TELECOM ISSUES FOCUS
Welcome to the new Telecom Issues Focus page. The NTA, in continually striving to bring you the latest news and opinions regarding the telecommunications space, has implemented this new page where important telecom issues are brought forth and then viewers can comment.
You can jump to any past article using the links in the table of contents. Comments will be moderated for appropriate content.
Table of Contents
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August 2025 - FCC Takes on “Telephone Access Charges” and Why It Matters
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July 2025 - U.S. Supreme Court Finds FCC USF Process Constitutional
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June 2025 - Summer Break - No issue
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May 2025 - Who Will Fund the Universal Service Fund?
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April 2025 - Delete, Delete, Delete - A New Regulatory Paradigm
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March 2025 - Meet the new BEAD – Same as the old BEAD?
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February 2025 - Stage Set for State Broadband Regulation
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January 2025 - Net Neutrality is Dead
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December 2024 - Who Holds the Fate of Universal Service Funding?
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November 2024 - the Federal Universal Service Fund Funding Dilemma
AUGUST 2025
FCC Takes on “Telephone Access Charges” and Why It Matters
August 2025
Andrew Isar, Miller Isar, Inc.
In June, the FCC released a Public Notice seeking to resuscitate a dormant 2020 rulemaking that would deregulate – if not out right prohibit – service providers from passing through regulatory- related surcharges such as the subscriber line charge and universal service fund assessments to end users. Despite strong opposition, the FCC is poised to prohibit these surcharges, risking significant harm to service providers and the public.
Under its 2020 Notice of Proposed Rulemaking (NPRM), the FCC proposed deregulating pass through regulatory program surcharges, called “Telephone Access Charges” ((TACs) not to be confused with network interconnection access charges) because regulation was no longer needed to protect consumers in a highly competitive communications market and because TACs were considered by the FCC to contribute to consumer confusion. Further, the Commission maintained that ongoing regulation would hinder carriers’ ability to quickly adapt to changing market conditions. But the FCC did not stop there. The Commission also proposed amending its Truth-In-Billing rule (47 C.F.R. § 64.2401) to “explicitly prohibit carries from assessing any TACs “on customers’ bills after those charges are deregulated and detariffed.” The June 2025 Public Notice requested comments to “refresh the record” in the proceeding given the passage of time. Yet the Commission’s expressed intent to deregulate and prohibit TACs remains unchanged, now under its “Delete, Delete, Delete” deregulatory initiative. The unstated issue is how services providers would be able to recoup their regulatory program costs if not through higher rates and creating the very consumer confusion the FCC maintains exists.
Responsive comments to the 2020 NPRM generally opposed deregulation though two major incumbent local exchange carriers supported the proposal, though later backtracked a bit. Opponents underscored not only the challenges in provider’s recouping the regulatory surcharge assessments, but in the underlying flaws in the Commission’s rationale for TAC deregulation. In reply comments, the National Association of Regulatory Utility Commissioners noted,
“Literally all the twenty-two filed comments found some critical fault in the NPRM’s proposals, either opposing it outright or supporting modifications that are, on their face, inconsistent with the NPRM’s stated (albeit flawed) rationale for acting. The most common modification suggested? Creation of a permissive separately listed interstate surcharge to replace the existing ones listed on customer bills that the NPRM proposes to eliminate entirely with the stated goal of reducing consumer confusion.” Even then Commissioner Michael O’Reilly expressed concern in his NPRM statement, noting that, “the proposal may in fact undermine consumer interests. As one ex parte filing makes clear, the interstate portion of providing local telephone service needs to be recouped one way or another and a prohibition on listing the legacy terms doesn’t mean consumers won’t ultimately foot the bill for it.”
Fast forward five years later, and the FCC’s TAC deregulation/prohibition proposal remains problematic for service providers and consumers. Nevertheless, only five parties submitted comments on August 5, all industry associations, and all opposing outright deregulation. USTelecom maintained that,
“Prematurely mandating the elimination of such charges, however, could actually delay [the evolution from legacy circuit-switched to packet – IP network] as carriers would need to devote resources to detariffing efforts rather than developing and deploying next-generation networks and advanced communications services.”
INCOMPAS urged the Commission to outright abandon its efforts to deregulate TACs. Reply Comments are due August 21, though it is unclear how much more could be said.
