Court Upholds FCC Broadband Subsidy

WASHINGTON (CN) - The Federal Communications Commission can redirect subsidies it gives to telecoms to support high-cost service telephone service to its program for expanding broadband Internet access, a federal court ruled.

In 2008 the FCC decided that when telecoms receiving subsidies under its High-Cost Universal Support Program give up their subsidies, the total limit on subsidies given in the state the carrier operated in would be reduced by the amount surrendered.

However the contributions for the program were still collected from all telephone subscribers at the same level. In 2010 the FCC issued an order allowing redistribution of excess subsidies to support broadband Internet access in underserved rural areas through its Connect America Fund.

Two coalitions representing wireless carriers - the Rural Cellular Association and the Universal Service for America Coalition - challenged that order, contending that they were entitled to the relinquished funds.

The RCA argued that the order is unconstitutional because it turns contributions to the High-Cost Universal Support Program into a tax used to support other government activity in violation of the Origination Clause and Taxing Clause of the Constitution.

In an opinion written by Senior Circuit Judge Douglas Ginsburg, a three-judge panel of the D.C. Circuit Court of Appeals rejected the coalitions' argument.

The court found that because the collected funds will not be used to support general government action but specifically to advance the FTC's congressionally mandated role of providing universal telecommunications access, the fees can not be considered a tax.

The court also rejected the coalitions' statutory argument that the FCC couldn't collect contributions for a service before it determined that service was part of its "universal" mandate.

Quoting from the Telecommunications Act, the RCA said the FCC could only assess contributions for "specific, predictable and sufficient mechanisms established by the Commission to preserve and advance universal service."

The FCC countered that just because the statutory language was written in the past tense it didn't need to be interpreted that way.

The court agreed with the FCC. Following Supreme Court precedent in Regions Hospital v. Shalala the court said the use of the past tense in statute could be interpreted as adjectival phrase rather than a verbial phrase allowing "alternate temporal readings."

"So, here, the adjectival phrases - 'services that are supported' and 'established by the Commission' - are temporally ambiguous, such that the agency's reading them to encompass both the present and the future is reasonable," Judge Ginsburg said.

Parsing the language of the statute, Ginsburg said the acceptable temporal alternative reading of the FCC's actions was that it had collected "contributions from telecommunications carriers to be used for a 'mechanism' to be 'established' by the agency in order to subsidize a 'service' the agency would thereafter list as 'supported.'"

In a statement FCC Chairman Julius Genachowski praised the ruling as "an important victory for our universal service reforms," that would allow help bring the benefits of broadband, including "including jobs, opportunities for small businesses, better education and quality healthcare," to areas that lacked access.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit