Industry Experts Expect SCOTUS Battle Over USF Contribution Mechanism

Industry experts expect the FCC will petition the U.S. Supreme Court for a writ of certiori following the split rulings between the 5th U.S. Circuit Court of Appeals and the 6th and 11th circuits on the Universal Service Fund contribution mechanism, they said during a Schools, Health, Libraries & Broadband Coalition webinar Wednesday. The 5th Circuit sided with Consumers' Research in its challenge of the contribution mechanism and agreed to stay its ruling pending the commission's petition (see 2408270030).

The circuit split "raises the likelihood that the Supreme Court is going to accept this case," said Dickinson Wright's Glenn Richards. Until then, Richards noted, the case was remanded to the FCC for further proceedings. "While it's been a couple of months since the FCC has had the opportunity to actually seek further comment" on issues the 5th Circuit raised, it hasn't done so, Richards said, likely because it will petition for a SCOTUS review before the end of the month.

"The FCC has the authority to assess broadband," Richards said, and there's "wide acceptance" that doing so would address the "ballooning and unsustainable" USF contribution factor, but it doesn't resolve Consumers' Research's concerns about the nondelegation doctrine and the FCC's use of the Universal Service Administrative Co. "We know that there are entities that are advocating for expansion of the payer base to tech companies," he said, but "I personally think that's problematic." Trying to define what tech companies would apply to entities required to contribute to the base would be "an enormous conundrum."

The 5th Circuit "went out on a limb in its analysis," said Seth Cooper, Free State Foundation director-policy studies, agreeing with the court's opinion that Section 254 of the Communications Act "was maybe more aspirational in its terms and not specific." How SCOTUS will rule on the issue remains to be seen, Cooper said, but it may prompt Congress to finally act on the issue.

"Congress can and should" address the inclusion of broadband service in the contribution base and be "a little more specific with some principal criteria for defining contribution amounts and how that's done," he said. Cooper noted that FSF backed congressional appropriations for the fund on a multiyear basis. "I recognize annual appropriations would" probably be "destabilizing," and one alternative could be directing the FCC to study whether including social media platforms, online e-commerce businesses and digital advertisers would lower the contribution factor.

NTCA Executive Vice President Michael Romano raised concerns about a multiyear appropriations process. Providers, especially rural providers, measure their return on investment in a "decade or decades." It's "the reason [Department of Agriculture] loans can really get in rural areas early on because that was the only ROI to really justify it," Romano said. "I do think there's a pathway through Congress" to address the delegation issue and expand the contribution base "to include all sorts of beneficiaries." Romano also noted that precedent "tends to be in favor of" the USF programs and warned that direct appropriations could deter provider participation in USF programs.