The majority of past and all current comments in the proceeding make clear that TAC deregulation is a solution seeking a problem. Importantly, virtually all parties stress that TAC deregulation would precipitate issues for providers and consumers with no meaningful countervailing benefits. Predictions on the outcome are challenging. On the one hand, it appears that the Commission remains committed to prohibit TACs, now within the context of its “Delete, Delete, Delete” initiative, potentially to score political points. On the other, no one agrees with the FCC that TAC prohibitions are necessary but rather stand to precipitate a myriad of issues for the industry and consumers. Under the circumstances, permissive TAC detariffing rather than outright prohibition makes sense. Is the FCC ready to listen?
Andrew Isar, is founder and President of Miller Isar, Inc. a Washington-based communications regulatory consultancy and NTA associate member. He may be contacted at aisar@mllerisar.com or 253.851.6700.
JULY 2025
U.S. Supreme Court Finds FCC USF Process Constitutional
July 2025
Andrew Isar, Miller Isar, Inc.
After some three years of Consumers’ Research et al. hammering the FCC over collection of federal universal service fund assessments, and their success before the U.S. Court of Appeals for the Fifth Circuit last year, on appeal the U.S. Supreme Court affirmatively rejected Consumer’s Research et al.’s principal argument that the Universal Service Fund (USF) is a tax whose administration cannot be delegated by the FCC to a third party. In other words, for now, the Supreme Court’s decision keeps the FCC’s USF funding process unchanged, while existing challenges remain.
On June 27, 2025, the U.S. Supreme Court released its decision in Federal Communications Commission et al. v. Consumers’ Research et al. The Supreme Court applied what it calls an “intelligible principle” test to guide governmental agencies in what they must do, noting that “Under that test, Congress must make clear both ‘the general policy’ the agency must pursue and ‘the boundaries of [its] delegated authority.’” The court concluded that “Section 254 (of the 1996 Telecommunications Act, as amended, 47 U.S.C. § 254) directs the FCC to collect contributions that are ‘sufficient’ to support universal-service programs,” setting both a floor and ceiling on what the FCC can assess.
Among the Court’s specific findings,
• The FCC’s universal-service contribution scheme does not violate the nondelegation doctrine under the “intelligible principle” test as Consumers’ Research et al. had argued.
• The Commission’s use of the Administrator [the Universal Service Administrative Company] is permissible. “The Administrator is broadly subordinate to the Commission: The Commission appoints the Administrator’s Board of Directors, approves its budget, and requires the Administrator to act “consistent with” its rules and directives
• Consumers’ Research et al. argument that the “combination” of Congress’s grant of authority to the FCC and the FCC’s reliance on the Administrator violated the Constitution, was rejected.
The Court’s decision offers a great read for those inclined to do a deep dive into the history of the federal USF and its legal framework.
With the certainty that the USF funding process stands on a firm legal footing, two major potential wrinkles remain. The first is the continuing pressure to expand what entities contribute to the USF. In the May Issues Focus, we discussed the pressure to expand the USF contribution base to spread the burden of ever-increasing USF program costs among a greater base of service providers including edge providers, those who “generally operate at the edge rather than the core of the network” per the FCC, e.g. VMware, Salesforce, AWS, etc. According to a recent Fierce Network Op-Ed piece, “A new report commissioned by the Computer and Communications Industry Association (CCIA) and funded by AWS argues that adding cloud players to the USF contribution base would have absolutely dire consequences. We’re not just talking about higher cloud costs but also reduced cloud adoption and even dings to U.S. state and national gross domestic product (GDP).” Their opposition is now likely to intensify.
The second, is uncertainty over how the Trump Administration’s recast of the Broadband Equity, Access and Deployment (BEAD) program will impact universal service funding. If more USF subsidies are in the offing for satellite providers, the federal government could question if USF needs to subsidize rural broadband deployments via the USF High-Cost Fund, which supports programs including the Rural Digital Opportunity Fund (RDOF).
As one analyst noted, the decision, “also takes away any legal timing pressures on [USF] reform.” So, while the USF funding framework challenges have now definitively been put to rest, ongoing USF funding challenges remain, and rural communities may well bear the brunt through limited access and lower quality service until these funding issues are addressed. It is now up to Congress to take on the challenge.
Andrew Isar, is founder and President of Miller Isar, Inc. a Puget Sound Washington-based communications regulatory consultancy and NTA associate member. He may be contacted at aisar@mllerisar.com or 253.851.6700.
MAY 2025
Who Will Fund the Universal Service Fund?
May 2025
Andrew Isar, Miller Isar, Inc.
