The Supreme Court issued its decision Friday in *Wisconsin Bell, Inc. v. United States ex rel. Heath*, a case that centers on allegations of fraud in the federal E-Rate program designed to provide affordable internet and telecommunications services to schools and libraries nationwide.
The case involves Wisconsin Bell, a telecommunications carrier, and allegations brought by Todd Heath, an auditor of telecommunications bills, who claims the company defrauded the E-Rate program out of millions of dollars. Heath alleges that Wisconsin Bell consistently overcharged schools in violation of federal regulations governing the subsidy program.
The E-Rate program, formally known as the Education-Rate program, was established under the Telecommunications Act of 1996 to bridge the digital divide by subsidizing internet and telecommunications services for educational institutions and libraries across the United States. The program represents one of the largest federal initiatives to ensure equitable access to digital resources in educational settings.
To finance these subsidies, Congress mandated that telecommunications carriers contribute to what is now known as the Universal Service Fund. This fund is administered by the Universal Service Administrative Company, a private not-for-profit corporation that operates under regulations prescribed by the Federal Communications Commission. The company collects contributions from carriers and distributes funds to eligible beneficiaries according to FCC guidelines.
Central to the fraud allegations is the "lowest corresponding price" rule, a key regulation that prohibits telecommunications carriers from charging schools and libraries more than what they would charge a "similarly situated" non-residential customer. This rule is designed to ensure that educational institutions receive fair pricing and that the subsidy program operates efficiently.
Under the current system, once an appropriate charge is established according to the lowest corresponding price rule, schools have two options for obtaining their subsidy. They can pay the carrier a discounted price upfront and require the carrier to seek the remainder of the payment from the Universal Service Fund, or they can pay the carrier the full amount initially and then apply directly to the Fund for reimbursement.
Heath's allegations against Wisconsin Bell focus on claims that the company systematically violated the lowest corresponding price rule by overcharging educational institutions. As a telecommunications bill auditor, Heath identified what he believed to be a pattern of pricing violations that resulted in millions of dollars in improper charges to the E-Rate program.
The case reached the Supreme Court after proceeding through the federal court system, with the high court granting certiorari to review the decision of the U.S. Court of Appeals for the Seventh Circuit. The case was argued before the justices on Nov. 4, 2024, and the decision was issued Feb. 21, 2025.
While the specific details of the Supreme Court's holding are not yet fully available in the preliminary print, the decision addresses fundamental questions about fraud liability under federal telecommunications subsidy programs and the enforcement mechanisms available to ensure compliance with E-Rate regulations.
The E-Rate program has distributed billions of dollars in subsidies since its inception, making it a crucial component of federal efforts to ensure educational institutions have access to modern telecommunications infrastructure. Schools and libraries rely heavily on these subsidies to provide internet access and other essential communications services to students and patrons.
The case has significant implications for telecommunications carriers participating in the E-Rate program and for the broader administration of the Universal Service Fund. The decision could affect how pricing compliance is monitored and enforced, and may influence the legal standards applied to fraud allegations in federal subsidy programs.
The Universal Service Administrative Company, which oversees the day-to-day operations of the fund, works closely with the FCC to ensure that subsidy programs operate according to federal regulations and Congressional intent. The company's role in administering these programs has become increasingly important as demand for telecommunications services in educational settings has grown.
The outcome of *Wisconsin Bell* may also impact other carriers' compliance strategies and the methods used by auditors and government officials to detect potential fraud in the E-Rate program. The decision comes at a time when federal oversight of telecommunications subsidy programs has intensified, with regulators seeking to ensure that limited public resources are used effectively to support educational institutions.
Going forward, the decision will likely influence how the FCC and other federal agencies approach enforcement actions related to E-Rate compliance and may affect the development of new regulations governing carrier participation in federal subsidy programs. The case underscores the ongoing challenges in administering complex federal programs that involve private companies and public institutions.