U.S. Supreme Court Reverses the Fifth Circuit Court of Appeals and Upholds the Constitutionality of the Universal Service FundFollowing oral arguments on March 26, 2025, the U.S. Supreme Court (SCOTUS) issues a decision on June 27, 2025, upholding the constitutionality of the Universal Service Fund (USF). This ruling reversed a July 24, 2024, decision by the full Fifth Circuit Court of Appeals (Fifth Circuit), which had called USF's legal foundation into question.
In Consumers' Research v. FCC, SCOTUS found that Congress acted appropriately and within its authority by establishing clear, intelligible principles when delegating oversight of the USF to the Federal Communications Commission (FCC). SCOTUS also determined that the FCC did not overstep its legal authority when it delegated certain administrative and accounting functions to an external organization. While Congress generally cannot transfer its legislative power without guidance, SCOTUS affirmed that the FCC's authority in this case was properly framed.
Originally adopted in the Communications Act of 1934 and significantly amended under § 254 of the Telecommunications Act of 1996, the USF has played a critical role in bringing affordable and reliable communications services to most Americans. It has supported rural infrastructure, broadband expansion, assisted in making internet service more affordable to low-income households, and subsidized connectivity for schools, libraries, and healthcare facilities. The fund is currently sustained by contributions from telecommunications providers from an interstate funding mechanism.
However, critics have argued that the current contribution system is outdated because it does not require all broadband providers to contribute. While the program may warrant modifications, this does not mean the almost one hundred-year-old concept has suddenly been rendered unconstitutional. In fact, the USF had previously been upheld as constitutional by other courts, and the Fifth Circuit ruling was deemed by many to be an outlier.
The Supreme Court's ruling was pivotal in preserving the USF and safeguarding continued delivery of communication services at reasonably affordable rates. The potential loss or restructuring of the USF would have had major implications for rural communities in North Carolina and throughout the country, which rely on these funds to bridge the digital divide. Programs such as E-Rate, the Rural Healthcare Program, Lifeline, and the High-Cost Program all depend on USF support to maintain affordable access to essential broadband services. Without USF, efforts to provide broadband in rural areas on par with urban communities would have been seriously jeopardized.