Current political and legal upheavals have not spared the increasing uncertainty of who is going to pay for universal service and how much. A new Senate bill, Lowering Broadband Costs for Consumers Act of 2025, could provide an answer.
For those of you who have been following evolving Universal Service Fund (USF) developments, you know that contributing service provider “contributions” to the universal service fund have hit an all-time high of 36.6 percent of jurisdictional interstate and international telecommunications and IP-enabled service revenues for 2Q25 – almost double the 19.6 percent contribution factor for the same quarter just five years ago. To stem the rising tide of contribution percentages resulting from fewer and fewer contributors, among other factors, the FCC has been clamoring for Congress to expand the FCC’s authority to impose universal service fund contribution assessments to edge providers – content, application, service, and device providers, that “generally operate at the edge rather than the core of the network” per the FCC, e.g. VMware, Salesforce, AWS, etc.
In 2022, then Commissioner – now Chairman Carr noted in his Statement in the Commission’s Report on the Future of the Universal Service Fund (Report, WC Docket No. 21-476)
The record and the Commission’s report show that assessing edge provider services would drastically reduce costs for consumers. For one, the Commission’s report points to a study showing that it would eliminate entirely the roughly 30% charge that consumers pay on their telecommunications bills today simply by assessing a far lower, 7% charge on Google’s and Facebook’s digital advertising revenues. Further, the Commission’s report points to evidence in the record that it would be difficult for the assessment on these services to be passed through to consumers since prices for digital advertisements are set via auction—this is unlike the current assessment on telecommunications, which is passed through easily onto consumers’ bills. Indeed, the Commission’s report concludes that “not only would the contribution factor be significantly lower as described above, but the amount that consumers would pay would also be significantly lower than today—and potentially eliminated entirely if the Commission were to look solely to those revenues for contributions.” Just last Thursday, May 8, 2025, U.S. Senators Markwayne Mullin (R-OK), Mark Kelly (D-AZ), Mike Crapo (R-ID), and Kevin Cramer (R-ND) introduced the Lowering Broadband Costs for Consumers Act of 2025 to do just that. The bill would direct the FCC to require USF contributions from edge and broadband providers. The FCC would also be directed to adopt a new mechanism under the current USF high-cost program to provide “specific, predictable and sufficient support for expenses incurred by broadband providers not otherwise recovered, among other things.”
This is far from the first such bill in Congress to expand the FCC’s authority to assess USF contributions on edge and broadband providers (See e.g. The Future of the Universal Service Fund and Related Broadband Programs for a deep dive into the issue.)
Meanwhile, Consumer’s Research and its co-appellants continue to challenge the FCC contribution factor each quarter before the Commission and the courts, most recently its May 1, 2025 appeal of the 2Q25 USF contribution to the U.S. Court of Appeals for the Fifth Circuit who previously ruled in favor of Consumer’s Research. We also await action on Consumer’s Research’s pending (re)appeal of the current USF funding regime before the U.S. Supreme Court. Readers will recall that Consumer’s Research maintains at the core of its arguments, that universal service funding is a tax that should be borne by taxpayers under federal law and Congressional oversight.
The apparent inability of Congress to pass legislation that would expand the FCC’s authority to impose USF assessments on edge and broadband providers in the past makes the prospect of the Lowering Broadband Costs for Consumers Act of 2025 passage a bit dubious. And if passed, would states follow suit for state USF funding? Further, it is unclear if the 2022 Commissioner Carr remains as supportive of expanding the FCC’s authority for USF assessments now as Chairman Carr. Yet too it remains a tossup as to how soon the U.S. Supreme Court might act in light of what is presumably a more pressing agenda. Ultimately, consumers are going to pay more, regardless.
APRIL 2025
“Delete, Delete, Delete” – A New Regulatory Paradigm
Andrew Isar, Miller Isar, Inc.
April 2025
For those of you familiar with the term “regulatory creep,” the concept that regulation grows incrementally over time resulting in an increasingly complex morass of regulations, FCC Chairman Carr’s new “Delete, Delete, Delete” proceeding is certainly the antithesis of regulatory creep, albeit with its own potentially ominous implications.
On March 12, 2025, Chairman Carr issued a Public Notice asking interested parties to “comment on deregulatory initiatives that would facilitate and encourage American firms’ investment in modernizing their networks, developing infrastructure, and offering innovative and advanced capabilities,” consistent with President Trump’s deregulatory Executive Orders. This is a refreshing change in FCC policy, at least at face value. And who can argue against maintaining current regulations if no longer necessary, right? Well, that depends on whether deregulation could precipitate benefits to some entities over others in competitive markets.
