Leaders of the House and Senate Commerce committees who are spearheading the bipartisan congressional working group on a USF legislative revamp, which relaunched in June (see 2506120091), told us they plan to begin meeting again this month. But they said they feel less pressure to quickly reach an agreement on legislative recommendations since the U.S. Supreme Court's recent ruling in Consumers’ Research v. FCC, which found that USF’s funding mechanism is constitutional (see 2506270054). Sens. Ben Ray Lujan, D-N.M., and John Thune, R-S.D., formed the working group in 2023 as Communications Subcommittee chairman and ranking member, respectively (see 2305110066).
Former FCC Commissioner Mike O’Rielly said Wednesday that while he has long been a critic of the USF, he was relieved that the U.S. Supreme Court last week didn’t overturn the program (see 2506270054). Cutting off support that USF recipients need would be “a terrible outcome,” O’Rielly said during a Broadband Breakfast webinar.
The U.S. Supreme Court upheld the FCC’s USF contribution scheme in a 6-3 opinion Friday in Consumers’ Research v. FCC, but dissenting and concurring opinions from several conservative justices appeared to invite future challenges, attorneys told us.
The U.S. Supreme Court ruled 6-3 on Friday in Consumers’ Research v. FCC that the USF's contribution scheme doesn’t violate the non-delegation doctrine. The decision overturned an en banc ruling from the 5th U.S. Circuit Court of Appeals. Justice Elena Kagan wrote the majority opinion, while Justice Neil Gorsuch wrote a dissent, which was joined by Samuel Alito and Clarence Thomas.
The design of the U.S. universal service subsidy regime is inherently flawed and lacks strong oversight, Competitive Enterprise Institute Senior Policy Analyst Solveig Singleton wrote this week. Rather than reform, it should be scrapped in favor of a market-centered policy that would better provide universal service at a reasonable price, she said. Existing universal service mechanisms "are unnecessary, price- and market-distortive, wasteful, and unaccountable [and] amount to a regressive and constitutionally inappropriate tax." Singleton said subsidies to high-cost areas "are no longer necessary," since mobile and satellite service have eliminated such areas. USF is also made superfluous by other subsidy programs supporting the deployment of advanced services, she added. Instead, she argued in favor of "voucher-type subsidies for low-income users," as that approach -- funded from general tax revenue -- "would limit distortion of consumers’ and carriers’ decisions." Any subsidies for rural health care and educational institutions should be funded from general revenue as well, she said. "Competitive neutrality would be restored."
Strand Consult last week poked holes in a recent study by the Computer & Communications Industry Association, which warned that a 5% USF fee on cloud service revenues, passed through to customers, would cause a hit to the U.S. GDP of up to $148.18 billion (see 2506030049). The study was written by Raul Katz, director of business strategy research at the Columbia Institute for Tele-Information at Columbia Business School. Katz modeled a 5% contribution rate, which would deliver $25 billion, “almost three times the current USF,” Strand said. “No policy maker had made such a proposal. The rate appears to be amplified on purpose to paint a picture of a doomsday scenario.”
The FCC Wireline and Wireless bureaus and the Office of International Affairs have signed off on the transfer of control of Windstream and Uniti Group as part of the two companies' merger, said a public notice Wednesday (docket 24-165). The merger was announced in 2024 and is expected to close in the back half of this year. The FCC said it concluded that the deal wouldn't reduce competition or hurt USF programs.
Consumers’ Research and other conservative interests are once again asking the FCC to zero out the USF contribution factor, this time for Q3 2025. The group filed the day after the FCC Office of Managing Director proposed a contribution factor of 36% for Q3 (see 2506110058). The U.S. Supreme Court is expected to rule in coming days on an appeal of a 5th Circuit en banc decision last summer, which found that the USF contribution factor is a "misbegotten tax.” Justices heard oral argument in that case in March (see 2503260061).
The leaders of the House and Senate Communications subcommittees said Thursday they're reviving the bicameral USF revamp working group, which had paused its work on legislative recommendations last year amid uncertainty following the 5th U.S. Circuit Court of Appeals’ ruling in the Consumers' Research lawsuit against the program’s funding mechanism (see 2407300053). The Supreme Court heard oral arguments for its review of the case in March (see 2503260061). Working group members had considered melding the FCC’s lapsed affordable connectivity program with USF’s Lifeline program and keeping the latter’s narrower eligibility rules (see 2404170066).
Competitive Carriers Association CEO Tim Donovan said he remains worried about what the U.S. Supreme Court will decide on the USF's constitutionality, though he also expressed optimism that the program will survive the Consumers' Research challenge (see 2504140039). Donovan spoke during a Free State Foundation webcast this week, hosted by former FCC Commissioner Mike O’Rielly.