On February 1, the U.S. Court of Appeals for the D.C. Circuit granted challenges to portions of FCC’s 2017 Lifeline reform order restricting the distribution of “enhanced” Lifeline subsidies of an additional $25 per month. The order had adopted rules stating that consumers could not receive the enhanced subsidy if they subscribed to the services of a reseller, or lived on Tribal lands that are not also classified as rural by the FCC.

The Court correctly pointed out that the FCC’s rationale for both of these new rules was inconsistent with long-standing FCC Lifeline policies. It noted that the primary purpose of the program has always been to increase the availability and affordability of telephone services—and more recently, broadband—to low income consumers, including those residing on Tribal lands. The 2017 order had attempted to recast the goal of the program to be network facilities deployment, particularly in rural areas, in order to justify the new rules.

The Court, however, found that the FCC ignored the fact that for 13 years, the FCC had waived the requirement that the service provider not be a reseller and have its own network facilities in order to receive Lifeline subsidies, and failed to provide any rationale for the sudden policy change. It also found that the FCC could provide “no justification” for its rationale that banning resellers on Tribal lands would guard against waste, fraud and abuse in the program, and noted that the FCC failed to consider that most facilities-based providers have been unwilling to serve Tribal lands. It found similar defects with respect to the limitation of the enhanced Tribal subsidy for only Tribal lands that are also rural. Finally, the Court found that the FCC “improperly adopted” the two new rules without providing sufficient opportunity or time for public comment “as it had promised.”

The ruling foreshadows significant difficulties for additional rules that the FCC had proposed in the 2017 order, which if adopted, would have had the effect of eliminating resellers from the Lifeline program, including those serving non-Tribal areas. In its proposal, the FCC had justified these additional rules on some of the same faulty logic behind the Tribal rules struck down by the Court. From a procedural standpoint, the FCC’s order was vacated and remanded for the FCC to conduct a new public notice and comment proceeding consistent with the Court’s findings, essentially, giving the FCC another bite at the apple. It remains to be seen if the FCC will continue to pursue these rules and attempt to support them with a better and more fulsome record, or whether it will instead direct its efforts to fully implementing the National Verifier and to modernize the Lifeline program without the limitations that had been overturned.