On April 11, 2025, initial comments were filed in the proceeding. Some seek elimination of archaic rules that no longer reflect today’s technologies, while others advocate for review and modifications reflecting market transitions yet preserving essential frameworks for universal service and accountability – another hot button as we have addressed, among other recommendations. Verizon, for example, urged eliminating rules relating to broadband mapping that impose costs that far exceed the benefits and streamlining or eliminating Part 51 of the FCC’s rules, including those relating to unbundled network element regime that resulted from the 1996 Telecommunications Act. The Small Company Coalition addressed several recurring regulatory filings it said have either transcended their original purpose or could be refined to be less cumbersome on small carriers, including FCC Forms 499-A, 499-Q and 481, and certain broadband data and Customer Proprietary Network Information submissions. Indeed, many FCC regulations remain stuck in the past and could benefit from a refresh or elimination. Yet some recommendations carry significant competitive implications that could ultimately determine who benefits from the deregulation Carr seeks. (Reply comments are due on April 28, 2025. Comments in the proceeding may be accessed via the Commission’s electronic comment filing system under GN Docket No. 25-133.)
Last month, we noted how Trump appointed Commerce Department Chief Howard Lutnick is revamping the Broadband Equity, Access and Deployment (BEAD) program to make it “technology neutral,” in a seeming effort to give Elon Musk and SpaceX the ability to get access to BEAD funding. This new policy has every potential to undermine more reliable facilities-based broadband deployment favored by state broadband program administrators. Former FCC Chair Tom Wheeler for the Brookings Institute recently argued that the FCC’s deregulatory agenda is effectively “heavy-handed regulation.” According to Wheeler, “In a flurry of early activity, Chairman Carr has chosen instead to achieve political goals by increasing the regulatory reach of the agency to intrude into corporate decisions to achieve political goals.” Point is, that if deregulation effectively promotes the interests of specific entities over others, whether due to dominance or political considerations, or is pursued to achieve political goals, competition and ultimately the public stand to bear the brunt through lost opportunities, lost jobs, worse service, and higher prices, among other adverse impacts. That is not what the FCC is supposed to promote.
This deregulatory fight been going on at the FCC for decades – recall AT&T divestiture, 1996 Telecommunications, Act, and more recently “Net Neutrality” and universal service fund regulations. Carr’s deregulatory proceeding is not going to be the end of these fights. It is still early in the process. We will have to see how much deference the FCC may give to specific parties and whether it will pursue a slash and burn or more evolutionary approach to deregulation. Whatever the FCC does in the proceeding, we should be vigilant that “deregulation” does not become a euphemism for favoritism and dogma, and that the FCC’s decisions are demonstrably in the broader public interest.
MARCH 2025
NTA Issue Focus – Meet the new BEAD – Same as the old BEAD?
Andrew Isar, Miller Isar, Inc.
March 2025
As virtually all government operations and programs are up for review under the new Administration, it comes as no surprise that the $42.5 billion Broadband Equity, Access and Deployment (BEAD) program has come under scrutiny with some interesting implications.
Trump appointed Commerce Department Chief Howard Lutnick wasted no time in saying Commerce is initiating a “rigorous review” of the BEAD program, noting, “The Department is ripping out the Biden Administration’s pointless requirements… It is revamping the BEAD program to take a tech-neutral approach that is rigorously driven by outcomes, so states can provide internet access for the lowest cost.” (Press Release)
Meanwhile, two BEAD related bills have been introduced – the Streamlining Program Efficiency and Expanding Deployment (SPEED) for BEAD Act, introduced by Rep. Richard Hudson (R-NC), would remove BEAD requirements related to rate regulation, prevailing wages, climate resilience, diversity, equity and inclusion (DEI) initiatives and more. Separately, the Broadband Buildout Accountability Act, introduced by Senators John Curtis (R-UT) and Rick Scott (R-FL) would remove the BEAD program’s Freedom of Information Act (FOIA) exemption so that the public can request information on how BEAD money is being spent.
It is unclear how the National Telecommunications and Information Administration (NTIA), who oversees the BEAD program, may amend its current rules under pressure from the Administration and/or through legislation or on its own. Clearly, efforts to streamline access to BEAD funding and removal of program “fraud, waste, and abuse,” in concept could stand to accelerate deployment of much needed high-speed broadband Internet service to underserved or unserved rural areas. But then, the proverbial devil is in the details.
