With the Universal Service Fund (USF) contribution factor at 37.6 percent of interstate end user telecommunications revenues for the first quarter of 2026 and rising, there is industrywide agreement the Fund’s contribution methodology must be modified as quickly as possible. The Fund is already under review in a Congressional working group and is also reviewed annually at the FCC.
Last summer, the USF survived a court challenge when the Supreme Court in a 6-3 vote overruled the Fifth Circuit Court of Appeals and found the Fund constitutional. However, the dissent in that Opinion by justices Gorsuch, Thomas and Alito has now led to a new challenge to the USF at the Fifth Circuit by the conservative Consumers’ Research group, which not so coincidentally filed the original appeal. Here is some background.
In section 254 of the Telecommunications Act, Congress established six principles for universal service. These include,
1) Quality and rates
Quality services should be available at just, reasonable, and affordable rates.
(2) Access to advanced services
Access to advanced telecommunications and information services should be provided in all regions of the Nation.
(3) Access in rural and high-cost areas
Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services…that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar serv ices in urban areas.
(4) Equitable and nondiscriminatory contributions
All providers of telecommunications services should make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service.
(5) Specific and predictable support mechanisms
There should be specific, predictable and sufficient Federal and State mechanisms to preserve and advance universal service.
(6) Access to advanced telecommunications services for schools, health care, and libraries
Elementary and secondary schools and classrooms, health care providers, and libraries should have access to advanced telecommunications services.
Congress also created four factors the Commission should consider when determining which services are eligible for universal service. These compensated services:
(A) are essential to education, public health, or public safety;
(B) have, through the operation of market choices by customers, been subscribed to by a substantial majority of residential customers;
(C) are being deployed in public tele communications networks by telecommuni cations carriers; and
(D) are consistent with the public interest, convenience, and necessity.
In a brief filed with the Fifth Circuit on January 16, 2026, as part of its new appeal, Consumers’ Research notes that for decades, “FCC and lower courts construed these principles and factors as optional and “aspirational,” allowing FCC virtually unfettered discretion to determine what services to fund and how much money to raise.” However, even while saving the USF last year, the High Court held that section 254’s principles are “separately mandatory … criteria” that must each be “met” and which together provide an “intelligible principle” for section 254’s contribution scheme generally.
Based on these new requirements, the Supreme Court dissenters noted that future appeals could attack the USF based on a claim that individual principles or service requirements have not been met. They noted specifically, that the Court in the original Consumers’ Research Opinion left unresolved two of the most far-reaching provisions of the Universal Service Fund requirements: section 254(c)(3) and (h)(2), which expressly relieve FCC from considering section 254’s principles and factors when raising funds for schools, libraries, and health care providers, therefore challengers remain free to appeal the constitutionality” of §§ 254(c)(3) and (h)(2).
That is precisely what Consumers’ Research argues in its new appeal:
As explained herein, [sections] 254(c)(3) and (h)(2) unconstitutionally delegate legislative power to FCC when raising funds for schools, libraries, and health care providers because those provisions relieve the agency from the binding criteria that the Supreme Court held constituted [section] 254’s intelligible principle. (Consumers’ Research Brief, filed, January 16, 2026, at p. 4).
Consumers’ Research also claims the USF contribution factor is unconstitutional because the “FCC arbitrarily failed to show that the contribution factor satisfies [section] 254’s mandatory criteria, as construed by the Supreme Court; [The] FCC lacks statutory authority to create and involve USAC [the Universal Service Administrative Company] in the Universal Service Fund; [The]USAC violates the Appointments Clause; and [the] FCC failed to respond to significant comments, violating the APA [Administrative Procedures Act].”
The next step in this appeal is for reply briefs to be filed by the FCC and its supporters. Then oral arguments will be held. A decision could come later this year and will likely once again wind up at the Supreme Court. What else is new?