On October 15, a three-judge panel of the Fifth Circuit held that the Federal Communications Commission violated federal law when it created the Universal Service Administrative Company, or USAC, the private corporation that collects contributions to the Universal Service Fund and pays out support for E-Rate and the fund’s three other programs. A sentence like that is easy to read as a threat to the program that pays a discounted share of internet access and internal networks for schools and libraries. Read alongside the opinion, the ruling is narrower than that, and the questions it leaves open deserve as much attention from school leaders as the one it settled.
The panel’s reasoning turns on a 1945 statute, the Government Corporation Control Act, which bars an agency from establishing a corporation “to act as an agency” without “a law of the United States specifically authorizing the action.” Judge Edith Brown Clement, writing for a panel that included Chief Judge Jennifer Walker Elrod and Judge Andrew Oldham, concluded that Congress never gave the FCC that authorization. Because the Commission relied on USAC’s projections to set the contribution factor for the fourth quarter of 2025, the court held that it “exceeded its statutory authority,” vacated that factor, and sent the matter back to the FCC. I lead technology for a K–8 district and I am not a lawyer, so what follows is a practitioner’s reading of a 20-page opinion rather than legal advice, and the views are my own.
What the ruling does
The opinion settles three things, at least for now. It holds that USAC acts as an instrumentality of the FCC in administering the fund, rejecting the Commission’s argument that USAC plays a strictly “advisory role” when it projects the fund’s expenses and revenues. It rejects each source of authority the FCC offered, including the Communications Act’s general grant of power and the fact that Congress used USAC to run two pandemic-era programs, the Affordable Connectivity Program and the Emergency Connectivity Fund. The court was “loath to conclude” that by authorizing USAC for two temporary measures, both of which ended in June 2024, Congress had “implicitly blessed” it as the permanent administrator of the entire fund. And it chose vacatur over a simple remand, reasoning that the FCC had adopted USAC’s projections “in toto” and could not repair that defect on remand.
What it does not do
It does not tell USAC to stop reviewing applications, issuing funding commitments, or paying invoices. The judgment reaches one quarter’s contribution factor, the 38.1 percent rate for October through December 2025, and the court did not order refunds. Funds For Learning, reading the opinion for applicants, put the practical point plainly: “Nothing changes for E-rate applicants today.” The decision is also not yet in effect. Because a federal agency is a party, the government has 45 days from the judgment to seek rehearing, and an FCC spokesperson has said the order would not take effect for at least two months and that the agency is considering its options.
It does not overrule the Supreme Court. In June 2025, in FCC v. Consumers’ Research, the Court held 6–3 that the fund’s structure does not unconstitutionally delegate legislative power, and it rejected the argument that the FCC had handed governmental power to a private company. The Fifth Circuit answered a different question: not whether the Constitution permits the arrangement, but whether Congress ever authorized the FCC to create the corporation at its center. Kevin Taglang of the Benton Institute points out the turn this takes. The FCC’s firm control over USAC, which helped the arrangement survive at the Supreme Court, now serves as evidence that USAC is the FCC’s instrumentality under the 1945 Act.
And it does not settle the question closest to schools. The petitioners also argued that the provisions of Section 254 authorizing support for “advanced” services to schools, libraries, and health care providers delegate too much power to the FCC, a question the Supreme Court expressly set aside in 2025. The panel did not reach it: “Because Petitioners’ GCCA challenge is dispositive, we do not address their alternative arguments.” A question left unanswered is not a question lost, but this one bears on the provisions behind much of E-Rate’s support more directly than anything the panel decided, and it has not gone away.
What I would bring to a cabinet or board
For applicants, the practical advice is to keep working from USAC’s announcements and the details of each funding request rather than from headlines. The FY2027 EPC administrative window opened October 21, and USAC lists late-October deadlines for some FY2025 invoices and some FY2026 Form 486 filings that are worth confirming request by request.
It also helps to keep the court case apart from the FCC’s two policy proceedings, which are moving on their own schedules. The E-Rate review in FCC 26-41, which asks whether the program should be narrowed or sunset, has reply comments due November 12. A separate proceeding, FCC 26-52, asks about the structure, costs, and governance of USF administration, with replies due October 30. Both are proposals rather than adopted rules. The second overlaps with the court’s question in an obvious way, and I would expect the ruling to surface in its reply record, but the two remain legally separate, and a board deserves to hear them explained separately.
If I were walking a cabinet through this, I would organize the conversation around three questions. What has actually changed? What is still being considered? What work remains ours? For now, the honest answers are one vacated quarterly factor that has not yet taken effect; two FCC proposals and a possible rehearing or appeal; and nearly all of the applicant work we were already doing.
The structure under the network
In September I argued in A Technoskeptic’s Case for E-Rate that the school network is load-bearing, that the building runs on it before anyone logs on. This ruling is a reminder that the funding under the network has a structure of its own, a corporate arrangement few of us in schools ever had reason to think about, and that a court has now found it rests on authority Congress never specifically gave. The 1945 Act names its own remedy, a law specifically authorizing the corporation, which would move the question from the courts back to Congress. Whether Congress takes that path, and how quickly, is worth watching as closely as the rehearing deadline.
A technoskeptic’s habit is to ask who decides and who bears the cost. On the first, the answer now runs through the courts as well as the Commission. On the second, if the structure fails, the cost would likely fall hardest on the schools and libraries with the deepest discounts and the least room in their budgets.
Sources
Consumers’ Research v. Federal Communications Commission, No. 25-60535 (5th Cir. Oct. 15, 2026). https://www.ca5.uscourts.gov/opinions/pub/25/25-60535-CV0.pdf
FCC To Review E-Rate Program To Ensure Congress’s Vision, 91 Fed. Reg. 52626 (proposed Aug. 14, 2026). https://www.govinfo.gov/content/pkg/FR-2026-08-14/pdf/2026-16590.pdf
FCC v. Consumers’ Research, 606 U.S. 656 (2025). https://www.supremecourt.gov/opinions/24pdf/24-354_0861.pdf
Jolley, V. (2026, October 20). Fifth Circuit rules the FCC lacked authority to create USAC. Here’s what it means for E-rate. Funds For Learning. https://www.fundsforlearning.com/news/fifth-circuit-rules-the-fcc-lacked-authority-to-create-usac-heres-what-it-means-for-e-rate/
Maximizing Efficiencies in Universal Service Administration, 91 Fed. Reg. 55826 (proposed Aug. 31, 2026). https://www.govinfo.gov/content/pkg/FR-2026-08-31/pdf/2026-17761.pdf
Taglang, K. (2026, October 19). Consumers’ Research v. FCC: The Fifth Circuit rules again. Benton Institute for Broadband & Society. https://www.benton.org/blog/consumers-research-v-fcc-fifth-circuit-rules-again
Universal Service Administrative Company. (n.d.). E-Rate announcements. Retrieved October 22, 2026, from https://www.usac.org/e-rate/resources/announcements/