In a not too subtle nod to Elon Musk, a March 4,2025 The Wall Street Journal article reports that Ludnik has told staff that he plans to see the BEAD program become technology-neutral. Where the BEAD program has had a preference for fiber, it seems more than a coincidence that Musk’s Starlink may now stand a much better chance of drawing an estimated $10 to $20 billion in BEAD funding according to The Wall Street Journal, to the determent of fiber-based BEAD applicants and recipients.
Many states are already actively implementing their broadband grant programs, so it is unclear how those programs could be affected, if not delayed, and how some program applicants could be edged out through a technology-neutral BEAD program. So, are efforts afoot to truly make the BEAD program more effective, streamlined, and more transparent to the public, or are we just seeing a political quid pro quo to help a single service provider while many rural internet users will continue to wait for access to reliable, high-speed internet?
FEBRUARY 2025
NTA Issue Focus – Stage Set for State Broadband Regulation
Andrew Isar, Miller Isar, Inc.
February 2025
A recent U.S. Court of Appeals for the Second Circuit (New York, NY) decision regarding New York’s Affordable Broadband Act (ABA) could unwittingly set the stage for state broadband regulation, even as incoming FCC Chairman Carr begins taking a far more deregulatory stance. Though the ABA itself does not open the floodgates to state broadband regulation, the finding that New York is legally entitled to impose specific requirements on broadband providers certainly raises specter that more state broadband regulation may be in the offing.
On January 14, 2025, New York’s 2021 (not a typo) ABA went into effect following unsuccessful appeals culminating in the U.S. Supreme Court’s December 16, 2025 denial of the New York State Telecommunications Association, Inc., et al.’s Petition for writ of certiorari seeking review of the Second Circuit’s decision upholding the law.
The ABA imposes an obligation on Internet Service Providers to “offer high speed broadband service to low-income consumers,” as defined, regulates corresponding rates – a $15.00 per month rate cap - and speeds, and imposes other requirements including promotion and advertising broadband service availability for low-income consumers, subject to enforcement action. Providers are to submit annual compliance reports to the New York Department of Public Service. As enacted, the ABA broadly applies to “Every person, business, corporation, or their agents providing or seeking to provide wireline, fixed wireless or satellite broadband service in New York state” without exemptions.
The string of appeals focused the ABA being preempted by the 1934 Communications Act, as amended, as the U.S. Court of Appeals for the Sixth Circuit most recently found in overturning the FCC’s Net Neutrality order that was to have resuscitated broadband regulation under Title II of the Act. The Second Circuit was not similarly persuaded. According to the Second Circuit,
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the ABA is not field-preempted by the Communications Act of 1934 (as amended by the Telecommunications Act of 1996), because the Act does not establish a framework of rate regulation that is sufficiently comprehensive to imply that Congress intended to exclude the states from entering the field, and
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the ABA is not conflict-preempted by the Federal Communications Commission’s 2018 order classifying broadband as an information service. That order stripped the agency of its authority to regulate the rates charged for broadband internet, and a federal agency cannot exclude states from regulating in an area where the agency itself lacks regulatory authority.
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The State of New York fully recognized that was forcing the legal preemption issue to the courts, noting in its brief to the U.S. Supreme Court that it did:
not seriously dispute that the [ABA] is the first of its kind. No other government (at any level) has ever enacted a statute that regulates retail broadband rates. New York does not dispute that the Second Circuit’s decision in NYSTA II [the appeal case] opens the door to other States following suit and a patchwork regime unknown in the internet’s history. Nor does New York deny that NYSTA II reaches far beyond broadband. It holds that the federal Communications Act does not preempt state rate regulation of interstate information services, a category that also includes video- and music-streaming services, cloud-storage services, and dozens more.
On January 10, 2025 the Appellants filed a Petition for Rehearing with the Supreme Court. The Petition for Rehearing argues that at the time the Supreme Court denied the petitioners’ Petition for writ of certiorari, the U.S. Court of Appeals for the Sixth Circuit panel, “had unanimously stayed the FCC’s latest attempt to transform broadband into a public utility service—subject to the Communications Act’s Title II, which includes rate regulation…” The petitioners maintain that the Supreme Court should now reflect on the Sixth Circuit’s decision in finding that the ABA is similarly preempted under federal law. The Supreme Court is scheduled to consider the Petition for Rehearing on February 21, 2025.
