WASHINGTON, December 18, 2023 – The Eleventh Circuit Court of Appeals ruled against a conservative nonprofit that challenged the constitutionality of the Universal Service Fund. 

The USF spends about $8 billion annually to fund four internet subsidy programs for rural infrastructure, low-income households, schools and libraries, and healthcare providers. It has been funded since 1996 by fees on phone bills from voice providers, with the Federal Communications Commission’s Universal Service Administrative Company responsible for collecting and distributing the money.

Consumers’ Research, along with other conservative groups, has been on a legal offensive against the USF, filing multiple federal suits alleging the fund is unconstitutional and taking the chance to air its concerns again in October by challenging the FCC’s contribution factor for this quarter. 

In each suit – two pending before the Fifth Circuit and one pending before the D.C. Circuit, with another struck down by the Sixth Circuit in May – the group argues that Congress did not put proper guardrails on the commission’s authority to collect the fund and that the FCC abused what authority it does have by handing responsibility to USAC.

The Eleventh Circuit disagreed. In a ruling issued on December 14, the judges found that Section 254 of the Telecommunications Act of 1996, which sets out the commission’s USF responsibilities, is in line with statutes that have survived similar challenges in the past. 

Section 254 directs the FCC to collect fees from telecommunications carriers to support universal service for low-income and rural areas, and to implement policies around the fund that are “necessary and appropriate for the protection of the public interest, convenience, and necessity.” Consumers’ Research alleged this is too broad to satisfy the nondelegation doctrine, a legal standard which requires Congress to articulate an “intelligible principle” when delegating duties to federal agencies, but the Eleventh Circuit found the law meets that standard.

The court also ruled that the FCC oversees USAC closely enough that the fund is still functionally under the agency’s control, not improperly delegated to a third party as the suit alleged.

That follows similar reasoning to the Sixth Circuit’s decision and an initial ruling from the Fifth Circuit. But the Fifth Circuit agreed in July to rehear the case with a full panel of five judges, signaling a potential reversal of its previous decision. Oral arguments took place in September and no ruling has been issued yet.

In a concurring opinion, Eleventh Circuit Judge Kevin Newsom expressed dissatisfaction with the precedent that kept Section 254 standing, saying its “mealymouthed shibboleths provide no meaningful constraint,” but that statutes he finds similarly vague have been found to provide enough guidance to avoid being struck down.

If the Fifth Circuit were to find the law in violation of the nondelegation doctrine, it would tee the issue up for potential review by the Supreme Court.

WASHINGTON, November 17, 2023 – Three senators proposed a bill on Thursday that would tap broadband providers and tech companies to contribute to a major internet subsidy.

The Universal Service Fund is a roughly $8 billion annual broadband subsidy for low-income households, schools, libraries, and healthcare providers. It’s funded by fees on voice service providers, leading to talks of reform as voice revenues decline and broadband adoption increases.

The Federal Communications Commission administers the fund, but has left it to Congress to change the USF’s contribution base, citing doubts about the agency’s legal authority to make that change on its own.

A Senate working group, which does not include the senators who proposed the new legislation, has been evaluating potential reforms to the fund since May.  

Commenters to that working group largely supported fees on broadband providers as a more sustainable long-term solution for the fund. A more contentious point has been whether or not to call on some tech companies to contribute as well.

The argument is that tech companies which operate largely online, like Google and Amazon, should pay into the USF because they benefit so directly from more people being able to access broadband. 

Tech companies have opposed the proposition, saying broadband companies are a more stable source of funding. FCC Commissioner Brendam Carr and broadband companies publicly support the idea.

So does the bill proposed on Thursday. It would direct the FCC to expand the USF contribution base to both broadband and online tech companies, known as “edge providers.” Those edge providers would be limited to companies responsible for more than 3% of the country’s internet traffic and with more than $5 billion in annual revenue.

Multiple broadband industry groups came out in support of the legislation, including USTelecom, which represents major providers like AT&T and Lumen, and two rural broadband coalitions.

