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On October 15, 2026, the U.S. Court of Appeals for the Fifth Circuit issued a decision in Consumers’ Research v. FCC, No. 25-60535. The court held that the FCC violated the Government Corporation Control Act (“GCCA”) by establishing USAC without specific congressional authorization.

While the ruling only directly affects the latest contribution factor, its reasoning attacks the legal foundation of the entity that has administered the Universal Service Fund (“USF”) for nearly 30 years.

Background

The FCC created USAC in 1997 as an independent not-for-profit company to administer the USF. USAC collects contributions from telecommunications and VoIP service providers and distributes support for telecommunications and broadband services to rural and low-income consumers, schools, libraries, and rural health care providers. USAC also prepares the financial projections the FCC uses to set the quarterly contribution factor, which is the percentage of interstate and international end-user telecommunications revenues that service providers must contribute to the USF on a quarterly basis. The fund collects about $9 billion a year, and most carriers pass the cost on to their customers.

The Case

Consumers’ Research, a non-profit advocacy organization, brought suit in the Fifth Circuit challenging the legality of the Fourth Quarter 2025 contribution factor. The FCC had set that factor at 38.1% after adopting USAC’s projections with a minor adjustment. The petitioners raised several arguments, but the Fifth Circuit panel addressed only one: whether the FCC had statutory authority to create USAC.

What the Court Decided

The court found that the FCC created USAC to act as its instrumentality in administering the USF. The court reasoned that, under the GCCA, the creation of such an administrative entity requires specific congressional authorization, and Congress never provided it. The court also rejected the FCC’s arguments that authorization came from other sources, including:

  • The FCC’s general ancillary authority
  • Congress’s authorization for the National Exchange Carrier Association to administer the USF’s “Lifeline” program
  • Congress’s later use of USAC for two temporary pandemic-era programs

The FCC relied on USAC’s projections in establishing the contribution factor, so the court held that the agency exceeded its statutory authority, vacated the 38.1% contribution factor, and remanded the matter back to the FCC.

How This Differs from the 2025 Supreme Court Ruling

In June 2025, the Supreme Court reversed an earlier Fifth Circuit ruling, FCC vs Consumers’ Research, upholding the USF contribution scheme against a separate challenge brought by Consumers’ Research who had argued that Congress’s decision to delegate the power to set the contribution rate to the FCC and the FCC’s reliance on USAC, were each unconstitutional delegations of Congressional power. In that case, the Supreme Court found that Congress had “sufficiently guided and constrained the discretion that it lodged with the FCC to implement the universal-service contribution scheme” and, therefore, did not violate the non-delegation doctrine of the Constitution.

In contrast, the current decision turns on whether the FCC’s actions delegating authority to USAC violated the statutory requirements of the GCCA.  

What Happens Next

The FCC may ask the Fifth Circuit to reconsider the panel decision en banc, or it may appeal the decision to the Supreme Court. It is not clear whether the FCC will seek to have the effect of the ruling paused pending the resolution of any such appeals. In the meantime, while the current ruling only applies to the fourth-quarter 2025 contribution factor, there is no reason to believe the court’s reasoning would not apply to any challenges brought against subsequent contribution factors. Indeed, Consumers’ Research has already challenged each quarterly factor adopted since the Supreme Court’s decision in 2025, the decisions on which had been paused pending the Fifth Circuit’s review.

Meanwhile, telecommunications and VoIP providers continue to be subject to USF contribution requirements and other compliance obligations.  

For more information, contact the authors of this blog, Partners Casey Lide (lide@khlaw.com, 202.434.4186) or Sean Stokes (stokes@khlaw.com, 202.434.4193), or your existing contact at Keller and Heckman LLP.

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On September 8, 2026, the United States Federal Communications Commission (“FCC”) began accepting comments in a regulatory proceeding with the potential to significantly expand the FCC’s national-security controls over communications equipment, largely impacting devices manufacturers outside of the U.S.

In its Third Further Notice of Proposed Rulemaking (“Third FNPRM”) in ET Docket No. 21-232, the FCC proposes to move beyond identifying specific foreign companies as security risks and increasingly scrutinize generally where equipment is produced. The proposals would have substantial implications for non-U.S. manufacturers seeking to obtain or maintain FCC equipment authorizations.

The proceeding largely focuses on the FCC’s “Covered List.” The Covered List is a list of equipment and services that have been specifically determined to pose an unacceptable risk to the national security of the United States or the security and safety of United States persons. Devices on the Covered List may not be imported or marketed in the U.S. Until December 2025, the FCC added devices to the Covered List by identifying the specific producer or provider of the equipment or services. In 2025, however, the FCC began adding devices to the Covered List based on the country in which the equipment was produced. For example, the FCC has added all UAS (i.e., drones), UAS critical components, and routers produced outside the U.S. to the Covered List. This distinction is critical. A company that is not itself named on the Covered List could nevertheless face authorization problems if it manufactures equipment falling within a location-based Covered List category.

Bills of Materials

Perhaps the most consequential of the FCC’s proposals for manufacturers is the potential requirement for hardware bills of materials and software bills of materials. The FCC proposes requiring applicants for equipment authorization to disclose all components, including hardware and software of a device. For critical components, the proposed disclosures could include the component’s name and function, its producer, where it was designed, developed, manufactured, assembled, or otherwise produced, and the percentage of component value attributable to particular producers and production locations.

This would substantially increase the compliance burden for manufacturers with complex supply chains. A manufacturer would need reliable visibility not merely into its direct suppliers, but potentially into the origin of important subcomponents, software, firmware, semiconductors, optical transceivers, modules, and other technology. Further, the FCC proposes to require updated hardware and software lists be provided within 30 days of changes thereto.

The significance is that the FCC would gain a much clearer picture of whether a supposedly non-covered device incorporates components associated with a Covered List entity or location. Supply-chain documentation would therefore become an important part of FCC authorization strategy rather than merely an internal procurement function.

