group behind the suit said Wednesday Congress should set the rate, not regulators at the Federal Communications Commission. An FCC spokesperson vowed to exhaust efforts to review the decision.
Depending on where you live, who your service provider is, and what sort of service you have, the Universal Service Fund fee might be 10 percent of your phone bill. Since 1996, telecommunications providers have been required to allot varying portions of their interstate and international revenue to the Universal Service Fund. In early 2016, it was 18.2 percent. In Spring 2024, it was 32.8 percent — a rate decided by industry analysts advising the FCC.
“There’s absolutely no bar whatsoever for Congress allocating money or even setting a tax and funding this through telecom services or even the general fund,” said William Hild, executive director of Consumers’ Research. “You can’t have this weird Rube Goldberg machine, if you are familiar with that term, where the FCC hires a private company to both administer the fund but also advise them on how much money they need for the fund and therefore the tax rate.”
Hild — whose “anti-woke” group claims government policies and private business practices favoring environmental responsibility, social issues, and internal corporate governance lead to slave labor and genocide — filed the Fifth Circuit Court of Appeals suit with a coterie of like-minded groups and individuals after identical suits failed in the Sixth Appeals Court and Eleventh Appeals Court.
He said his intent was to streamline and add oversight to the fund, not stop efforts to buildout telecommunications infrastructure nor make a value judgement on its worth.
Versions of the Fund have been around since 1916.
By some estimates, the Universal Service fund would collect $8.8 billion in 2024. This spring, the FCC planned to use the fund to support more than $631 million in school and library programs, more than $297 for impoverished people, and $1.109 billion for serves in high-cost areas.
In the Virgin Islands, that amounted to 40 schools and six libraries receiving $3,531,856 for broadband connectivity and internal connections from 2022 to 2024, benefitting 13,405 students, according to the FCC. Ten rural healthcare providers in the territory received more than $307,000 in connections assistance from 2021 to 2023. Nearly $15 million went to connect rural Virgin Islands households in 2023. And in March of this year alone, 1,316 Virgin Islanders received discounted phone or internet service.
FCC Chairwoman Jessica Rosenworcel called the decision “misguided and wrong.”
“It upends decades of bipartisan support for FCC programs that help communications reach the most rural and least-connected households in our country, as well as hospitals, schools, and libraries nationwide. The opinion reflects a lack of understanding of the statutory scheme that helped create the world’s best and most far-reaching communications network. We will pursue all available avenues for review,” Rosenworcel said in a July statement.
How the fund would operate if fee collection for the fund was unconstitutional was not clear.
Five dissenting appeals court judges said the ruling opened the door for vast changes in how the federal government regulates industries.
Writing for the minority, Judge Stephen A. Higginson said the majority went beyond what the suit had asked for, using a new, novel theory that two constitutional actions created an unconstitutional one.
“That is, according to the majority, when Congress provides an intelligible principle to channel agency discretion (constitutional) and a private entity performs calculations under the agency’s supervision (also constitutional), it becomes—pursuant to an undefined, unannounced, and unprecedented test—unconstitutional,” Higginson wrote. “Make no mistake, there is nothing narrow about this ruling. This decision invites lower courts to leapfrog the Supreme Court; creates a split with all other circuits to have considered the issue; ignores statutory criteria and regulations; and upends the political branches’ decades-long engagement with each other, industry, and consumers to address the technology divide.”
Congress set up the USF to address the quickly changing nature of telecommunications offerings, needs, and pricing, Higginson said. Subject matter experts at the FCC, in consultation with industry groups and community leaders, constantly evaluate the program.
“Congress provided additional principles to guide FCC. For example, Congress made the policy decision that rural Americans should not be abandoned on the wrong side of the technology divide,” he wrote. “The USF remains subject to extensive congressional efforts to weigh competing policy priorities and interests, balancing concerns of different consumers and industries.”
Others who brought the suit include a former Tea Party Patriots activist from Houston, Texas, a California-based petroleum consultant, and Cincinnati-based Cause Based Commerce — a company that offers “mobile, long distance, and toll-free services” to “values-based consumers who want alternatives to the many companies and providers that support causes and positions contrary to their beliefs,” according to the company website.
Cause Based Commerce is the parent company of The Sienna Group, a so-called affinity marketing group. Like Cause Based Commerce, the Walton, Kentucky-based company seeks its customers based on share interests not strictly related to its professional capabilities.
Cause Based Commerce President David W. Condit deferred questions to attorney Trent McCotter of Boyden Gray. McCotter, a member of the conservative Federalist Society and Director of the Separation of Powers Clinic at the Catholic University of America in Washington, D.C., where he’s filed briefs on behalf of Sen. Ted Cruz (R-TX) and Rep. Darrell Issa (R-CA). McCotter replied curtly late Wednesday: “Stop calling the parties in this case. We have no comment.”
