Deeply Unserious 5th Circuit Declares $8 Billion Rural FCC Broadband Subsidy Program ‘Unconstitutional’

The FCC has long run an $8 billion federal subsidy program to help bring phone and broadband services to lower income homes and schools called the Universal Service Fund. The bipartisan program has historically been funded by a fee on traditional phone lines. But with traditional phone lines dying, there's been a long, ongoing discussion about how to best continue to fund the program.

The Trumplican-stacked Fifth Circuit court of appeals has proposed a novel solution: they've simply ruled the entire program unconstitutional (pdf), throwing efforts to actually fix it into chaos. The ruling, which ignored past Fifth Circuit and Supreme Court precedent, effectively declared the USF an unconstitutional, illegal tax, something seven court dissenters said was a preposterous leap.

The lawsuit was spearheaded by pseudo-consumer group and Conservative nonprofit Consumers' Research (be sure to check out the part of their website that whines about woke" companies for making bare-bone attempts at inclusivity).

The fate of the USF will now slowly head to a Supreme Court easily corrupted by a free Winnebago. Actual consumer groups and telecom legal gurus I've spoken to think the Supreme Court will shoot down this ruling, but precedent and coherent logic aren't exactly in fashion at the moment.

To come to their decision the court had to jump through a lot of hoops and ignore longstanding bipartisan consensus, real consumer groups and telecom lawyers say.

A narrow majority of the Fifth Circuit used a radical, unsupported constitutional theory to attack the long-standing foundation of a critical program for supporting the deployment of communications networks in rural areas, at schools and libraries, and to low-income consumers," Blake Reid, professor at Colorado Law, told Techdirt.

The ruling is a rare instance where the FCC, activists, and many telecom companies (the NTCA called it a severe blow" to helping low income families) all agree: the ruling was myopic and ignorant.

This decision is misguided and wrong," FCC boss Jessica Rosenworcel said of the ruling. 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. We will pursue all available avenues for review."

You Are Not Serious People

To be very clear the USF hasn't been without its issues. The program has a long history of abuse, and an equally long history of the FCC struggling to adequately police fraud (though they have gotten much better over the last decade). At the same time, the USF has a equally long history of connecting rural and low income communities that would have never been connected to the internet otherwise.

Politicians are generally split on how to fix the problem of a sagging contribution base. Few people want to pay higher taxes, especially on already expensive broadband and telecom services (made expensive, if we're being honest, by unchecked monopoly power and regulatory capture).

Many extremist Trumpy Federalist Society types believe the solution" to programs in need of reform is to dismantle the federal regulatory state entirely with no regard for impact. Buoyed by Chevron and other recent controversial Supreme Court rulings, they're going to declare most regulatory actions - regardless of settled precedent, value, or common sense - an illegal and unconstitutional overreach.

It's dressed up as something noble, but the goal is to dismantle what's left of U.S. corporate oversight for profit. With Chevron defanging regulatory independence, it's pretty clear most people in the press, public, and policy circles aren't aware - or aren't being honest - about the monumental legal chaos and real world problems this is going to cause. Marginalized populations, as always, will be the first to be harmed.

Given the 1996 Telecommunications Act is a murky and badly written mess, any consumer protection effort the FCC engages in is now subject to being dismantled post Chevron - especially if the courts don't hold much respect for precedent or foundational logic. Everything from net neutrality to basic efforts to mandate transparency in broadband pricing are now in very real jeopardy.

Ideally that's where Congress would step in to pass better-written new laws and reforms (whether it's related to the USF, net neutrality, or broadband privacy), but given the unprecedented levels of corruption and dysfunction, that's simply not happening. AT&T, Comcast, Verizon, and others have spent countless millions over decades to ensure state and federal politicians are fecklessly corrupt.

There's another segment of Republicans - like the FCC's Brendan Carr - who want to fix" the USF by destroying it and replacing it with a giant new tax on tech companies (he wrote an entire Project 2025 chapter about it). These fair share" initiatives usually involve pretending that big tech companies don't pay their fair share" to use the Internet get a free ride on the internet" (patently false), and should therefore give telecoms billions in new subsidies with minimal to no oversight.

We've outlined the problems with that approach numerous times. It basically drives up the cost of tech services for consumers and companies alike (Twitch was driven out of Korea, where such a regulatory regime exists, because it could no longer afford to do business in the country). AT&T loves this idea because it involves getting billions of dollars from Netflix and Google in exchange for promising to deploy new fiber networks they'll never have to actually deploy.

So with one hand you've got FedSec Republicans defanging corporate oversight and regulatory power, ensuring nobody in the federal government has the authority to police fraud or do much of anything else. On the other hand you've got guys like Carr, demanding that billions of additional dollars be flung into the laps of telecom giants like AT&T with a very long history of subsidy fraud and empty deployment promises. It doesn't take a law degree to understand how well this all works out in practice.

Congratulations, You Broke Everything

The ironic bit: the Fifth Circuit's ruling is so broad and incoherent it could even screw up Carr and AT&T's gambit, telecom legal experts say.

The holding not only attacks the FCC's existing programs, but would make impossible even Project 2025's call to require Internet companies to pay into the Universal Service Fund," Reid said. The holding is not serious constitutional jurisprudence, but an ideological effort to dismantle the government's capacity to tackle pressing, complex societal problems that affect Americans across the political spectrum."

I tend to believe the solution for spotty, expensive, U.S. broadband involves stocking regulators with tough reformers, intelligently reforming existing subsidy programs, and taking aim at the regional monopoly power responsible for most of the industry's biggest problems (spotty access, high prices, poor customer service). That's extremely tough to do in the face of monumental court and congressional corruption (see: the attack on Gigi Sohn) and a well-funded and relentless assault on the regulatory state.

The USF definitely needs fixing and new funding, but a significant chunk of the folks involved in the debate over how to do it aren't serious people operating in good faith. The very last thing many of these folks have in mind is the best interest of the residents of rural Appalachia.

FedSec guys are just mindlessly taking hatchets to social program support pillars and throwing legal grenades in the middle of complicated adult conversations. And guys like Carr are trying to tack on entirely new cumbersome taxpayer-leeching systems at the direct request of giant telecom monopolies.

But the effort to dismantle the federal regulatory state in particular is a largely mindless affair that has very little to do with government efficiency, personal freedoms, legal precision, or the balance of power. It has everything to do with ignoring precedent, logic and the public good to dismantle corporate oversight in the pursuit of fatter profits. The chaos of this effort is going to be monumental, the harm to struggling Americans is going to be very real, and if it's not clear yet, absolutely none of it will be subtle.