White Labelling

The FCC is also targeting arrangements in which equipment is manufactured by one entity but marketed under another company’s name. The Third FNPRM seeks comment on whether an entity exercising substantial responsibility or control over a major stage of production, including the design, manufacturing, assembly, or development, should be treated as the producer.

The FCC proposes requiring applicants to identify all entities that “produced” and asks whether applicants for equipment authorization should disclose all brand and model names associated with an FCC ID.

This could materially affect overseas OEM business models. A non-U.S. factory producing an FCC-authorized product for a U.S. brand may no longer be able to remain effectively undisclosed in the authorization process.

Component-Level Restrictions

The Third FNPRM proposes potentially prohibiting, or establishing a presumption against, authorization of devices containing hardware components, software, or firmware produced by a Covered List entity, even when used as device components by another manufacturer. It also proposes certification requirements for devices falling within Covered List sectors, regardless of the identity of the manufacturer.

This could be particularly significant for international manufacturers because a device could become difficult or impossible to authorize even where the company itself is not named on the Covered List. The issue could instead arise from a single covered component or software element. In addition, a manufacturer that currently relies on a supplier that later becomes subject to a Covered List determination could face problems not only with new products but potentially with product modifications and future authorizations.

Importation and Marketing Restrictions

The FCC proposes additional restrictions on importing covered equipment into the United States. Among other things, the proposal would generally permit covered equipment to be imported only where it has a valid, unrestricted authorization, is imported in quantities of 40 or fewer units for testing/evaluation or product development, is imported solely for export, or is intended for certain U.S. Government purposes.

This could make U.S. product development and commercial launch more difficult where authorization status is uncertain. The proposed framework would also reinforce restrictions on marketing unauthorized equipment and tighten rules concerning pre-authorization operation.

The accompanying Third Report and Order separately closes a “component part loophole” by prohibiting authorization of certain devices containing logic-bearing hardware components produced by Covered List entities. It also subjects modifications or permissive changes made by Covered List entities to full certification. Those provisions are distinct from the proposals in the FNPRM but demonstrate the direction in which the FCC is moving.

Equipment Authorization Expirations

The FCC also seeks comment on term limits for equipment certifications, potentially requiring periodic recertification. Currently, device certifications are good forever, unless withdrawn, revoked, or terminated or become subject to a subsequent rule change that affects their validity.  The Commission asks whether a 10-year term is sufficient. These measures could mean that FCC compliance becomes a continuing obligation rather than a one-time certification exercise. Manufacturers may need systems capable of tracking component changes, production sites, suppliers, software updates, corporate ownership, and FCC representations over the entire product lifecycle.

Impacts

Taken together, the Third FNPRM would make the FCC equipment-authorization regime substantially more supply-chain-oriented. The FCC is considering a framework under which regulators could examine the entire chain: the manufacturer, contract manufacturers, production locations, component suppliers, software and firmware, branding arrangements, importers, and U.S. entities responsible for compliance. Costs of compliance would certainly increase as a result.

For manufacturers that are not currently on the Covered List, the immediate message is therefore not that U.S. market access will necessarily disappear, but that traditional certification and OEM structures may become inadequate. Companies should follow the FCC’s rulemaking closely and be prepared to adjust to any new requirements.

For more information about the FCC’s proposal, assistance evaluating its impact on your business, or guidance on drafting comments, please contact Greg Kunkle (kunkle@khlaw.com) or your existing contact at Keller and Heckman LLP.

Additionally, if you are interested in participating in an exploratory discussion on the potential impact of the FCC’s proposed national security controls on communications equipment, please click here to join the interest list. We will provide additional details, including the date and time, shortly.

Photo of Timothy A. DoughtyPhoto of Wesley K. Wright

Last year, the Federal Communications Commission (FCC) proposed sweeping updates to its 911 reliability and interoperability regulations. The proposed changes, under consideration by the FCC in response to the Further Notice of Proposed Rulemaking (FNPRM), would expand reliability requirements with an eye towards supporting the nationwide transition from legacy networks to fully Next Generation 911 (NG911) systems.

For service providers that carry, route, or process 911 traffic, these proposals expand the scope of regulatory obligations and establish additional compliance obligations.

Expanding the Definition of “Covered 911 Service Provider”

At the heart of the FCC’s proposal is an expanded definition of a “covered 911 service provider” (C9SP). A C9SP is defined under the existing rules as an entity that provides selective routing, Automatic Location Information (ALI) and/or Automatic Number Information (ANI) directly to a Public Safety Answering Point (PSAP). The FCC intends to expand the universe of entities that are C9SPs by including all companies it views as essential to NG911 delivery — not just traditional wireline operators, but also network players whose facilities directly affect the flow and reliability of IP-based 911 traffic.

Under the proposed revisions, C9SPs would now include operators of:

  • Location Information Servers (LIS) and equivalent IP-based 911 location databases
  • Legacy Network Gateways (LNGs) that convert time-division multiplexing (TDM) traffic into Session Initiation Protocol (SIP)
  • Major Transport Facilities, defined as dedicated SIP links (OC3 or higher) that carry 911 traffic across multiple originating service providers and over interstate routes
  • IP Traffic Aggregation Facilities that combine and segregate 911 and non-911 IP traffic for delivery to Emergency Services IP Networks (ESInets)
  • ESInet Interconnection Facilities linking separate state or regional ESInets

If adopted, these additional providers will be required to comply with the agency’s Section 9.19 reliability rules.

Revised Reliability Framework: “Reasonable Measures” and Presumptive Compliance

The FCC’s proposal would also update the benchmarks that give C9SPs some peace of mind that the steps they have taken constitute “reasonable measures” to promote 911 network reliability consistent with the FCC’s rules. These updated benchmarks are meant to reflect IP-era realities and obligate C9SPs to continue taking “reasonable measures” to ensure network reliability across three broad categories:

  1. Physical Diversity – Networks must provide alternate, geographically diverse routes for critical IP paths. Automatic failover and path re-routing would be required to sustain service continuity during an outage.
  2. Network Monitoring – The Commission would expand its monitoring expectations to reflect NG911 architectures, including real-time monitoring of routers, LISs, and LNGs, with physically diverse links between monitoring points and network operations centers.
  3. Operational Integrity – Backup power requirements would evolve to fit IP environments, ensuring continuity of NG911 operations during power failures.

