US appeals court invalidates federal $9 billion telecom subsidy fund
XLC•A U.S. appeals court ruled that the FCC exceeded its authority in establishing the Universal Service Fund’s administrator, which collects contributions for a program drawing about $9 billion a year. The ruling would not take effect for at least two months, the FCC said.
1. Court challenges fund structure
The Fifth Circuit said the FCC lacked legal authority in 1997 to establish the Universal Service Administrative Co. to collect contributions and set rates for the Universal Service Fund. The court held that the agency violated the Government Corporation Control Act because Congress had not specifically authorized it to establish the company.
2. Program supports services
The fund subsidizes communications for consumers in rural and low-income areas, Native American tribal lands, schools, libraries and rural health care facilities. In 2024, it benefited 7.5 million low-income households and provided telecom companies $4.2 billion for high-speed internet in hard-to-serve rural areas; schools and libraries received $7 billion over three years to provide internet service for 54 million students.
3. FCC considers options
The FCC said it was considering its options and that the court’s order would not take effect until two months from then at the earliest. In June 2025, the Supreme Court endorsed the FCC’s method of funding the program.
