Supreme Court Weighs Legality of Universal Service Fund

The Supreme Court is reviewing the legality of the Universal Service Fund, a program crucial for rural and low-income Americans' access to phone and internet services. The decision could impact broadband subsidies that have been in place for 30 years. While some justices appear skeptical of the challenge, the outcome remains uncertain, with potential implications for the program's funding and future.

The Supreme Court recently heard arguments challenging the legality of the Universal Service Fund (USF), a program that allocates over $8 billion annually to assist low-income and rural Americans with phone and internet access. This program also supports schools, libraries, and hospitals. The case was initiated by the conservative non-profit Consumers' Research against the Federal Communications Commission (FCC) in 2022. The case is timely, coinciding with the Trump administration's push for significant changes to a $42 billion rural broadband infrastructure investment. The Court's decision could potentially disrupt broadband subsidies that have existed for three decades.

During the hearing, the three liberal justices, along with Amy Coney Barrett and Brett Kavanaugh, appeared unconvinced by the argument that the USF is unlawful or unchecked by Congress. Adam Crews, a Rutgers law professor, noted that the proceedings seemed more favorable to the government than anticipated. The USF has been a target for conservatives for some time. Project 2025, a conservative blueprint aggressively pursued by the Trump administration, includes a proposal by FCC Commissioner Brendan Carr for a new funding mechanism that would involve Big Tech companies instead of phone companies. Carr criticized the FCC's current approach as outdated, likening it to taxing horseshoes to pay for highways.

Despite the criticism, lawyers for the Trump administration defended the FCC, arguing that Consumers' Research's brief attacks a strawman. The brief portrays the FCC as a bureaucratic entity levying arbitrary taxes, but the justices largely dismissed this argument. Justice Elena Kagan emphasized that the FCC's actions are aimed at providing access to services for rural and low-income individuals. Justice Samuel Alito, initially seen as likely to rule against the FCC, expressed concern about the impact on rural areas if the USF were deemed unconstitutional.

The Universal Service Fund, established under the Communications Act of 1934 and expanded in 1996, is a popular program, particularly among Republicans. It funds four programs targeting different aspects of the digital divide: the Connect America Fund, Lifeline, E-Rate, and the Rural Health Care Program. The program is managed by the Universal Service Administrative Company, a private non-profit.

The Supreme Court's decision, expected by the end of June, will determine the future of the USF. If the Court rules in favor of maintaining the program, it will continue to be funded through phone bill fees. However, this funding model is considered unsustainable in the long term. If the Court finds the funding mechanism unlawful, Congress and the FCC may need to reform the program or find alternative funding solutions to prevent financial strain on rural telephone companies.