Providers following FCC-defined “best practices” in these areas would enjoy presumptive compliance, reducing the need for case-by-case engineering justifications.

Interstate Interoperability and Annual Certifications

Perhaps the most significant – and contentious – step toward national uniformity is the FCC’s proposed interstate interoperability requirement for ESInet interconnection facilities. Under the draft rules, C9SPs responsible for interstate routing would need to:

  • Conduct annual conformance and interoperability testing with at least two ESInets in other states (or document equivalent alternative measures).
  • Certify annually that their equipment conforms to “commonly accepted standards” for NG911 interoperability.
  • Demonstrate the ability to process and share interstate 911 requests — including voice, text, and video — consistently and without data loss.

This proposal received a significant amount of criticism and opposition during the comment cycle. Many commenters argued it was premature to implement interoperability requirements and cautioned that such an approach would stifle innovation and hamper the ongoing NG911 rollout.  

Expanded Oversight and Direct 911 Authority Access

The FCC also seeks to bolster transparency and state-level oversight of reliability data. Key proposed changes include:

  • Requiring C9SPs to submit updated reliability and interoperability certifications that specify which facility types (legacy or NG911) they operate.
  • Granting 911 Authorities direct access to these certifications — either through the FCC’s database or upon request to the provider — mirroring the agency’s Network Outage Reporting System (NORS) access framework.
  • Mandating notification to both the FCC and relevant 911 Authorities when a provider ceases 911 service.

For providers, this means enhanced state visibility into network reliability practices — and potential opportunities to informally audit and follow up with providers if there are concerns about network reliability.

Enforcement and Petition Process

To reinforce compliance without resorting immediately to formal enforcement, the FCC proposes a structured remedial process:

  1. If the Public Safety and Homeland Security Bureau identifies apparent reliability or interoperability deficiencies, it may issue a notice of deficiency proposing corrective actions.
  2. C9SPs would have 30 days to respond, providing explanations, disputing the notice, or suggesting alternative measures that can be taken to resolve the issue.
  3. The Bureau could then issue a corrective order setting deadlines and requiring documentation of remedial actions.
  4. State and local 911 Authorities would be empowered to petition the Bureau if they believe a C9SP has filed inaccurate certifications or failed to maintain reasonable network practices.

This codified escalation path represents a more expedited compliance development — providing both the FCC and state agencies with new tools to proactively address real or perceived 911 reliability issues before public safety is compromised.

Implications for Covered 911 Service Providers

The Comment cycle was completed nearly a year ago, and we expect the FCC to issue new rules in late summer that track the initial proposal with some important deviations, particularly around interoperability. Entities in the NG911 ecosystem – even those that currently are not considered C9SPs – should continue to monitor this closely. New categories of providers could be swept up in this expanded definition of a C9SP and, in short order, would be required to develop procedures to ensure they have taken the required steps to provide network reliability to satisfy the annual certification obligations. All C9SPs – under the current definition and potentially expanded definition – should also prepare for direct inquiries from state and local 911 Authorities if the FCC adopts its new petition process.

Federal Communications Commission Chairman Brendan Carr has been leading the agency for just over a year. Keller and Heckman’s Communications and Technology Practice has been monitoring key actions taken by the FCC that were priorities of the Chairman (highlighted here), as well as anticipated actions we expect the agency to take in 2026.

