June — or perhaps July — is shaping up to be a critical month for the E-Rate program. There are two primary areas of concern.
First, and potentially — although unlikely — the most disruptive event, would be a decision by the U.S. Supreme Court that the Universal Service Fund (“USF”), the funding source for E‑Rate, is unconstitutional. This case was heard by the Court last March with the expectation of a decision as early as June. With the number of emergency petitions currently arising before the Court, however, a decision on USF could be delayed.
The underlying issue before the Court is whether the USF contribution fees assessed, on interstate telephone services, are “taxes” whose collection have been improperly delegated to the FCC — and, in turn, delegated to the Universal Service Administrative Company (“USAC”), a private company — without proper Congressional oversite. Our sense, after listening to the March hearing (see our newsletter of March 31st), is that the Court is unlikely to find USF to be unconstitutional. It could, however, direct the FCC or Congress to address the delegation, or the re‑delegation, of USF administration authority to the FCC or USAC. On a positive note, any Supreme Court decision may encourage the FCC or Congress to reevaluate and broaden the USF contribution base (see our newsletter of March 17th).
The second and more targeted challenge to E-Rate concerns the eligibility of hotspots, currently scheduled to take effect in July. Earlier in May, using a provision of the Congressional Review Act (“CRA”), the Senate voted narrowly to vacate the 2024 FCC order, enacted by the then-majority Democratic-controlled Commission, making hotspots eligible for E‑Rate funding. A companion CRA has been introduced in the House of Representatives, but no date for a vote has been set.
Whether Congress acts on the CRA (and the President signs it) or not, the FCC is positioned to reverse hotspot — and potentially school bus Wi-Fi — eligibility when it regains a Republican majority later in June. At the moment, the Commission is balanced with two Republican Commissioners (Chairman Brendan Carr and Nathan Simington, both of whom had strongly dissented on the earlier hotspot and bus Wi-Fi votes) and two Democratic Commissioners (Geoffrey Starks, who is set to resign before the next FCC open meeting on June 26th, and Anna Gomez). Should the FCC move to eliminate hotspot eligibility, it has three apparent options, namely:
- The FCC could formally introduce a Notice of Proposed Rulemaking (“NPRM”), solicit comments and reply comments, then issue a new order in place of the old one, withdrawing hotspot eligibility.
- The FCC, without directly reversing the 2024 order, could revise various procedural rules to make hotspot eligibility much more difficult for applicants — a process, sometimes referred to as “regulatory obfuscation” or “constructive repeal.” In our view, hotspots’ administrative rules are already difficult.
- An alternative strategy — based on President Trump’s April 9th order “Directing the Repeal of Unlawful Regulations” — would be to simply cancel the hotspot order. The FCC could argue, as did the Senate majority in its CRA action, that the enabling E-Rate legislation applies only to on-campus services and, thus, hotspots for at-home use are not legally E‑Rate eligible.**
For those of us in E-Rate, this should be an interesting summer. Stay tuned; it starts this month.