Telecom Subsidy Ruled Unconstitutional, May Go to Supreme Court

A monthly charge on American phone bills that subsidizes telecom services for poor and rural users may be reviewed by the U.S. Supreme Court after a federal appeals court said the charge is unconstitutional.

The 5th U.S. Circuit Court of Appeals in New Orleans announced that ruling Wednesday (July 24), saying the charge is “a multibillion-dollar tax nobody voted for,” Bloomberg reported Wednesday.

The ruling came in one of three cases filed by Consumers’ Research, according to the report.

In earlier decisions, two other courts — the 6th Circuit in Cincinnati and the 11th Circuit in Atlanta — upheld the program, the report said.

The U.S. Supreme Court declined to review those decisions but could decide to do so now that the 5th Circuit in New Orleans delivered a different decision, per the report.

The program, the Universal Service Fund, is funded by charges levied by the Federal Communications Commission (FCC) and the Universal Service Administrative Co., a nonprofit organization that administers the fund, according to the report.

It disbursed $8.1 billion in 2023, helping 8 million people afford phone and internet service and helping to build telecommunications infrastructure in remote areas, per the report.

“Incredible win for telecom consumers, American citizens, and the Constitution,” Will Hild said in a post on X that was reposted by Consumers’ Research.

“This is a significant victory that could set the stage for an even bigger one to come at SCOTUS,” Casey Mattox said in another post on X that was reposted by the advocacy group.

FCC Chairwoman Jessica Rosenwercel said in a statement on the ruling that the FCC will “pursue all available avenues for review.”

“This decision is misguided and wrong,” Rosenwercel said. “It upends decades of bipartisan support for FCC programs that help communications reach the most rural and least-connected households in our country, as well as hospitals, schools and libraries nationwide. The opinion reflects a lack of understanding of the statutory scheme that helped create the world’s best and most far-reaching communications network.”

It was reported in June that AT&T CEO John Stankey said during a telecom industry forum that Congress should empower the FCC to mandate financial contributions from major technology firms towards the Universal Service Fund.

Under current legislation, the fund is sustained by fees levied on subscribers of cellphone and landline services.

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