As our firm previously announced, the Fifth Circuit Court of Appeals recently ruled that the current Universal Service Fund funding mechanism is unconstitutional. This ruling has prompted major industry stakeholders to call on Congress to act swiftly in repositioning the fund for the future.

USTelecom’s Appeal to Congress

USTelecom – The Broadband Association, representing the industry’s largest broadband carriers and ISPs, including AT&T, has issued an open letter to Congress, urging lawmakers to undertake comprehensive reforms of the USF. Jonathan Spalter, USTelecom’s President and CEO, emphasized that the appeals court’s decision presents a critical opportunity to reshape the program, which is essential for maintaining affordable broadband access and supporting the broader U.S. technology and internet ecosystem.

Spalter highlighted the high stakes involved, noting that the USF enables broadband connectivity that drives the entire technology sector. Parroting some of the same policy arguments and positions that were publicly announced by USTelecom less than two months ago, Spalter stressed the importance of congressional action to ensure the sustainability and effectiveness of the USF in light of the court’s ruling.  

Court Ruling and Its Implications

The Fifth Circuit’s en banc ruling overturned a previous unanimous panel decision that upheld the USF’s structure. The court found that the program’s creation effectively transferred Congress’ taxing authority to a private entity via the FCC, which collects fees from phone carriers to subsidize broadband access for low-income and rural Americans. This decision has created a circuit split, increasing the likelihood that the issue may be reviewed by the U.S. Supreme Court.

Following the ruling, plaintiffs challenging the USF’s constitutionality have renewed their petition to the Supreme Court, urging it to address the circuit split. However, industry leaders like USTelecom argue that Congress should not wait for the high court’s decision but should proactively reform the USF.

Meaningful Industry Shift

It is particularly noteworthy that USTelecom, which includes major players like AT&T, is vocally criticizing the Fifth Circuit’s ruling as fundamentally flawed. This stance represents a significant shift from previous positions. Not long ago, AT&T was advocating against the current funding mechanism, favoring direct Congressional appropriations instead. However, USTelecom’s current advocacy for reform signals a strategic pivot towards maintaining the existing administrative framework of the USF while expanding the base of contributors to make the fund more equitable and sustainable.

Spalter and USTelecom are now pushing for legislative reforms that would expand the revenue-based contribution system. They propose including revenue from a variety of new sources, such as broadband, edge providers, digital marketers, and other heavy users of the networks funded by the USF. This approach aims to distribute the financial burden more broadly, ensuring that the fund remains affordable for all contributors.

Legislative Action Needed

Spalter’s letter calls on Congress to take decisive action to reform the USF, ensuring that it remains a sustainable and effective mechanism for supporting universal broadband access. He pointed out that previous warnings about the potential negative impact of a court decision on the USF have now materialized, making immediate legislative intervention crucial.

There has been some bipartisan interest in reforming the USF to protect it from judicial challenges. Notably, Sen. Ted Cruz, R-Texas, proposed bringing the FCC program under direct congressional control. Additionally, a bipartisan group of senators has been exploring potential reforms for the USF.

Spalter commended these efforts and urged Congress to consider all options to modernize and update the USF. He suggested that a broader base of fee-payers, including large tech platforms that benefit from widespread broadband access, should contribute to the fund. This approach could lead to lower fees for consumers as the financial burden is shared more equitably.

Call to Action!

The Fifth Circuit’s ruling on the USF has created a pressing need for congressional action to ensure the future stability and effectiveness of the fund. USTelecom’s call to action highlights the importance of proactive legislative reform to safeguard universal broadband connectivity and maintain the U.S.’s leadership in the global information economy. As developments unfold, it is essential for stakeholders to stay informed and engaged in the reform process to ensure that the USF continues to serve its vital role.

To learn more about the implications of the Fifth Circuit’s decision, you are cordially invited to join our firm’s managing partner, Jonathan Marashlian, and other experts on a Zoominar hosted by none other than VoIP industry pioneer and visionary, Jeff Pulver.  Details below: