Consumers' Research Brings a New Challenge to the Universal Service Fund

The legal questions around the Universal Service Fund (USF) aren't going away just yet.

Last year, SHLB scored an historic victory when the Supreme Court issued a decisive 6–3 ruling affirming the constitutionality of the USF — one of the most important tools we have for connecting schools, libraries, and rural health care providers to broadband. SHLB stood alongside the Federal Communications Commission (FCC) as a named party in that case, and we celebrated the outcome.

Now, Consumers' Research is back at the 5th Circuit Court of Appeals with a new set of arguments. And once again, SHLB is back in the courtroom.

What's different this time?

Last time, Consumers' Research challenged the USF broadly, arguing that Congress handed the FCC too much unchecked power and that the FCC improperly delegated authority to a private entity, Universal Service Administrative Company (USAC). The Supreme Court rejected both arguments.

This time, the challenge is narrower — but the implications are still significant. Consumers' Research is zeroing in on two specific provisions of the Communications Act: Sections 254(c)(3) and 254(h)(2). If those section numbers don't mean much to you, the programs they authorize will: E-Rate and the Rural Health Care Program.

E-Rate provides funding for internet access at eligible schools and libraries, with subsidy levels tied to poverty rates and urban or rural status. The Rural Health Care Program helps rural clinics and hospitals pay rates for telecommunications services comparable to what their urban counterparts pay.

These programs play a real and ongoing role in keeping communities connected.

The legal argument

Consumers' Research is making again what lawyers call a "nondelegation" argument — the idea that Congress can't hand off its legislative power to an agency without giving that agency clear enough instructions. The legal test is whether Congress provided an "intelligible principle" to guide the agency's decisions.

Here's the key context. The Supreme Court already found that Section 254, taken as a whole, passes that test. Consumers' Research is now arguing that the provisions that specifically authorize the E-Rate and Rural Health Care programs operate independently of those overall guideposts. In other words, they claim the FCC can raise and spend money on these programs without being bound by the same criteria the Supreme Court relied on to uphold the statute.

They also raise additional challenges to the FCC's broader statutory authority, including its authority to create USAC.

Why SHLB disagrees

In SHLB’s brief, we argue that the Supreme Court's reasoning applies directly to the provisions Consumers' Research is now challenging. The Court held that Congress imposed "ascertainable and meaningful guideposts" for the FCC across Section 254 — not just in one or two subsections. Every USF program, the Court said, "reflects Congress's choices about universal service's scope and content." The FCC exercises significant discretion but it is "discretion tethered to legislative judgments."

That tethering doesn't disappear just because you're looking at E-Rate or Rural Health Care instead of another USF program.

Our brief walks through the multiple layers of statutory constraint that apply to these programs.

Why this matters

If Consumers’ Research prevails in court, the ruling would undermine the legal basis for the E-Rate and to Rural Health Care Programs, which connect students to digital learning, help libraries serve their communities, and allow rural clinics to deliver care using modern technology. A ruling against these programs would create serious uncertainty for the communities that rely on them.

We are confident that the 5th Circuit, consistent with the Supreme Court's decision last year, will find that the statute provides the FCC with the intelligible principle it needs to administer these programs.

The case is still moving through the 5th Circuit. Consumers' Research will file a reply brief, and we expect oral arguments later this year, with a decision to follow.

SHLB will continue to be involved throughout the process and fight to protect USF.

Stay informed

We'll keep you updated as this case progresses. In the meantime, here are ways to dig deeper:

• Join our upcoming webinar on Wednesday, May 6 where we'll break down the arguments and what they mean for broadband policy

• Read our press release and court brief for the latest on our advocacy efforts

• Watch our Policy Bytes for a short video explainer

The Supreme Court affirmed the USF's constitutionality last year, and we believe the 5th Circuit will reach a consistent conclusion. In the meantime, it's worth understanding what's being argued and why these programs matter.

To stay informed or get involved, visit shlb.org and follow our updates on LinkedIn, Facebook, YouTube, or X.

For any questions related to this blog, please reach out to: sdinesh@shlb.org