T-Mobile Challenges 'Inequitable' Calif. Change to USF Surcharge

T-Mobile will take California regulators to federal court over a decision to switch state USF contribution to a connections-based mechanism. In a complaint Wednesday against the California Public Utilities Commission (case 3:23-cv-00483), T-Mobile and subsidiaries urged the U.S. District Court of Northern California to preliminarily enjoin a $1.11 monthly per-line fee from taking effect April 1. A consumer advocate scoffed Thursday at T-Mobile’s claim that the order hurts low-income households.

Last October, the CPUC required carriers to count access lines to determine contributions to California public purpose programs including state USF (see 2210200073). The per-line fee will replace a revenue-based assessment. A handful of other states previously switched to a flat fee, including Maine, Montana, Nebraska, New Mexico, Oklahoma and Utah.

T-Mobile challenges "an unlawful and inequitable CPUC decision that fundamentally overhauls how the” CPUC assesses USF surcharges, the carrier wrote. The CPUC's decision “disproportionately shifts the burden of funding state [USF] programs to wireless providers and their customers,” said T-Mobile: Federal law restricts states from making rules inconsistent with federal USF, and the CPUC order violates the Constitution's Commerce Clause. The CPUC didn’t comment Thursday.

“Federal law authorizes states to create their own counterpart” USF programs “but includes explicit limitations on such state authority,” said T-Mobile, citing Section 254(f) of the Communications Act. State rules should be consistent with FCC rules, and any state USF rule "must require contributions on an 'equitable and nondiscriminatory basis,’” it said. "The CPUC’s Decision flouts both statutory mandates."

The FCC has considered switching to connections from revenue for federal USFcontribution for more than 20 years, said T-Mobile: But the federal agency declined, "concluding that (i) the existing, revenues-based approach has the benefits of being competitively neutral and easily administrable, while avoiding economic distortions, whereas (ii) a connections-based approach raises serious problems, such as the lack of a universally recognized definition of a 'line' or connection."

"In a shell game of shifting funding obligations, the CPUC seeks to foist onto wireless carriers and their customers surcharge obligations that currently -- and appropriately -- fall more on LECs and their customers in proportion to those customers’ higher usage of intrastate telecommunications service,” the wireless company said. Wireline carriers get most revenue from intrastate voice while wireless carriers "earn the overwhelming majority of their revenues from nonsurchargeable broadband service,” but a flat fee "takes no account of which services are provided and in what quantities,” it said.

Without a preliminary injunction, the order will cause “serious and irreparable harm” to T-Mobile and customers on April 1, the carrier said. "Wireless-only households -- the majority of California households and those who are much more likely to be lower-income individuals -- would see their surcharges substantially increase, with an especially heavy burden falling on families with multiline wireless plans.” The CPUC failed to cite any current funding shortfall necessitating the change, added T-Mobile.

Claiming the lawsuit is "to protect low-income customers is laughable,” emailed Paul Goodman, legal counsel for Center for Accessible Technology (CforAT). “For decades, T-Mobile refused to participate in the California LifeLine program until it was required to do so as a condition of its acquisition of Sprint. In 2022, T-Mobile shut down its 3G network, abandoning the many low-income households that relied on 3G devices to connect. If T-Mobile is truly concerned about the impact that an $0.83 monthly cost increase per line will have on its customers, it should consider using some of the $2.6 billion dollars in net income it reported in 2020 to offset those costs.”

The complaint includes statements that falsely suggest consumer groups support T-Mobile’s position, said Goodman. While raising implantation concerns, CforAT backed a flat fee throughout the proceeding and supported the CPUC decision, he said. “While the changes to the surcharge mechanism will result in price increases to some customers, those changes are necessary to ensure that low-income households are able to afford service.” Goodman said T-Mobile never gave evidence supporting its claim that voice contributes little to its revenue.