A federal appeals court on Friday issued a ruling affirming the constitutionality of the FCC's Universal Service Fund (USF), which helps fund broadband and telecom services for low-income households.

The decision from the Fifth Circuit Court of Appeals is welcome news for industry stakeholders who warned that a ruling against the FCC in this case would have been catastrophic. But the future of the USF and low-income broadband affordability programs is still uncertain.

For starters, two other courts are expected to rule on this subject as well, with a decision to come soon from the Sixth Circuit Court of Appeals and an argument scheduled before the 11th Circuit Court in June.

In a research note (registration required) on Monday, New Street Research analyst Blair Levin wrote that he expects both courts to rule in favor of the FCC. However, he added: "If the 11th Circuit comes to the opposite decision, the odds of the Supreme Court taking the case go up. Given the interest of Justice Gorsuch and others in expanding the judicial oversight of agencies through the nondelegation doctrine, we think the Supreme Court taking the case could spell trouble for the future of USF."

Figure 1: (Source: Ivan Kmit/Alamy Stock Photo)

But even if all works out in the courts, the industry has long been sounding the alarm on the instability of the USF and the need for reform.

In a letter written on behalf of industry groups and stakeholders to the FCC last year, the entities warned that the USF is "under significant duress because the mechanism that pays for these important programs has not been modernized despite much more recent updates to the services that the programs support." The group urged the commission to "expand the services that pay into the USF to include broadband internet access services."

To that end, a bipartisan group of senators recently reintroduced legislation – the Funding Affordable Internet with Reliable (FAIR) Contributions Act – to "conduct a study into the feasibility of collecting Universal Service Fund (USF) contributions from internet edge providers," or Big Tech companies.

Where that legislation goes remains to be seen. But as Levin wrote for New Street Research, it's "a bit odd to do a study of a funding mechanism when there are so many uncertainties about the future of the program" including "whether Congress will want to continue funding the Affordable Connectivity Fund or whether it will prefer low-income subsidies be funded through other means, if at all."

Future of ACP

Indeed, uncertainty about the Affordable Connectivity Program (ACP) is the other cloud hanging over the future of USF. That program, which currently helps subsidize broadband for roughly 17 million households, is projected to run out of funding next year if no action is taken.

As AT&T's Joan Marsh, EVP, Federal Regulatory Relations, wrote in a blog last year, that matters for the future of USF. "If the ACP funding is not renewed by Congress, the FCC will face an impossible choice: either let the ACP program expire and watch many low-income families disconnect from the Internet; or try to provide funding for some continuation of the program from the already burdened Universal Service Fund," she said.

Many in the industry, from analysts like Levin to trade groups like ACA Connects, have been sounding the alarm about the ACP and are stepping up efforts to lobby Congress on the matter. Recently, the Digital Progress Institute, a telecom policy think tank, published a map breaking down ACP enrollments by congressional district, offering an additional tool to pressure members to prioritize funding for the program.

In a letter last week, the Digital Progress Institute along with Multicultural Media and Telecom Internet Council (MMTC) urged senators to "act now" to refund the ACP.

"Without ACP, some of our most vulnerable communities will be at a significant disadvantage for receiving adequate healthcare, fulfilling children's educational needs, and obtaining other essential services that have been easier to access via broadband connectivity," said the groups.

They further noted that, according to a survey conducted in January, a "strong bipartisan majority of voters (78%) support continuing the ACP."

That includes 95% of Democrats, 70% of Independents and 64% of Republicans. "Majorities of voters across all sub-groups support continuing the program," states the letter.

"Given the important role the ACP plays in helping millions of lower-income American families, students, and veterans continue to access the internet for work, school, telemedicine, and other purposes, Congress must act now to ensure this overwhelmingly popular program is on a sustainable path and that the Americans who depend on this successful program can continue to benefit from it," the groups added.

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— Nicole Ferraro, editor, Light Reading, and host of "​​The Divide" on the Light Reading Podcast.