Conservative groups are also challenging the USF in court. The right-wing nonprofit Consumers’ Research and other organizations currently have four pending suits alleging the fund is unconstitutional.

They argue Congress gave the FCC unfettered authority to collect a tax by establishing the fund in 1996, and that the FCC abused that authority by delegating USF management to a nonprofit under the commission’s control.

The Fifth Circuit Court of Appeals reheard one such case with a full panel of judges on September 19 and has yet to issue a ruling. The Sixth Circuit struck down a petition from the group in May, while the Eleventh and D.C. circuits also have yet to issue rulings. 

Senators Markwayne Mullin, R-O.K., Mark Kelly, D-A.Z., and Mike Crapo, R-I.D., proposed the bill. Kelly, along with Senate working group leader Ben Luján, D-N.M., reintroduced another bill in March that would also direct the FCC to research the feasibility of tapping big tech for funds.

Congress dedicated more than $42 billion to help states and companies build out broadband networks to all Americans. This program, called the Broadband Equity, Access, and Deployment Program, marked a crucial step towards bridging the digital divide in our nation. But this program will fail if Congress doesn’t renew the Affordable Connectivity Program that states are relying on to connect low-income Americans.

Bipartisan legislation from Congress made it clear that states needed to offer a low-cost broadband plan to residents to qualify for BEAD funding. For the uninitiated, the ACP is a $30-a-month subsidy that an eligible consumer can use towards any broadband plan a participating service provider offers.

In fact, many providers have started offering broadband plans at a $30 price point so the effective cost of broadband to the consumer is zero. Using ACP is an easy way for ISPs to meet the affordability requirement, a “short-hand” of sorts for them to offer affordable plans using an existing — and successful — model.

However, the ACP is expected to exhaust its funding in the first half of next year, leaving a potentially disastrous scenario for families who may have little savings or discretionary income. Ultimately allowing the ACP to end leaves a crucial question unanswered: what good are networks if people cannot afford to connect to them?

During a congressional oversight hearing in May, National Telecommunications and Information Agency Administrator Alan Davidson explained to Members of Congress that the BEAD program will be negatively impacted if continued funding for the ACP is not found. He emphasized that for low-income rural Americans, the ACP is the lifeline ensuring they can afford to access the internet. Without it, some providers may hesitate to deploy in rural areas over fear that the investment will be sustainable. Subscribership concerns may prove to be a limiting factor on which rural areas are served.

The ACP extends every BEAD dollar further. A study conducted by Common Sense Media found that the ACP could reduce the BEAD subsidy needed to incentivize providers to build in rural areas by up to 25% per year. According to the study, ACP reduces the per-household subsidy required to incentivize ISP investment by $500. Simply put, ACP improves the economic case because it 1) effectively lowers the cost of service, 2) creates a customer base with less churn, and 3) makes subscribers easier to acquire because of the massive public and private investment in raising awareness for the program.

But if the ACP is allowed to end, the federal government could end up overspending on every broadband deployment made through BEAD. This ultimately means BEAD networks will fail to connect millions of Americans.

The ACP is more than a simple affordability program; for over 21 million households; it’s a gateway to our ever-increasing digital society. Without it, millions of Americans will be unable to see doctors, visit with family, shop, and engage with their communities online. At the same time, the ACP plays a significant role in future infrastructure deployment. Allowing the ACP to end all but ensures that millions will be disconnected and future funding dollars won’t go the distance to close the digital divide.

Ryan Johnston is senior policy counsel at Next Century Cities. He is responsible for NCC’s federal policy portfolio, building and maintaining relationships with Federal Commissions Commission officials, members of Congress and staff, and public interest allies. Working with various federal agencies, Ryan submits filings on behalf of NCC members on technology and telecommunications related issues that impact the digital divide such as broadband data mapping, benchmark speeds, spectrum policy, content moderation, privacy, and others. This piece is exclusive to Broadband Breakfast.

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