- The Supreme Court will likely reach its verdict on the USF’s constitutionality in summer 2025
- Elon Musk’s influence on telecom policy could impact the future of the subsidy program
- Congress may opt to wait for the Supreme Court’s ruling before making any moves on USF reform
The fate of the $8 billion Universal Service Fund (USF) now lies in the hands of the Supreme Court, which has the power to determine whether the subsidy program is unconstitutional.
The Court on Friday agreed to hear an appeal of the Fifth Circuit’s ruling that the Federal Communications Commission’s (FCC) method of funding the USF is unconstitutional.
The legality issue concerns the FCC’s choice to delegate the administration of USF programs (Connect America Fund, Lifeline, E-Rate and Rural Health Care) to a private third party – the Universal Service Administrative Company (USAC).
The Sixth and Eleventh Circuits have already ruled to uphold the constitutionality of the USF’s current funding mechanism. New Street Research policy analyst Blair Levin thinks the Supreme Court will side with their decision, but the outcome is “far from certain.”
We probably won’t know the Supreme Court’s decision until June 2025. But one key factor weighing on the USF’s future is Elon Musk’s influence on telecom policy.
As head of the Trump administration’s new Department of Government Efficiency, Musk could push the idea that the current USF program is “inefficient and should be scrapped,” said Levin in a note to investors.
Musk could also suggest the government move forward with a more “narrowed” USF program geared toward deploying his Starlink satellite service.
But the Republican-leaning Circuit Courts could swing the pendulum toward the USF’s favor, said Levin.
In March 2023, a Fifth Circuit panel of three judges originally upheld the USF’s constitutionality. But the whole circuit later overturned the ruling via an en banc hearing, arguing the USFs administration violates the Constitution’s “non-delegation doctrine.”
The non-delegation doctrine is the principle that Congress cannot delegate its legislative powers, such as taxation or lawmaking ability, to other entities.
“Three judges appointed by Republican Presidents joined with the Democratic appointed judges in dissent” of the Fifth Circuit decision, Levin wrote.
“If one more Republican had joined them, the original decision would have been upheld, suggesting there is significant Republican support for the idea that the current system is constitutional,” Levin said
He added the Sixth and Eleventh Circuits are also Republican majority with “strong conservative leanings.”
Will Congress make a move?
“Ultimately, the ball is now in Congress’ court” to try to reform the program, said Joe Kane, director of broadband and spectrum policy at ITIF.
Senator Ted Cruz, who is set to be chair of the Senate Commerce Committee in the new administration, has argued the USF should be funded through congressional appropriations instead of telco contribution fees, a revenue base that continues to decline.
“Congress should treat the end of this Supreme Court term as a deadline to reform the program in a way that moots this case, that is, convert the funding mechanism to normal appropriations,” Kane told Fierce.
Levin however thinks the current activity in Congress on USF will stall until the Supreme Court reaches its verdict.
Incoming FCC Chairman Brendan Carr is in favor of tech companies contributing to the USF, a move that would also require an act of Congress.
But if Congress does decide to push forward with Carr’s request, “that action by itself would cure the USF defects with the Fifth Circuit decision,” said Levin.
The legal lowdown
The Supreme Court’s decision to take the USF case makes sense given “the current court’s pattern of scrutiny toward administrative agencies,” said Kane.
One recent example was the Supreme Court’s reversal of the longstanding Chevron doctrine. Essentially, it ruled federal agencies don’t have the final authority to make a decision in cases where there is “a major question” of national policy; Congress does.
As for the non-delegation doctrine, the Supreme Court hasn’t used the principle to invalidate a statute since the 1930s, according to Steve Vladeck, a law professor at Georgetown Law.
During the New Deal era, Congress passed the National Industry Recovery Act, which gave the president the power to regulate industry to promote economic recovery during the Great Depression. A Supreme Court case in 1935 ruled that giving this power to the executive branch violated the doctrine.
“We’ll know more by the end of June, but at least for now, folks should perhaps take a beat before assuming that Friday’s grant means that the Court is going to party like it’s 1935,” Vladeck wrote in his One First newsletter.
