Third Court of Appeals Rules in Favor of Rural Telecommunications Providers

Austin, Texas – The Public Utility Commission (PUC) must immediately restore over $200 million in past-due support to rural telephone providers from the Texas Universal Service Fund (USF), a state program designed to ensure reliable and affordable telecommunications connectivity in rural Texas, according to a judgment from the Third Court of Appeals issued June 30, 2022.


The Court ruled that the PUC “acted without legal authority” when it stopped paying more than 70% of its TUSF obligations in January of 2021. Justices said the PUC’s interpretation of the law would lead to an “absurd result.”


“For two years, rural Texans have faced the uncertainty of whether their local phone companies would be able to ride out the financial storm created when the Public Utility Commission stopped funding universal communications services for rural areas of the state — and whether they might face dramatic increases in their phone bills or lose service altogether as a result,” said Rusty Moore, General Manager and COO of BBT Telecom and Board President of the Texas Telephone Association. “Today we are thrilled the court has agreed with us — USF is a fundamental building block of a connected rural Texas.”


Moore described the Court’s ruling as the first step to restore needed funding for rural communications and committed to working with the Texas Legislature to ensure stable and appropriate funding for the future. USF is funded through a surcharge on telephone services and is not part of the state’s general budget.
The USF was created in 1987 because costs to build and maintain the telecommunication network over large rural areas are much higher than in densely populated urban areas, meaning many rural Texans could not afford service without a cost balancing mechanism.


Almost 4 million rural Texans rely on USF to support their affordable access to the telecommunications network, which enables voice and broadband service and powers rural cellular service.


“We look forward to working with the new commissioners at the PUC to quickly follow the court’s directions, recoup the money owed to these companies, and move on with the business of providing reliable and affordable telecommunications to all of Rural Texas,” said Moore.

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43 Rural Texas telecommunications providers comprise the Texas Telephone Association. Its members include telephone cooperatives and both privately held and publicly traded companies that serve over 3 million rural Texans across almost half of the total land mass of Texas (145,000 square miles – an area the size of Montana).