  1. Modernizing the Commission’s NEPA and NHPA Rules: In response to the Trump Administration’s Executive Order 14154 (“Unleashing American Energy”), which prioritized the effective streamlining of agency regulations, the Commission adopted a Notice of Proposed Rulemaking (“NPRM”) proposing to revise the Commission’s implementation of the National Environmental Policy Act (“NEPA”). The NPRM proposed to limit the FCC’s environmental review requirements by excluding geographic and site-based license applications, as well as earth station licenses and antenna structure registrations (“ASR”). Additionally, the Commission sought comment on reducing administrative burdens to perform Environmental Assessments and Environmental Impact Statements and streamline joint agency procedures during the environmental review process. Comments and reply comments have concluded, and parties await the release of a Report and Order. You can find more information about this proceeding in Keller and Heckman’s Regulatory Recap from last year.
  2. Facilitating the Implementation of NG911 and Improving 911 Reliability: Last September, the Commission completed a comment cycle on a Further Notice of Proposed Rulemaking (“FNPRM”) involving a rule update to facilitate the NG911 transition and ensure that the transition does not inadvertently create vulnerabilities in public safety networks. The proposed rules would also establish NG911 interoperability requirements for the interstate transfer of 911 traffic. A Report and Order is expected in 2026.
  3. Rebanding the 900 MHz Band: In 2020, the Commission adopted a Report and Order (“R&O”) that paved the way for Anterix to aggregate narrowband 900 MHz channels authorized under Part 90 of the Commission’s rules into a single 3×3 MHz broadband license on a county-by-county basis. Anterix has been working for several years to migrate incumbents off of these channels to clear this spectrum for the company’s broadband offering. In 2024, Anterix proposed that it be permitted to aggregate the entire 900 MHz band to a 5×5 MHz broadband offering. The Commission sought comment on implementing Anterix’s proposal in an NPRM issued last year and effectively approved the proposal in an Order adopted at its February 18th Open Meeting. The new rules largely retain the existing technical standards and eligibility requirements in the band. However, one significant change relates to the mandatory relocation of incumbent narrowband licensees. In the 3×3 MHz portion of the band, once a party acquires 90% or more of the broadband portion of the band, they could require remaining incumbents to relocate to alternative spectrum (though the acquiring party would be required to pay for this relocation). Under the 5×5 MHz rules, such mandatory relocation is not permitted outside of 897.5–900.5/936.5–939.5 MHz.
  4. GVP Device Operations in the Unlicensed 6 GHz Band: At the January Open Meeting, the Commission adopted a Report and Order authorizing further unlicensed operations in the 6 GHz Band for very low power (“VLP”) devices. The R&O authorized geofenced variable power (“GVP”), subject to technical limitations, to operate alongside VLP and low-power indoor (“LPI”). The R&O describes how incumbent microwave users in the band will be protected from interference from the newly approved unlicensed devices. However, in January of this year, the Utilities Technology Council submitted an ex parte letter to the FCC arguing that unlicensed devices in the 6 GHz band cause harmful interference to licensed fixed point-to-point microwave systems in this band. In addition to the new rules, the Commission adopted a Third Notice of Proposed Rulemaking seeking comment on further updates to the 6 GHz band unlicensed rules.
  5. Wireline and Wireless Permitting Reform: Last fall, the Commission initiated two closely related proceedings to remove perceived barriers to telecommunications and broadband deployments. In the first, the Commission issued a Notice of Inquiry (“NOI”), seeking comment on the permitting, fees, and terms and conditions that state and local governments impose on wireline telecommunications providers seeking to access public rights-of-way and government-owned poles and conduits. In the second, the Commission issued a Notice of Proposed Rulemaking, seeking comment on wireless permitting practices of state and local governments. Both proceedings have been undertaken as part of the Administration’s “Build America Agenda,” and both seek to broaden the scope of Section 253 of the Communications Act to remove state and local legal requirements that have the effect of prohibiting the provision of telecommunications service. More information about this proceeding is available on Keller and Heckman’s Regulatory Recap summarizing the Commission’s NOI.
  6. Pole Attachment Rules: The Commission is continuing its years-long effort to facilitate access to utility poles, primarily by placing even more burdens and constraints on pole owners. In its pole attachment rulemaking proceeding that has remained open since 2017, the Commission released its Fifth Report and Order and Fourth Further Notice of Proposed Rulemaking on July 25, 2025. This ruling establishes contractor approval deadlines, extends make-ready deadlines to requests to attach to 3,000-6,000 poles in a month, adds new requirements for pole owners and attachers to coordinate buildouts, and provides a new self-help remedy for make-ready estimates. The latest proposed rules address possible deadlines for attachment installations, limitations on make-ready estimates, expanding the reach of one-touch make-ready, a deadline for “on-boarding” new contractors, and mandatory access to streetlight-only poles.

    If you have any questions about the above, please contact a member of Keller and Heckman’s Communications and Technology Practice Group.

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    On September 11, 2025, the FCC released a Consent Decree with T-Mobile US, Inc. (“T-Mobile”) formally resolving an investigation into whether T-Mobile violated section 302 of the Communications Act of 1934 and parts 2 and 15 of the FCC Rules, specifically concerning the import, marketing, and sale of its REVVL 7 PRO 5G smartphone. The core issue was that T-Mobile imported, marketed, and sold the smartphone device before it had received the necessary FCC equipment authorization. To settle the matter, T-Mobile agreed to the terms of the Consent Decree, including the implementation of a comprehensive compliance plan and monetary payment of $7,000.

    The FCC regulates radio frequency (RF) energy-emitting equipment, primarily to prevent harmful interference. The FCC’s Rules require such devices to meet specific standards and obtain authorization before being marketed in the U.S. The Rules apply to devices that intentionally radiate RF energy, like cell phones or Wi-Fi devices, but also to devices that unintentionally emit RF energy, like digital cameras and toys. Section 2.803(b)(1) of the FCC’s Rules specifically prohibits, with very few exceptions, marketing RF devices without proper authorization. Additionally, Sections 2.1203 and 2.1204 of the FCC’s Rules generally provide that an RF device can only be imported if it has received an equipment authorization from the FCC, or if it does not require such authorization but still complies with certain FCC technical and administrative regulations.

    According to the Consent Decree, T-Mobile announced the REVVL 7 PRO 5G’s availability on May 14, 2024, and began sales on May 23, 2024. However, the device did not receive its official FCC equipment authorization until May 29, 2024. Even given the brief period of non-compliance, thousands of smartphones were sold during the gap. The FCC initiated an inquiry on October 1, 2024, questioning T-Mobile’s premature marketing and its documentation of import compliance, which was eventually concluded by the Consent Decree.

    As part of the settlement, T-Mobile admitted to the factual background and acknowledged the Commission’s jurisdiction. T-Mobile also agreed to a robust Compliance Plan. Within thirty days of the settlement, T-Mobile must appoint a senior corporate manager with the authority to halt marketing activities if compliance issues arise as a Compliance Officer. The Compliance Plan requires strict new operating procedures, such as a compliance checklist, enhanced contractual obligations for T-Mobile’s manufacturers, and verification of equipment authorization before accepting product delivery. The Compliance Officer must also verify equipment authorization at least forty-eight hours prior to marketing or sale. Additionally, T-Mobile will develop a Compliance Manual and implement a mandatory Compliance Training Program for all “Covered Employees,” with annual refreshers.

    The Consent Decree is notable for a couple of reasons:

    First, T-Mobile informed the FCC that it “generally relies on manufacturers to ensure that FCC equipment authorization procedures are met” and that “compliance with FCC rules are routinely memorialized in the agreement between T-Mobile and the manufacturer.” The FCC generally provides that consignees must “be able to document compliance with the selected import condition and the basis for determining the import condition applied.” Here, the FCC disagreed that the terms of T-Mobile’s agreement satisfied its documentation requirements. Although the exact terms of the agreement are not available, this indicates that contractual representations and warranties, by themselves, may not be sufficient to ensure compliance with the FCC’s Rules.

