The U.S. Court of Appeals for the District of Columbia concluded that it would not overrule the FCC’s May 2008 decision creating an interim cap on universal high-cost support received by competitive eligible telecommunications carriers (“ETCs”). The cap went into effect in August 2008. Accordingly, competitive ETCs likely will continue to face decreasing high-cost support until the FCC completes its overhaul of the universal service support mechanism.

According to the court, the FCC did not violate the notice-and-comment requirements set forth in Administrative Procedures Act. Numerous commenters expressed support and opposed the cap, and the FCC clearly took all of the views into account in its order. The court also rejected arguments that the cap violated Section 254 of the Communications Act of 1934, as amended, noting that the FCC rightfully could consider ways to sustain the Universal Service Fund by restricting excessive spending. The court noted that the FCC “apparently reasons that ‘sufficiency’ encompasses not just affordability for those benefited, but fairness to those burdened. The agency seeks to strike an appropriate balance between the interests of widely dispersed consumers with small stakes and a concentrated interest group seeking to increase its already large stake.” The court further explained that competitive ETCs “enjoy a significant advantage over ILECs under the current support system” and rejected claims that the cap contradicted the FCC’s competitive neutrality principles.