Phone Fee to Subsidize Services for US Poor Blocked by Court

A federal appeals court said a funding mechanism the US government has relied on for decades to subsidize telecom services for poor and rural users is unconstitutional.

In a 9-7 ruling Wednesday, the 5th US Circuit Court of Appeals in New Orleans called the charge imposed on American phone bills every month a “misbegotten tax” levied by the Federal Communications Commission and the private entity that administers the Universal Service Fund.

“American telecommunications consumers are subject to a multi-billion-dollar tax nobody voted for,” US Circuit Judge Andrew Oldham wrote for the majority. “The size of that tax is de facto determined by a trade group staffed by industry insiders with no semblance of accountability to the public.”

The ruling is a victory for Consumers’ Research, a conservative advocacy group that has filed three separate lawsuits challenging the constitutionality of the Universal Service Fund, which disbursed $8.1 billion in 2023. 

However, the 6th Circuit in Cincinnati, Ohio, and the 11th Circuit in Atlanta, Georgia, have both upheld the program. The US Supreme Court declined to review either of those decisions, but could reconsider now that a separate appeals court has reached a different conclusion.

The FCC didn’t immediately respond to an email seeking comment on the ruling.

The Universal Service Fund helps more than 8 million people afford phone and internet service and helps to build telecommunications networks in rural areas. It is overseen by the FCC and administered by the Universal Service Administrative Company, a nonprofit organization.

The subsidy is funded by fees collected from telephone calls made by consumers. Telecom providers such as AT&T Inc. and Verizon Communications Inc. collect the fees and funnel them back to the program. They also receive payments from the fund. Those companies are eager to avoid a future of ever-increasing rates as traditional phone service wanes.

The case is Consumers’ Research v. Federal Communications Commission, 22-60008, US Court of Appeals .

With assistance from Greg Stohr.

This article was generated from an automated news agency feed without modifications to text.