The Supreme Court heard arguments on Wednesday challenging the legality of the Universal Service Fund, a program that spends more than $8 billion a year to help low-income and rural Americans access phone and internet service, as well as schools, libraries and hospitals.
The conservative non-profit Consumers’ Research first brought its case against the Federal Communications Commission in 2022 but it feels particularly of the moment. At the same time as the Trump administration is pushing for drastic changes to a $42 billion investment in rural broadband infrastructure, the Court’s decision in the USF case has the potential to upend broadband subsidies that have been around for 30 years.
The three liberal Supreme Court justices, plus Amy Coney Barrett and Brett Kavanaugh, didn’t seem swayed by the argument that the program is unlawful or completely unchecked by Congress.
“I thought this went much better for the government than I anticipated at the beginning of this morning,” Adam Crews, a law professor at Rutgers who represented the FCC during previous proceedings, told CNET.
The USF has been in conservatives’ crosshairs for some time. In Project 2025, the conservative blueprint that the Trump administration has aggressively pursued, since-appointed FCC Commissioner Brendan Carr called for a new funding mechanism that would have Big Tech contribute instead of phone companies.
“The FCC’s current approach is the regulatory equivalent of taxing horseshoes to pay for highways,” Carr wrote in 2023.
That said, lawyers for the Trump administration have defended the FCC in the case, arguing that the Consumers’ Research brief “attacks a strawman.”
Court appears reluctant to take down the program
The legal brief filed by Consumers’ Research paints a picture of bureaucracy run rampant — a group of unelected officials levying a tax of whatever size they see fit.
“Congress handed its taxing power to the FCC without objective or meaningful limits on the size of the tax,” its lawyers wrote. “The FCC is guided by its own ‘aspirations,’ and for good measure Congress let the agency expand its own scope of authority at will.”
But the justices largely seemed unmoved by this argument, and pushed back on the idea that there were no constraints built in.
“The FCC can’t do anything by way of this program that is not basically geared towards getting those who live in very rural areas or who are very low-income, get access to services that all the rest of us have,” Justice Elena Kagan said.
Toward the end of the arguments, conservative Justice Samuel Alito expressed concern about the on-the-ground impact of ruling against the USF.
“What would be the effect on people in rural areas if this is held to be unconstitutional and Congress does not act?” Alito asked.
Alito was viewed as one of the justices who would be most likely to rule against the FCC, but his questions brought that into doubt.
“I thought that was very striking, because it suggests that even if he’s sympathetic to the position, he might not be willing to pull the trigger on it,” Crews said.
Maybe more important than the questions asked were the ones that weren’t.
“The chief justice was very, very quiet,” Crews said. “His silence, I read as, he’s probably more likely to stick with the status quo.”
What is the Universal Service Fund?
Pull up your phone bill and do a Ctrl+F search for “Universal Service.” You’ll likely see a couple bucks tacked on for the program. The Federal Communications Commission collects the money from telecommunications companies — not individuals — but it’s standard practice for them to pass it along to their customers.
This is Consumers’ Research point of contention: The USF fee is effectively a tax and that’s something only Congress has the power to do.
“Petitioners are wrong that the size of a multi-billion-dollar social welfare program is a trifling detail that can be left to agency bureaucrats to fill up,” Consumers’ Research argued in its brief.
At the heart of the USF case is an idea called “universal service.” The Communications Act of 1934 stated that “all people in the United States shall have access to rapid, efficient, nationwide communications service with adequate facilities at reasonable charges.”
An update to the Communications Act in 1996 created the USF, an independent program under the FCC’s jurisdiction that expanded universal service to include broadband internet in addition to telephones.
The USF funds four programs that target different aspects of the digital divide: the Connect America Fund (rural areas), Lifeline (low-income users), E-Rate (schools and libraries) and the Rural Health Care Program. It’s run by the Universal Service Administrative Company, a private not-for-profit.
“Do you really want to overturn a 30-year program for the sake of some theoretical thing?” said Blair Levin, former chief of staff at the FCC and a telecom industry analyst at New Street Research. “This is a very popular program, particularly because it serves lots of Republicans.”
What’s next?
We probably won’t hear anything new about the USF case until the Supreme Court issues their decision, likely at the end of June. If the court goes in the direction it appears to be heading, the program will continue to be funded by phone bill fees in the near future. That said, funding internet subsidies through phone bill fees is probably untenable long-term.
“The economic challenge — growing funding needs financed on a shrinking revenue base — has been well understood for at least the last two Administrations yet nothing, beyond discussions in Congress, was done to address it,” Levin wrote in a note to investors.
On the off chance that the Court finds USF’s funding mechanism to be unlawful, any number of potential paths would open up. Would they give Congress and the FCC time to reform the program or find alternate funding?
“I think they would,” Levin said. “If you were to cut out the funding right now, I think there are a number of rural telephone companies that would go bankrupt.”
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