In this edition of the ICORE Blog we provide updates on recent significant Court cases affecting the telecommunications industry.
* Universal Service Fund – Supreme Court Review
In the 12/27/24 issue of the ICORE Blog we reported on the July 2024 ruling by the U.S. Court of Appeals for the 5th Circuit finding that the FCC’s Universal Service Fund (USF) is unconstitutional as it is currently administered. The ruling came in the case of FCC v Consumers’ Research. The Court found that contributions to the fund constitute a tax, and that Congress improperly delegated its authority to the FCC to assess a tax. Further, the Court found that the FCC improperly delegated its authority to USAC for administration of the USF. In September 2024 the FCC filed a petition with the U.S. Supreme Court seeking review of the 5th Circuit’s ruling and the Petition was granted by the Supreme Court in November 2024. Since the Supreme Court granted the FCC’s petition, Briefs have been filed by the main Parties to the case and numerous Amicus Briefs have been filed by interested Parties in support of both sides of the Case. Oral arguments before the Supreme Court have now been scheduled for March 26, 2025.
In another case related to the USF, on February 21, 2025, The Supreme Court issued a ruling in the case of Wisconsin Bell, Inc. v United States ex rel. Heath. In a unanimous decision, the Supreme Court affirmed a lower Court ruling finding that USF E-Rate reimbursement requests are claims under the False Claims Act (FCA) and as such could be subject to treble damages. The Supreme Court decided that a whistleblower can file a FCA complaint against a telecommunications carrier over reimbursements from an industry funded program like the USF. The FCA lawsuit was filed against Wisconsin Bell by Todd Heath, a school district auditor who alleged that Wisconsin Bell, Inc. violated the lowest corresponding price rule by overcharging schools and libraries for services and then seeking reimbursement from the USF E-Rate Program. The lowest corresponding price rule prohibits carriers from charging schools and libraries more than they would charge a similarly situated non-residential customer. The Court remanded the case back to the lower Court to allow the FCA suit to proceed. As mentioned above, the finding that E-Rate reimbursement requests satisfy the definition of a “claim” under the FCA exposes a telecommunications carrier, in this case Wisconsin Bell, Inc., to significantly greater penalties including up to three times the amount of actual damage. In a consenting opinion, Justice Thomas discussed the relationship between the FCC and USAC who administers the E-Rate program. While not issuing a specific opinion on this relationship, he mentions that this relationship will be the subject of deliberations by the Court in the near future in reference to case of FCC v Consumers’ Research discussed above.
* FCC Open Internet Order
In April, 2024 the FCC issued its Open Internet Order which restored FCC regulation of Broadband Internet Access Service (BIAS) as a telecommunications service under its Title II authority. The rules adopted in this Order would have prevented providers from blocking traffic, slowing down content, or creating pay to play internet fast lanes but did not impose rate regulation, tariffing, or unbundling requirements. The Order was met with significant opposition and ultimately was set aside by the U.S. Court of Appeals for the 6th Circuit. The 6th Circuit ruled that BIAS was an information service not subject to Title II regulation. In response, the FCC urged Congress to enact laws to establish the FCC’s net neutrality provisions. This issue, however, has again become the subject of a legal challenge. A Petition for a Rehearing En Banc has been filed with the 6th Circuit by four Public Interest Groups seeking review of the 6th Circuit’s ruling setting aside the Open Internet Order. The Petition asserts that the 6th Circuit erred in its finding that BIAS is an information service and cites past rulings by two other U.S. Courts of Appeal that found that BIAS was a telecommunications service. The Petitioners argue that an En Banc review is warranted due to the conflict with previous Circuit Courts’ findings. As of this writing there has been no response by the 6th Circuit.
The outcome of the Cases discussed above could have significant implications for the telecommunications industry. We will continue to closely monitor developments in the Cases and will provide updates as the Cases proceed.
