The telecom industry and public interest groups supported government arguments asking the U.S. Supreme Court to overturn the 5th U.S. Circuit Court of Appeals’ 9-7 en banc decision invalidating part of the USF program (see 2501090045). In a decision that sent shock waves through the telecom industry, judges on the conservative circuit agreed with Consumers' Research that USF violates the Constitution by improperly delegating Congress’ power to the FCC and the agency's power to a private company, the Universal Service Administrative Co. (see 2412100060).
The FCC in a U.S. Supreme Court filing defended the USF in general, and the contribution factor more specifically, as the justices prepared to hear what could be the most consequential FCC case in years (see 2412100060). SCOTUS agreed in November to review the 5th U.S. Circuit Court of Appeals' 9-7 en banc decision, which sided with Consumers' Research and found that the USF contribution factor is a "misbegotten tax.”
Attorneys for Maurine and Matthew Molak asked the 5th U.S. Circuit Court of Appeals to restart their challenge of a July order that lets schools and libraries use E-rate support for off-premises Wi-Fi hot spots and wireless internet services (see 2409230024). In September, the court dismissed the case, saying it lacked jurisdiction (see 2409260046). Petitioners “wish to inform the panel that, after nearly six months, they are still waiting on the FCC to rule on their July 2024 request that the agency reconsider its … ‘Hotspots Order,’ which subsidizes Wi-Fi hotspots anywhere students go,” said a Monday filing at the court: “It seems the FCC is content to ignore the petition for reconsideration, safe in the belief that as long as the petition remains pending the agency can both implement its unlawful policy and avoid judicial review.” The filing in docket 23-60641 also notified the court of the 6th Circuit’s recent decision vacating the FCC’s net neutrality order (see 2501020047) as it ponders a second case on school bus Wi-Fi. Judges heard oral argument in that case in November (see 2411040061). That decision “slams the door on the FCC’s contention in this case that the Declaratory Ruling expanding E-Rate subsidies for Wi-Fi on school buses is authorized” by the Communication Act section on the USF, the filing said. The Molaks brought both cases because they oppose unsupervised social media access on school buses. The Molaks' son David died by suicide after he was bullied online as a 16-year-old.
Two law professors told the U.S. Supreme Court on Friday it should reverse the 5th U.S. Circuit Court of Appeals' 9-7 en banc decision, which found the USF contribution factor is a "misbegotten tax.” SCOTUS has agreed to hear the case, FCC v. Consumers’ Research, which potentially has broad implications, experts say (see 2412100060). Look no further than a 1938 brief by then-Solicitor General Robert Jackson, urged Gerard Magliocca, professor at the Indiana University Law School, and John Barrett, professor of law at St. John’s University, in an amicus brief Friday. They wrote that Jackson, later appointed to SCOTUS, “proposed an elegant solution to the issue now before the Court" when he argued in Currin v. Wallace that "the non-delegation doctrine applies only when Congress delegates power to the President" and "that congressional delegations to federal agencies, independent boards, and private actors are not subject to" the doctrine. Acknowledging that SCOTUS decided Currin without addressing Jackson's theory, they said the court should read his "thoughtful brief" and reverse the 5th Circuit.
Consumers’ Research asked the 5th U.S. Circuit Court of Appeals to vacate the FCC’s USF contribution factor for Q1 of this year, set by the agency last month. The group, and its allies, had already asked the FCC to zero out the contribution factor (see 2412130016), calling it “an unconstitutional tax raised and spent by an unaccountable federal agency.” The 5th Circuit earlier found in a 9-7 en banc decision that the contribution factor is a "misbegotten tax.” That decision is before the U.S. Supreme Court (see 2412100060). “Congress’s standardless delegation to the FCC of legislative authority to raise and spend nearly unlimited money via the Universal Service Fund violates Article I, section 1 of the U.S. Constitution,” said the filing with the court: USF charges “are taxes and therefore Congress’s standardless delegation to the FCC of authority to raise and spend nearly unlimited taxes violates Article I, section 8” of the Constitution.
Challenges remain for industry in its efforts remove and replace Huawei and ZTE equipment within carrier networks, even though Congress finally allocated $3.08 billion, closing the funding shortfall in the FCC’s Secure and Trusted Communications Networks Reimbursement Program (see 2412240036), Summit Ridge Group President Armand Musey said in an interview. Musey's firm advises several carriers in the program.
Small and mid-sized cable operators are largely bullish about President-elect Donald Trump's incoming administration and his choice of FCC Commissioner Brendan Carr to head the agency, expecting aggressive deregulation, ACA Connects President Grant Spellmeyer said during an interview with Communications Daily. Spellmeyer discussed the industry group's 2025 priorities, growing questions surrounding BEAD, and what one does during the lame-duck weeks before inauguration and a new administration. The following transcript was edited for length and clarity.
Consumers’ Research and other conservative interests last week urged the FCC to zero out the USF contribution factor. Next year, the U.S. Supreme Court is slated to hear a case that Consumers’ Research brought in the 5th U.S. Circuit Court of Appeals (see 2412100060), which found in a 9-7 en banc decision that the contribution factor is a "misbegotten tax.” Posted Friday in docket 96-45, the filing arrived the day after the FCC Office of Managing Director proposed a contribution factor of 36.3% for Q1 2025 (see 2412120061). The contribution factor “is an unconstitutional tax raised and spent by an unaccountable federal agency -- which in turn has delegated almost all authority over this revenue-raising scheme to a private company registered in Delaware,” the Universal Service Administrative Co. The cost “is ultimately borne by consumers via a separate line item on nearly every phone bill in the country,” the filing said. In its decision, the 5th Circuit found the USAC “sets the USF Tax -- subject only to FCC’s rubber stamp” and the agency lacks "a documented process for checking USAC’s work,” the filing said. Among those endorsing the pleading was Edward Blum, president of Students for Fair Admissions, which last year won a SCOTUS case that effectively ended race-based affirmative action policies in American college admissions, and other respondents listed on Consumers’ Research’s initial SCOTUS brief.
The FCC’s final order on letter of credit (LOC) rules for providers receiving high-cost USF support saw one major change from the draft version. Commissioners approved the order 5-0, with language added at the request of Commissioner Anna Gomez (see 2412110050), addressing tribal issues. The final version notes that “making wholesale changes to our rules in the middle of an ongoing program would be unnecessary and could create confusion for support recipients,” the same as the draft. But the final version added a sentence: “Given the difficulties some Tribal carriers have collateralizing assets to support a LOC, however, we will consider waiving the relevant LOC requirements on an individual basis consistent with the Commission’s waiver standard, and we do not foreclose examining in future support programs whether Tribal carriers should be permitted to rely on alternatives to LOCs.” The FCC on Friday posted the final version of the LOC changes. It includes a statement by Chairwoman Jessica Rosenworcel. The agency also posted the final version of an order that expands the parts of the 6 GHz band where new very-low-power (VLP) devices are permitted to operate without coordination. That order was also approved 5-0 with no changes of note (see 2412110040). Only Rosenworcel and Commissioner Geoffrey Starks issued written statements. That order was also posted on Friday.
With USF in the crosshairs at the FCC (see 2412030044), the FCC Office of Managing Director Thursday proposed a contribution factor of 36.3% for Q1 2025. That’s up from 35.8% during Q4 2024 but below a November projection of 38.8% by analyst Billy Jack Gregg (see 2411040026). The total contribution requirement for Q1 is $2.2 billion, of which just more than $1 billion is tied to high-cost program support. Next is the schools and libraries program ($657 million), Lifeline ($288 million) and the rural healthcare program ($129.5 million).