On October 15, in a significant development for the telecom industry, the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) granted a Petition for Review in Consumers’ Research v. Federal Communications Commission, vacating the Federal Communications Commission’s (FCC or Commission) Fourth Quarter 2025 Universal Service Fund (USF) contribution factor of 38.1 percent. The Fifth Circuit found that the FCC lacked the statutory authority to establish the Universal Service Administrative Company (USAC) to administer the federal universal service programs. The court found that USAC acts as a federal agency or instrumentality for the purposes of the Government Corporation Control Act because of its significant role in administering the federal universal service programs, including developing the financial projections the FCC uses to calculate quarterly USF contribution factors.
The decision does not invalidate the federal universal service statute of any of the four USF programs, and the Fifth Circuit did not order refunds of contributions assessed or paid. It does, however, create uncertainty regarding USAC’s legal status, the treatment of contributions for the affected quarter, and the FCC’s reliance on USAC in establishing subsequent contribution factors. The FCC and the U.S. may seek rehearing, a stay, or Supreme Court review, while the FCC could also respond on remand by establishing contribution factors without relying on USAC, restructuring USAC’s role, or seeking express congressional authorization.