    The Consent Decree is also notable in that T-Mobile is required to pay a voluntary contribution of $7,000 to the United States Treasury within thirty calendar days of the Consent Decree’s effective date. For several years, the FCC has been moving away from allowing voluntary payments in Consent Decrees, instead characterizing such payments as “civil penalties,” reinforcing culpability for the alleged violator. A voluntary contribution may have been allowed in this instance due to the relatively short period of non-compliance paired with T-Mobile’s documented efforts to comply with the Rules. However, the fact that a voluntary contribution was allowed at all is noteworthy.

    For more information, please contact Greg Kunkle (kunkle@khlaw.com; 202.434.4178).

    Photo of Casey Lide

    The following post discusses legal and financial matters and is provided for general informational purposes only. It is not intended to serve as legal or financial advice, particularly with respect to an individual entity’s tax status. Readers should consult qualified legal, accounting, and tax planning professionals for advice as to their specific circumstances.

    On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a massive budget reconciliation bill that codified many of the Trump Administration’s tax and spending policy objectives. While the final version of the Act did not exclude broadband grants from treatment as gross income for purposes of federal taxation (as proposed under the Broadband Grant Tax Treatment Act re-introduced earlier this year), the OBBBA’s 100% bonus depreciation provision provides some consolation, as it promises to significantly benefit some broadband network owners.

    In general, depreciation provides a tax deduction equivalent to the purchase price of the property, normally realized over the economic life of the property. Bonus depreciation enables the tax deduction to occur on an accelerated basis and is intended to incentivize capital investments by businesses. First enacted in 2002, some form of bonus depreciation has been in effect for most of the past two decades. The percentage rate of bonus depreciation, and property eligible for it, has changed under various legislative enactments over that period.

    The 2017 Tax Cuts and Jobs Act established a 100% bonus depreciation rate (meaning a business may be able to deduct all of a qualifying asset’s cost in the year that asset was acquired) for assets acquired and placed in service between September 27, 2017 and January 1, 2023, but would have phased down the bonus depreciation rate to zero percent in 2027. The OBBBA, however, now provides a permanent 100% bonus depreciation provision of eligible assets acquired and placed into service after January 19, 2025.

    What does this mean for fiber optic networks and other Telephone Distribution Plant (including conduit and related outside plant and equipment (OSP))? AT&T and others in the industry are very bullish on it, touting bonus depreciation as enabling, in AT&T’s case, “over $1 billion annually in cash-tax deferrals, effectively reducing the cost of capital for fiber projects.”

    But fiber network owners should note that bonus depreciation may or may not be available to them, depending on what accounting methods they follow.

    Bonus depreciation is available only for assets with a recovery period of 20 years or less under the Modified Accelerated Cost Recovery System (MACRS). Fiber optic networks and other OSP, however, generally have a long economic life: the IRS lists the “class life” of Telephone Distribution Plant as 24 years, which is also the recovery period for depreciation of Telephone Distribution Plant under the Alternative Depreciation System.

    At first glance, the 24-year class life of telecommunications OSP would suggest that fiber optic networks simply are not eligible for bonus depreciation. But that is not the case, as is evident from the reaction of AT&T and others.

    The key is that bonus depreciation eligibility depends on the recovery period of the asset, not its class life. Under the Alternative Depreciation System (ADS), the recovery period of Telephone Distribution Plant is 24 years. But under the General Depreciation System (GDS), the recovery period is 15 years.

    In the most general terms, then, eligibility of fiber optic network assets for bonus depreciation depends on the provider’s chosen accounting and depreciation methods.

    We must emphasize that the above is a greatly simplified explanation, and there is considerable nuance in the tax treatment of capital assets. As noted in the introduction, readers should consult with their own legal, financial, and tax professionals with respect to their particular circumstances.

    If we can be of assistance with respect to the above, please contact an attorney within Keller and Heckman’s Communications and Technology practice group.

    Photo of Casey Lide

    Under the BEAD Restructuring Policy Notice issued by NTIA on June 6 (“Policy Notice”),[1] state and territory broadband offices must rescind all preliminary and provisional BEAD awards made under the prior rules and must, in very short order, run a single competitive round with a strong preference for providers that promise to provide 100Mbps / 20 Mbps service for the least amount of BEAD funding support.

    Crucially, the Policy Notice puts LEO satellite and unlicensed fixed wireless (ULFW) on the same footing as end-to-end fiber projects. Under the prior rules, only end-to-end fiber projects qualified as “Priority Broadband Projects,” meaning fiber projects would receive support to serve a given area even if another “Reliable Broadband Service” technology (such as cable modem or licensed fixed wireless) might do so less expensively. Under the prior rules, LEO and ULFW service was not even considered “Reliable Broadband Service,” and BEAD funding for such “Alternative Technologies” was only available if the cost to deploy Reliable Broadband Service to a given location exceeded a certain threshold.[2]

    The new Policy Notice turned that approach upside down. Now, all technologies that can provide 100/20 Mbps service with sub-100ms latency and that are ostensibly capable of scaling to meet future needs are considered “Priority Broadband Service” – including LEO and ULFW.

    At the same time, the Policy Notice requires state broadband offices to “choose the option with the lowest cost based on minimal BEAD program outlay.” Only if an applicant submits a proposal within 15% of the lowest-cost proposal may a state broadband office consider the speed of the network and other factors (i.e., that a futureproof FTTP network that will provide 1Gbps+ with sub-20ms latency is a better long-term infrastructure investment than a ~100/20 Mbps LEO service with ~100ms latency).

    To put it mildly, these changes put prior BEAD applicants in a defensive position, especially those that proposed end-to-end fiber projects. Fiber providers that already submitted BEAD applications must now compete against LEO and ULFW service solely on cost. It is essentially a one-round reverse auction, with unequal technologies being treated the same.

