A three judge panel of the US Court of Appeals for the Fifth Circuit held on Thursday that the Federal Communications Commission exceeded its authority in the late 1990s when it set up the Universal Service Administrative Company to collect funds and set contribution rates for the Universal Service Fund, Reuters reported. Judge Edith Brown Clement wrote that Congress never specifically authorised the FCC to establish USAC, so the agency violated the Government Corporation Control Act.
The fund draws about 9 billion dollars a year from telecom carriers, most of whom pass the cost to customers, and spends it on communications access for rural and low income consumers, Native American tribal lands, schools, libraries and rural health care facilities.
The FCC said it is considering all options and noted the order would not go into effect until two months from now at the earliest. The decision lands oddly against recent history: in June 2025 the Supreme Court endorsed the way the FCC funds the programme, overturning an earlier Fifth Circuit ruling against the contribution mechanism.
What is now in question is the administrator, not the tax like contribution the Supreme Court approved. Fixing it likely means the FCC collecting directly, a congressional authorisation for USAC, or another appeal, against a two month clock.