As one legal analyst recently noted, “By denying certiorari, the [U.S. Supreme Court] has effectively cleared the path for states to regulate rates charged by internet service providers. This case also serves as a reminder that, where the federal government takes a step back, states will often step in.” Unless the Supreme Court is persuaded that the ABA, like the FCC’s net neutrality order, is preempted under federal law, we may see similar state broadband laws and regulations pop up, resulting in a slew of patchwork state requirements that are sure to stifle broadband deployment.
UPDATE:
Supreme Court denies petition for rehearing on New York Affordable Broadband Act
On Feb. 24, 2025, the U.S. Supreme Court denied the New York State Telecommunications Association, Inc., et al.’s petition for rehearing of the court’s order denying their petition for writ of certiorari of a decision from the U.S. Court of Appeals for the 2nd Circuit upholding the New York Affordable Broadband Act.
JANUARY 2025
NTA Issue Focus - Net Neutrality is Dead
Andrew Isar, Miller Isar, Inc.
Jan 2025
It is a safe bet that Net Neutrality is dead, certainly for the foreseeable future following the U.S. Court of Appeals for the Sixth Circuit’s (Cincinnati, OH) January 2, 2025 unanimous panel ruling in Ohio Telecom Association et al. v. Federal Communications Commission regarding the FCC’s May 2024 Net Neutrality Declaratory Ruling. The court found that Broadband Internet Service Providers offered unregulated “information services” under the plain language statutory definition in 47 U.S.C. §153(24) because broadband Internet access service allows users to retrieve and otherwise utilize information via telecommunications. It concluded that, “the FCC lacks the statutory authority to impose its desired net-neutrality policies through the “telecommunications service” provision of the Communications Act." The ruling applied to both wireline and wireless broadband services.
The U.S. Supreme Court’s 2024 Loper Bright Enters. v. Raimondo decision overturning the Chevron defense, decidedly played a role in the Sixth Circuit’s decision. Under the Chevron defense, courts would generally defer to government agency interpretation of statute and rules governing the agency’s jurisdiction. According to the Sixth Circuit’s ruling, “unlike past challenges that the D.C. Circuit considered under Chevron, we no longer afford deference to the FCC’s reading of the statute… Instead, our task is to determine ‘the best reading of the statute’ in the first instance.”
The Sixth Circuit’s ruling was decidedly pointed against the FCC, characterizing the FCC’s Net Neutrality Declaratory Ruling a “heavy-handed regulatory regime.” Indeed Republican Commissioner Brendan Carr, a long time Net Neutrality critic and incoming FCC Chair, in his detailed Dissenting Statement regarding the FCC’s Declaratory Ruling – an interesting read regarding Net Neutrality’s history - blamed President Obama for forcing the FCC’s hand on Title II broadband service regulation, underscoring among other things why Net Neutrality was entirely unfounded.
With the new Republican Administration, an FCC Chair who vehemently opposed Title II broadband regulation, and a Republican majority of FCC Commissioners once a Republican is appointed to replace outgoing Chairwoman Rosenworcel, it is highly unlikely that broadband regulation will be considered anytime soon, certainly so long as the Loper decision stands. Nevertheless, questions remain regarding the impact of keeping broadband services free of regulation and the effect on consumers, as a Fierce Network Op-Ed piece suggests: “The FCC’s authority has become outdated under the Telecommunications Act of 1996. The agency’s authority covers telcos, but these providers have since morphed into broadband providers, over which the FCC has little authority.” The Sixth Circuit’s decision, while perhaps marking the end of FCC broadband service regulation once and for all, might nevertheless be viewed as microcosm of an ongoing battle between industry and consumer interests that will continue under other guises for years to come to be decided by the courts.
To make these Issue Focuses as relevant, informative, and useful as possible, please share your comments and suggestions. And if you have a regulatory-legislative topic of interest, believe an Issue Focus is missing the mark, or have questions, certainly contact me at aisar@millerisar.com.
DECEMBER 2024
NTA Issue Focus – Who Holds the Fate of Universal Service Funding?
Andrew Isar, Miller Isar, Inc.
Dec 2024
When preparing the inaugural NTA Issue Focus last month, it was unclear how quickly the U.S. Supreme Court might act on the FCC’s appeal of the U.S. Court of Appeals for the Fifth Circuit’s finding that the FCC’s universal service funding methodology was unconstitutional, violated statutory authority, and was ultimately illegal. Late last month the Supreme Court granted the FCC’s writ of certiorari and a separate, supporting appeal by a coalition of interests including USTelecom. While I wish to avoid a singular focus on this matter, here is a quick update on developments in this case given its direct impact on NTA members.