    The expansion of funding for ULFW also means that locations designated as “served” by ULFW in the FCC National Broadband Map may be removed from eligibility for BEAD funding, but it is not automatic. Under the process outlined in the Policy Notice, an ULFW provider may protect its existing service territory from BEAD funding by submitting evidence that its current service meets the technical requirements of “Priority Broadband Service.” [3] (Or, the ULFW provider could opt not to submit such evidence, and instead compete to obtain BEAD support to upgrade its network.) The Policy Notice does not specifically provide for third-party comment or intervention in this process, and it is not clear that state broadband offices would have enough time to entertain contrary evidence. Most broadband offices have yet to issue substantive guidance following the Policy Notice, and we simply do not know at this point — some might allow it, while others might not.

    The Policy Notice is conspicuously silent on the issue of locations currently able to be served by LEO service that qualifies as “Priority Broadband Service,” if any. Logically, any such locations should be removed from BEAD eligibility, but the Policy Notice does not address it. At the same time, it is important to note that any LEO Capacity Subgrant does not require qualifying service immediately: a LEO recipient is only obligated to commence provision of qualifying broadband service within four years from the date of the subgrant.

    Prior BEAD applicants (and ULFW and LEO providers) are not the only stakeholders under the new BEAD rules. Any entity that has continued to deploy infrastructure and services while the BEAD process has dragged on should be mindful of the potential for new BEAD-supported competition. Many months have elapsed since the close of state challenge processes, and many providers have continued deploying fiber optic networks and other Priority Broadband Projects in the meantime. If maps of BEAD-eligible locations are not updated before funding decisions are made, BEAD funding will end up supporting significant overbuilding of existing networks.

    So, the new BEAD rules will require many to play defense, including: (1) prior BEAD applicants that wish to resubmit, (2) prior BEAD applicants that do not plan to resubmit, but that wish to protect expansion areas from BEAD-supported overbuilds, and (3) non-BEAD applicants whose expanded networks are not accurately reflected in funding maps.

    To summarize:

    1. Prior BEAD Applicants That Wish to Resubmit:
    • The provider may need to aggressively adjust its BEAD proposal budget.
    • The provider may or may not end up competing against a LEO or ULFW application. For ULFW, check the National Broadband Map for ULFW code 70. For insight on LEO bids, see the recent post from the Benton Institute for Broadband & Society, “What Do We Know About LEO BEAD Bids.”
    • If the provider is planning to deploy fiber in the area anyway, and can commit to do so, it may be especially feasible to compete against ULFW or LEO service. As an extreme example, a $1 “bid” would presumably win the area and protect it from BEAD-supported overbuilding (but would also obligate the provider to comply with various BEAD program rules going forward).
    • If the National Broadband Map shows that there is ULFW coverage (code 70) in the proposal footprint:
      • The provider may wish to explore whether it can rebut any ULFW claim that the ULFW’s provider’s current service meets the Appendix A technical qualifications (see above).
      • If the ULFW service does not submit a claim and supporting evidence to the state broadband office (under the process outlined in note 1), it is fair to assume the ULFW provider will seek BEAD funding. In that case, a competing applicant might either (1) compete aggressively on BEAD cost, or (2) seek to partner with the ULFW provider somehow, or (3) propose its own ULFW solution.
    1. Prior BEAD (Fiber) Applicants That Do Not Plan to Resubmit:
    • Assuming BEAD support was sought for expansion of current service area, consider the implications of BEAD-supported competition in adjacent territory.
    • Can the provider partner with an ULFW provider to obtain targeted BEAD support in the near term, and potentially migrate to fiber?
    • Can the provider support a “planned service” challenge to BEAD location eligibility, and more importantly, will the state broadband office entertain it (unlikely, absent a new challenge round)?
    • If the provider intends to serve the area in the near future anyway, and can commit to doing so, it may be worth considering whether to submit an application for nominal support.
    1. Providers That Have Significantly Expanded Networks Over the Past 18 Months:
    • Post-challenge BEAD funding maps may not accurately reflect the current state of BEAD-eligible locations.
    • It is unclear whether state broadband offices will have the time or inclination to enable a new “true-up” process to avoid BEAD-funded overbuilds.
    • Providers should closely watch announcements from their state broadband office in the coming days, and may wish to reach out to the office directly to advocate for an update to BEAD funding maps.

    As a final comment, please note that additional clarity may emerge with respect to some of above issues as state broadband offices begin issuing substantive guidance reflecting the dictates of the Policy Notice. Note also that there is a reasonable likelihood of litigation challenging certain aspects of the Policy Notice, with unknown consequences.

    [1] For a general overview of the Policy Notice, please refer to our earlier blog post, “Commerce Department’s New BEAD Reform Notice Upends Structure of Program,” June 16, 2025.

    [2] NTIA Policy Notice, June 26, 2024.

    [3] The Policy Notice requires state broadband offices to undertake a process to “ensure that locations already served by an ULFW service that meets the technical specifications within Appendix A [of the Policy Notice]” are not eligible for BEAD funding. First, the state broadband office must review the National Broadband Map to determine whether any ULFW-served locations overlap with any previous BEAD-eligible locations. If so, the broadband office must notify the ULFW provider that it has seven days to respond that it intends to claim that BEAD funding is not required. After doing so, the ULFW provider has seven additional days to submit evidence substantiating the claim. For example, the Ohio broadband office (“BroadbandOhio”) recently published a notification stating that ULFW providers have until June 20 to submit a claim that their service area meets technical specifications for BEAD performance (as documented in the Policy Notice) and that BEAD funding is not required for the locations. After doing so, ULFW providers have only 7 days – until June 27 – to submit evidence supporting the claim.

    Photo of Sean A. Stokes

    This is the first of several planned blogs on the recently released NTIA BEAD Restructuring Policy Notice (“Notice”).

    In early March, Department of Commerce Secretary Howard Lutnick paused all funding under the $42.5 billion BEAD program pending a “rigorous review” by the new administration. At that time, the Secretary announced his intention to “rip out” many of the Biden Administration’s requirements and “revamp” the BEAD program to take a “tech-neutral approach.”

