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The Future of Funding

When a three-judge panel of a federal appeals court upheld most of the tenets of the E-rate program July 30, it rejected the way the Federal Communications Commission has assessed carriers for contributions to the Universal Service Fund. And like many aspects of the E-rate program, the result is still up in the air.

On Sept. 9, the FCC filed a motion, asking the U.S. Court of Appeals for the 5th Circuit to stay its ruling that the intrastate and international revenues of Universal Service Fund contributors could not be factored in when their contributions are calculated. It also asked for a rehearing of arguments on that point.

The FCC asked that if the court denied its request for a rehearing, that it be allowed to delay changes in the contribution formulas until the start of the next quarter, to avoid disrupting the program. And on Sept. 10, the FCC instructed contributors that until it heard from the court, it expected the companies to continue to abide by the old formulas.

The three-judge panel's ruling, if upheld, would sharply limit the revenue pool on which Universal Service Fund contributions are based, and shift more of the burden of the program onto the backs of the long-distance companies. However, the good news for the E-rate program is that the court's ruling affects all of the Universal Service Fund programs, including the politically popular program of support to rural telephone customers, and thus chances for a resolution of the issue are greater than if the decision applied only to the schools and libraries program.

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