On November 22, 2024, the U.S. Supreme Court granted certiorari to the Federal Communications Commission and the separately to the SHLB Coalition, et al. who petitioned the U.S. Supreme Court for review the U.S. Court of Appeals for the Fifth Circuit decision granting Consumers’ Research, et al.’s petition for review of the first quarter 2022 universal service contribution factor. The challenges seek to test whether the Fifth’s Circuits finding that the funding methodology violates the Constitution’s “non-delegation” and “private non-delegation” doctrines, and moreover, whether fundamental changes to program funding will be needed will stand.
Federal universal service funding for each of the four programs overseen by the Universal Service Administrative Company (USAC) on behalf of the FCC is staggering. The High-Cost Fund accounted for a $4.32 billion in fiscal year (FY) 2023; the E-Rate program accounted for $2.46 billion in FY 2023 funding; Lifeline funding was $869.9 million, and Rural Healthcare support was $468.2 million. The Universal Service Fund (USF) contribution factor – the percentage assessment on jurisdictional interstate and international revenues - has risen from 25.2% for the first quarter 2022, when Consumers’ Research first challenged the FCC’s contribution factor, to 35.8% in fourth quarter 2024, with no end to factor increases under the current funding methodology.
As noted, in June, the Sixth and Eleventh Circuits upheld the USF funding methodology as constitutional, but in July, the full Fifth Circuit ruled 9-7 that the program violated constitutional limits by granting excessive power to the FCC and to USAC as the Commission’s delegated program administrator. In granting certiorari the Supreme Court directed the parties to address why they did not seek reconsideration of Fifth Circuit’s decision in one hour of oral argument. This is perhaps telling of where the Supremes may be headed.
If the Supreme Court finds that the FCC failed to seek preliminary relief from the Fifth Circuit decisive, it could dismiss the case on procedural grounds, leaving unresolved the substantive challenges to the USF program. And, if the case proceeds – a finding that the issue is not moot – the Supreme Court will hear arguments on the merits of the case, potentially setting the stage for significant USF classification rulings and limits of FCC authority under the non-delegation doctrine.
The outcome of the November elections may now come into play in the Supreme Court’s and FCC’s thinking. Chairwoman Rosenworcel issued a statement following the grant of certiorari referring to “the Fifth Circuit’s misguided decision.” Yet as Republican Commissioner Brendan Carr stands to assume the Chairmanship, it is unclear whether he will agree. Former Republican FCC Chairman Ajit Pai (2017 to 2021) has already expressed support for direct congressional USF funding, consistent with proposals from Senator Ted Cruz, R-Texas. Carr could follow suit.
The outcome of the proceeding(s) will certainly impact NTA members at the federal and likely state level, if Nevada’s and other state USF programs follow court-mandated changes to the federal program funding or if Congress steps in. What is clear is that we can expect fundamental changes in how the USF is funded and possibly administered. We will keep you posted.
And speaking of Commissioner Carr, we may also anticipate sweeping changes in the FCC’s regulatory orientation toward greater deregulation. According to Fierce Network, “Carr will likely support Elon Musk's efforts to push BEAD funds towards satellite broadband, as well as weigh in on spectrum policy issues that would favor Starlink.” As reported in our November 2024 Regulatory Review, Carr has already gone after Chief Executive Officers of Alphabet, Inc. Microsoft Corporation, Meta Platforms, Inc. and Apple, Inc. requesting information regarding the companies’ work with NewsGuard. Carr’s letter states that the companies “have played significant roles removing or blocking social media posts to labeling whole websites or apps as ‘untrustworthy’ or ‘high-risk’ in an apparent effort to suppress their information and viewpoints, including through efforts to delist them, lower their rankings, or harm their profitability” through NewsGuard use. It should come as no surprise that we can anticipate some regulatory “streamlining” under his administration, while perhaps including limitations on the Section 230 of the Communications Decency Act protections, which shield online platforms from being held legally responsible for content posted by third-party users. Next year certainly stands to be a year of regulatory change in the industry.
To make these Issue Focuses as relevant, informative, and useful as possible, please share your comments and suggestions. And if you have a regulatory-legislative topic of interest, believe an Issue Focus is missing the mark, or have questions, certainly contact me at aisar@millerisar.com.
NOVEMBER 2024
NTA Issue Focus – the Federal Universal Service Fund Funding Dilemma
Andrew Isar, Miller Isar, Inc.