    Now, three months later, true to his word, Secretary Lutnick has released NTIA’s Restructuring Notice, revamping the underlying structure of the prior program toward a new “tech-neutral” approach that gives primacy to low-cost solutions rather than long-term value or infrastructure investment. It is widely anticipated that the restructured program will, in many instances, favor low-earth orbit (“LEO”) satellite as the lowest-cost solution. The Notice also removes several Biden-era grant compliance requirements.

    The Notice requires all states and territories to rescind preliminary awards (including those in states already approved under the Biden administration, including Delaware, Louisiana, and Nevada) and conduct a new selection round prioritizing sub-recipients who submit lowest-cost bids in accordance with the NTIA’s new “Benefit of the Bargain” scoring rubric. States and territories will have 90 days to complete this process and submit a Final Proposal that reflects the results of the “Benefit of the Bargain” round. The Notice states that NTIA will complete its review of each Final Proposal within 90 days of submission. According to Secretary Lutnick, the “goal” is to get BEAD funding flowing by the end of the year.

    Benefit of the Bargain Round Scoring

    The Notice redefines the definition of a “Priority Broadband Project” to remove NTIA’s prior preference for end-to-end fiber solutions. It will now include any technology, including LEO and unlicensed fixed wireless broadband (“ULFW”), that meets the minimum speed and latency requirements – 100 Mbps down and 20 Mbps up; 100ms latency; and scalability. In other words, all broadband projects are now “Priority Broadband Projects,” except those that cannot meet the speed and latency requirement or satisfy the vague scalability standards outlined in the Notice.

    The Notice adopts new scoring criteria that heavily prioritizes proposals with the lowest overall cost to the program. This may enable selection of a proposal that is not necessarily the lowest-cost option for an individual broadband service location but is part of the combination of selected locations with the lowest overall cost to the program. When comparing competing proposals, the Notice directs states and territories to assess the total BEAD funding that will be required to complete the project (i.e., the total project cost minus the applicant’s proposed match) and the cost to the program per location (i.e., the total BEAD funding that will be required to complete the project divided by the number of locations the project will serve).

    If competing applications to serve the same general project area propose a project cost within 15% of the lowest-cost proposal, the state or territory must evaluate such competing applications based on: (1) speed to deployment; (2) speed of network and performance capabilities; and (3) whether the entities were previously provisionally selected by the state or territory in an earlier selection round.

    Challenge Process

    The Notice does not explicitly require states and territories to re-run their location eligibility challenge process. States and territories are, however, required to implement the following measures:

    • Investigate and account for locations that are not eligible for BEAD funding because: (1) the locations are shown as served under the latest version of the FCC Broadband Data Collection map; (2) the locations will be served by an enforceable commitment; and (3) the locations are already served by a privately funded network.
    • Modify BEAD-eligible location lists to include locations no longer served due to a default or change in service area on a federal enforceable commitment.
    • Investigate and modify BEAD-eligible location lists that are found to be served by ULFW.

    NTIA’s downplaying of the challenge process notwithstanding, the overlay of existing ULFW service, coupled with ongoing fiber deployment that has occurred over the past 18 months or so (and continues), strongly suggests that maps and data relied upon by the states and territories to create their lists of eligible locations do not reflect the current reality, let alone the reality that will exist at the time the BEAD funding is actually awarded. A significant “true-up” would seemingly be needed to reconcile the data.

    Elimination of Prior Compliance Requirements

    The Notice eliminates several non-statutory compliance requirements instituted by the Biden-era NTIA, including those relating to:

    • Labor and workforce development
    • Climate change
    • Open access/network neutrality
    • Local coordination and stakeholder engagement
    • Preference for non-traditional providers
    • Regulation of low-cost plans

    While the Notice eliminates these requirements, applicants are still subject to applicable federal laws related to all the above but may demonstrate its compliance through a certification.

    Similarly, while subrecipients still must offer at least one low-cost broadband service option (a requirement under the BEAD statute), the Notice removes NTIA’s previous requirement that states and territories define the parameters of such plans.

    Up next in the BEAD Notice series. “Playing Defense Under the New BEAD.”

    Photo of Sean A. Stokes

    Even before taking office, incoming members of the Trump Administration and some Republican members of Congress criticized various regulatory requirements in the  $42.5 billion BEAD program as being unnecessarily burdensome and contributing to a perceived slow rollout of BEAD funding. The Commerce Department and Congress have now begun efforts to streamline and reform the BEAD program. The changes raise a number of questions, and if implemented as expected, will significantly impact and may delay the program.

    Commerce Department Reviewing BEAD Program Rules

    Last week, newly appointed Commerce Secretary Howard Lutnick announced that he has directed NTIA to launch a “rigorous review” of the BEAD program. According to Secretary Lutnick, NTIA “is ripping out the Biden Administration’s pointless requirements” and “revamping the BEAD program to take a tech-neutral approach,” which is clearly intended to eliminate the current funding preference for end-to-end fiber optic projects and pave the way for much more of the BEAD funding going to low-earth orbit (LEO) satellite or unlicensed fixed wireless broadband. NTIA is expected to release details of such rule changes in the coming days.

    House Introduces “SPEED for BEAD Act”

    Also last week, Congressman Richard Hudson (R-NC), Chairman of the House Communications and Technology Subcommittee, introduced legislation to revise and expedite the deployment of the BEAD program to get “shovels into the ground as soon as possible.”[1] H.R. 1870, The Streamlining Program Efficiency and Expanding Deployment (“SPEED”) for BEAD Act would eliminate certain BEAD requirements that are viewed by the bill’s supporters as being politically driven, overly bureaucratic, and not tied to the underlying goals of deploying broadband infrastructure.

