Pennsylvania Public Utility Commission Challenges USF Order at Third Circuit; NASUCA to Appeal

The Pennsylvania Public Utility Commission appealed the FCC’s order on Universal Service Fund and intercarrier compensation at the 3rd U.S. Circuit Court of Appeals in Philadelphia. Another appeal from NASUCA is coming, the group’s executive director, Charles Acquard, told us. More appeals might be coming from states, analysts said. The FCC looks forward to “vigorously defending” in court its “unanimous, balanced” USF and ICC reforms, an agency official said.

The Pennsylvania commission asked the court to vacate, enjoin and set aside the FCC order, according to the appeal, filed Monday. The state PUC asked the court to remand the matter to the FCC with appropriate instructions. The PUC claimed the FCC’s order contravenes the 10th Amendment, violates state and federal law, preempts independent state law, is “arbitrary and capricious,” is without “substantial record support,” violates “the basic tenets of due process,” and is a “departure from reasoned decision-making.” The appeal was filed within 10 days of the FCC order and thus is filed subject to the procedures for multi-district litigation. The USF order was published in the Federal Register on Nov. 29.

Meanwhile, NASUCA has decided to appeal and is considering where it will file the appeal, Acquard said. The Maine Public Advocate won’t be appealing independently but will support NASUCA’s decision, said Wayne Jortner, senior counsel to the Maine Public Advocate’s office. States like Indiana and Nebraska are still reviewing the order but no appeal has been planned at this point, state officials told us. States that haven’t deregulated retail services are more likely to appeal than the ones that have, a state official said.

Now that the decision has been challenged, parties that were on the fence about whether to petition for review may re-evaluate, said Harold Feld, legal director with Public Knowledge. Other states are likely to join the case, he said. Small wireless providers receiving high-cost support who can’t meet the new broadband standards and who don’t think the mobility fund is large enough to provide the same level of support are also likely to seek review, he said. David Kaut, analyst with Stifel Nicolaus, said he won’t be surprised if other states and rural telcos follow suit. It’s inevitable that some states would be unhappy with the FCC order, said Paul Gallant with Guggenheim Partners. The FCC is probably “on solid legal ground with respect to many of the rule changes on the decision,” said Jeff Silva with Medley Global Advisors. Appeals are unlikely to be limited to the FCC’s “massive USF/ICC order,” he said. Subsequent orders implementing the “overarching” reform framework could also be subject to court challenges in the future, he said.