Nov 2024
This is the first in a series of industry issue focus discussions to highlight regulatory and legislative matters that may impact Nevada Telecommunications Association (NTA) members. As a long-time practitioner in the telecommunication’s regulatory arena, I clearly understand initial negative reactions to “regulatory” maters by some. And indeed, for many, regulation is simply a necessary evil of doing business in our industry. There is an upside to understanding issues that are in play and how those issues may impact corporate bottom lines. In other words, looking at regulatory and legislative issues with a member planning and profitability mindset. This is the perspective being taken in these Issue Focuses. With that in mind, let’s dive into our first topic.
During the NTA fall conference, I spoke about Consumers Research’s challenges of the FCC’s universal service fund (USF) framework and quarterly assessments. These challenges have gained traction, first through a U.S. Court of Appeals for the Fifth Circuit (New Orleans, LA) and now on appeals to the U.S. Supreme Court. The outcome of the appeals, now coupled with the election results, may significantly impact how much service providers and ultimately their subscribers “contribute” to maintaining universal service funding and the effect of profitability and service affordability.
For those unfamiliar with the issue, Consumer Research, is a non-profit corporation founded in 2021 whose mission it characterizes as “seeking to increase knowledge and understanding of issues, policies, products, and services of concern to consumers and to promote the freedom to act on that knowledge and understanding.” Since 2022, Consumers Research has challenged the FCC’s quarterly federal universal service fund surcharge each quarter. Consumers Research maintains that the FCC’s USF funding methodology is unconstitutional, violates statutory authority, and is ultimately illegal, among other things, as most recently argued in its November 4, 2024 comments regarding the proposed 1Q25 contribution factor. Beyond challenging the USF before the FCC, Consumers Research has challenged the FCC’s USF contribution factor before several U.S. Courts of Appeal and this year achieved a favorable decision before the full Fifth Circuit, which remanded the case back to the FCC. Consumers Research was also successful in its request for the U.S. Supreme Court to grant a writ of certiorari regarding the U.S. Court of Appeals for the 11th Circuit (Atlanta, GA) denial on Consumers Research’s USF challenge.
As anticipated, on September 30, 2023, the FCC petitioned the U.S. Supreme Court for a writ of certiorari seeking review of a U.S. Court of Appeals for the 5th Circuit decision that granted Consumers’ Research, et al.’s petition for review. The Commission argued the Fifth Circuit decision was incorrect and that Congress did not delegate legislative power to the Commission. In October, the Schools, Health and Libraries Broadband Coalition, et al. filed a letter with the Supreme Court supporting the FCC’s appeal as well as its own separate appeal, while attorneys general of West Virginia and 14 other states and the Arizona state legislature submitted a friend of the court brief supporting Consumers Research’s appeal, arguing that Congress should find a way to provide universal telecommunications services for everyone and that the Court needs to be the one to act, not industry participants.
Pending action by the U.S. Supreme Court, the election results may now point to Congressional action on the issue. Following his reelection, Texas senator Ted Cruz, current ranking member of the Senate Committee on Commerce, Science, and Transportation, is poised to become committee Chairman and move to recast the USF funding process through a Congressional appropriations process rather then through the current FCC process, as Cruz has argued.
With a change in the administration and Republican majority in the Senate, the chances of a recasting of the federal USF through Congressional action are fairly good. At time when the quarterly USF contribution factor has reached a whopping 35.8 percent of interstate and international revenues and likely growing, it becomes increasingly challenging for USF funding to maintain the status quo. The possibility of Congressional appropriations to the USF may benefit consumers by spreading funding over a broader range of taxpayers rather than through telecommunications service users alone. Doing so would stand to reduce the financial burden on service users, promote increased service usage if users no longer have to factor in USF assessment costs, and streamline USF reporting to the Universal Service Administrative Company in what has become an exceptionally challenging FCC Form 499 reporting process. On the flip side, a change in the funding process may begin to limit USF programs funding, including the E-Rate for Schools and Libraries, and overall subsidies that USF recipients have grown accustomed to.
Given the outcome of the elections, the Supreme Court may now find that Congress and not the FCC is to establish how USF will be funded, as Consumers Research has argued. This will undoubtedly have ramifications on state USF programs that have been modeled after the federal USF framework – now moving the state USF funding discussion to state legislatures. We will keep you posted.
To make these Issue Focuses as relevant, informative, and useful as possible, please share your comments. And if you have a regulatory-legislative topic of interest, believe an Issue Focus is missing the mark, or have questions, certainly contact me at aisar@millerisar.com.
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Great Article Andrew, thank you!
Hooray for common sense!