    1. Certain BEAD Requirements Removed

    Among other things, the SPEED for BEAD Act would prohibit NTIA and eligible entities (e.g., states) from conditioning or scoring BEAD subrecipient awards based on:

    • Prevailing wage laws;
    • Labor agreements;
    • Local hiring;
    • Climate change;
    • Regulation of network management practices, including data caps;
    • Open access; and
    • Diversity, equity, and inclusion.
    1. Amend Definition of Reliable Broadband Service

    Under the BEAD statute, funding will be made available for projects serving “unserved locations” and “underserved locations”[2] lacking access to “reliable broadband service.” The legislation would amend and broaden the definition of “reliable broadband service” to include “any broadband service that meets the applicable performance criteria without regard to the type of technology by which service is provided.” This would reverse the current NTIA requirements, which exclude locations “served exclusively by satellite, services using entirely unlicensed spectrum, or a technology not specified by the Commission for purposes of the Broadband DATA Maps.”[3] This will enable LEO and unlicensed fixed wireless providers to participate more broadly in the BEAD program as providers of “reliable broadband service,” if they meet certain performance requirements to be set by NTIA. It may also exclude from BEAD eligibility locations already served by such services.

    1. Prohibition on Rate Regulation

    The legislation would prohibit the imposition of rate regulation of broadband services provided over BEAD-funded network facilities. This includes prohibiting NTIA or any state or territory from regulating, setting, capping, or otherwise mandating the rates charged for broadband service by BEAD subrecipients, or the use of rates as part of an application scoring process. The Act does not remove the low-cost service option requirement from the BEAD statute, but instead prohibits eligibility entities from imposing specific low-cost service requirements.

    1. Ability to Remove High Cost Locations From a Project Area

    The legislation would provide a mechanism for subrecipients to remove locations from a project area that the subrecipient “determines would unreasonably increase costs or is otherwise necessary to remove.” The provision raises several questions as to how and when such determinations can be made by the subrecipient. States and territories would apparently award a separate subgrant to address such removed locations, presumably creating additional opportunities for BEAD-funded LEO service.

    1. Elimination of LOC Requirement

    The legislation would also eliminate the requirement for a BEAD subrecipient to provide a letter of credit (“LOC”) if the provider has commercially deployed a similar network using similar technologies and is either: (a) seeking funding that is less than 25% of the provider’s annual gross revenues; or (b) seeking to serve a number of locations that is less than 25% of the provider’s total number of existing service locations. These revisions would tend to benefit larger service providers, and would likely be of less benefit to new entrants or smaller providers, for whom LOC requirements often present a greater challenge.

    Questions Raised by Impact of Reform Effort     

    While some stakeholders have already embraced a streamlining of the BEAD program rules, it must be noted that the proposed reforms are coming at a time when funding is about to be disbursed. NTIA has already approved Initial Proposal for all states and territories, and most of them have either already selected subrecipients, or are in the later stages of doing so. While the reform efforts at Commerce and in Congress are aimed at getting “shovels in the ground” as soon as possible, the reform initiatives – and resulting policy and legal questions – may well impose additional delay.

    Introducing sweeping changes to BEAD at this stage raises thorny questions on whether some of the new rules can and should be applied mid-way through the award selection process, and after the application windows have closed. It should also be noted that despite concerns that the existing rules would result in low participation, many states are reporting strong bidder participation. Applicants around the country spent millions of dollars developing business plans, forging partnerships, locking down inventory, mapping out participation strategies, and developing detailed applications, all in reliance on the existing rules. Many other entities elected not to participate in BEAD based on the existing rules. Will they have any recourse to participate based on the new rules?

    Finally, the broadband ecosystem is in a constant state of flux, with new privately funded networks coming online all of the time. Many state broadband offices, at the direction of NTIA, have been hesitant to revise their BEAD maps to remove locations after the “challenge” period. If there are now going to be additional delays in BEAD awards, what will be the impact on the existing maps? Will NTIA allow states to revise eligible locations to account for new deployments based on new updated data reported in the next Broadband Data Collection?

    While targeted reforms aimed at enabling BEAD to better meet its underlying goal of providing all Americans with robust broadband connectivity make sense, care must be taken to ensure that such reforms do not themselves cause undue delays or undermine state processes that are working reasonably well.

    [1] Chairman Hudson’s Opening Statement at Subcommittee on Communications and Technology Hearing on Rural Broadband

    [2] Defined respectively as, a location lacking access to “reliable broadband service” of 25/3Mbps, with latency of less than 100ms, and a location lacking access to reliable broadband service of 100/20 Mbps, with latency of less than 100ms.

    [3] NTIA BEAD Notice of Funding Opportunity

    Photo of Casey Lide

    In March 2022, we published a blog post explaining that broadband grants are apparently subject to federal income taxation. Three years later, and with $42.5 billion in BEAD grants on the verge of disbursement, nothing has changed.

    As discussed in 2022, the taxability of broadband grants seems to be an unplanned quirk of the 2017 Tax Cuts and Jobs Act. Prior to that, broadband grants were generally exempt from taxation based on a favorable IRS interpretation of Section 118 of the tax code. But the Tax Cuts and Jobs Act amended Section 118 to the effect that “contributions to capital” (including grants) made from governmental or civic groups to a corporation are taxable as gross income.

    Recent recipients of state and federal broadband grants are already struggling with this. Crucially, the tax bill applies to grants used to cover front-end costs relating to construction of a broadband network, with taxes likely due on the grant before revenues ramp up. If a company receives $50 million in grant funds in 2024 to construct a rural broadband network, the company would need to pay $10 million in taxes on the grant (give or take) in 2025. The very substantial tax bill would come due while the network developer is still building up operations, and may in fact threaten the operational feasibility of the entire project.

    Bipartisan legislation has been repeatedly introduced over the past several years to address this issue, to no avail. But on February 24, a bipartisan group of Senators announced the re-introduction of the Broadband Grant Tax Treatment Act, with such varied supporters as Sen. Tim Kaine (D-VA) and Sen. Tommy Tuberville (R-AL). (Notably, the Act would apply to amounts received in taxable years ending after March 11, 2021.)

    Broadband providers have reason to be optimistic that the Broadband Grant Tax Treatment Act will finally be enacted this session. But until that occurs, it would be prudent to set aside funds to cover the tax bill associated with broadband grants.