The U.S. Court of Appeals for the Fifth Circuit recently ruled the current Universal Service Fund (USF) mechanism unconstitutional. Here are the key points and implications of this decision:
- Current Status: The existing E-rate rules and programs remain in effect. The court remanded the case to the FCC but did not vacate the USF mechanism. The status quo continues for the indefinite future.
- Circuit Split: This decision creates a split among the circuit courts (the USF was deemed constitutional in both the 6th and 11th Circuits).
- Appeal Process: The government is expected to request a stay on the decision, likely to be granted because of the split between the 5th, 6th, and 11th Circuits.
- Strong Precedent: There is a strong precedent for the USF being upheld as a fee, not a tax. Even the conservative 5th Circuit was nearly split, with two Republican judges dissenting.
The E-rate and other USF-supported programs will continue without interruption for the time being and we do not anticipate any change to the program. The USF-programs are considered mission critical and play an important role in the telecommunications ecosystem of the United States. It will likely take a year for the Supreme Court to consider the case. In the unlikely event that the Supreme Court upholds the 5th Circuit’s decision (over the other two Circuits), the Supreme Court is likely to give Congress and/or the FCC some time to reform the USF process. The flow of support to USF beneficiaries is likely to remain in place for the foreseeable future.
We will continue to monitor the situation closely and provide updates as new information becomes available.
