Monthly Archives: December 2024

The Supreme Court Tackles the USF

The Supreme Court has agreed to review a decision from the 5th Circuit Court of Appeals, which ruled earlier this year that the Universal Service Fund (USF) is unconstitutional. Multiple lawsuits were filed by Consumers’ Research, a conservative non-profit advocacy organization. The Supreme Court accepted the case after there were conflicting rulings on the matter. Both the 6th Circuit and 11th Circuit recently ruled in similar cases that the USF is constitutional. The original lawsuits also alleged that the FCC acted unlawfully by delegating the operation of the USF to USAC.

The heart of the lawsuits relies on the nondelegation doctrine. This is a constitutional principle that believes that Congress can’t give its legislative authority to other parts of the government. In this specific case, the challenge is that Congress erred in delegating responsibility for the USF to the FCC, which is part of the executive branch of government. The nondelegation doctrine relies on Article I of the Constitution, which grants legislative authority to Congress, and argues that Congress can’t expand or delegate that responsibility. This hasn’t been used as a legal argument since the 1930s, in lawsuits filed to try to stop Franklin Roosevelt from creating New Deal agencies.

The Universal Service Fund was specifically created as part of the Telecommunications Act of 1996. This fund was originally created to support universal access to affordable telephone service, particularly in rural and low-income communities.

The function of the USF has been expanded over time to include four major programs: Connect America Fund, Lifeline, E-Rate and Rural Health Care. The Current USF is roughly $9 billion per year. USF is currently paying for the rest of the RDOF subsidy to build rural broadband infrastructure. The fund will also be covering the EACAM subsidy to fund faster infrastructure for rural telcos and cooperatives. The FCC recently announced it would be using USF funds to cover the $9 billion 5G Fund for Rural America.

Aside from this lawsuit, USF was already a hot topic in DC since it’s clear that the current way of funding USF is not sustainable. Currently, the USF is funded by a fee on interstate and international telecommunications services – a revenue stream that has been steadily shrinking. The new FCC Chairman Brandon Carr has been lobbying to spread the USF assessment base to include tech companies like Google and Facebook. Senator Ted Cruz, who will likely be the Chairman of the Senate Commerce Committee, has been suggesting that the USF should be funded with general tax revenues so that Congress can have a more direct say in how the money is spent.

The USF has also been in the news as a possible vehicle for funding a low-income subsidy for broadband. The USF currently supports the Lifeline program, which provides a $9.25 subsidy for qualifying households for telephone or broadband service. There was a lot of discussion during 2024 about trying to somehow move the now-dead ACP plan into the USF. This was the plan that provided a $30 monthly subsidy for broadband bills for qualifying households.

It’s not clear what might happen if the Supreme Court rules that the FCC doesn’t have the authority to operate the USF and to assess the fees that pay for it. Congress would have to intervene somehow to keep USF alive. Congress could do this by directly funding the effort. It could also create a specific tax to pay for the fund as a replacement for the FCC fees. If Congress is forced to jump through these hoops, it also seems likely that there will be an overall review of all parts and functions of the USF. This would include the role of USAC and the operating details of each of the four major USF funds.

FWA Wins 3Q 2024

The table below shows the broadband additions for the publicly traded ISPs in the country in the third quarter of this year. Missing from this list are large ISPs that don’t publish customer counts, like Cox,  Mediacom, Windstream, Brightspeed, and Google Fiber. However, this list represents roughly 90% of the broadband customers in the country.

To the dismay of other ISPs, the three FWA cellular carriers continued to perform well and collectively picked up 913,000 net customers in the quarter, just 20,000 fewer than in the second quarter.

The big cable companies continue to lose customers. However, both Comcast and Charter reported that they would have had small customer gains for the quarter except for losses due to the end of ACP. We’re liable to hear more about the impact of ACP with the year-end customer numbers.

Telcos and fiber overbuilders on the list had a collective small overall gain of 39,000 customers. That number disguises the continued fast growth of fiber customers and the continued loss of DSL customers. Lumen continues to underperform the rest of the telcos and lost 57,000 broadband customers in the quarter.  Frontier continues to be the fastest growing of the large telcos with 1.6% customer growth in the quarter.

Also not included on this list are the fiber networks of Lumos and Metronet. T-Mobile bought a partnership share of these two companies and it’s not clear if we’re going to get details of their future growth.