GCI says court ruling could disrupt subsidies behind nearly half its revenue

GCI's parent company said Thursday that it can't yet tell what a federal appeals court ruling will mean for the federal subsidies that made up 47% of GCI's revenue in the first nine months of this year.

The money comes from the Universal Service Fund, which pays for phone and internet networks in rural areas, connections at rural clinics, discounts for schools and libraries, and service for low-income customers. The ruling "could disrupt GCI's USF support," Liberty Capital Corp. said in its quarterly report, and "could result in a material decrease in revenue and accounts receivable." At the end of September, GCI was owed $107 million in fund payments.

Alaska carriers drew $212.1 million in 2025 from the fund's High Cost program, which supports rural networks, according to USAC data. GCI Communication Corp. got $71.9 million of that, the most of any Alaska carrier. Rural Alaska health care sites were committed about $276 million from the fund's Rural Health Care telecom program for the 2025 funding year, 97% of the program's commitments nationwide. GCI was the provider on about $242 million of it.

On Oct. 15, a three-judge panel of the 5th U.S. Circuit Court of Appeals ruled that the Federal Communications Commission broke federal law when it set up the Universal Service Administrative Co., known as USAC, the private corporation that collects money from phone companies and pays out the fund.

"Because Congress never specifically authorized the FCC to establish USAC, we hold that the agency violated the Government Corporation Control Act," Judge Edith Brown Clement wrote.

The ruling threw out the rate telecom companies paid into the fund for the last three months of 2025, 38.1%, and sent the case back to the FCC. It didn't order any payments stopped. But the court said the FCC's reliance on USAC was a "serious procedural" deficiency that the agency "would not be able to correct" when it takes the case back up.

The ruling takes effect when the court issues its mandate, which the company's filing says won't happen until Dec. 7. "It is unclear what this decision means at this time," the filing says, but the decision could disrupt its support "unless and until any identified legal defects with the program structure or administration are remedied."

With a "material reduction" in support, the filing says, carriers including GCI "may need to consider various actions," including "terminating certain high-cost or low profit services, discontinuing rural networks or a reduction in workforce." It doesn't announce any such plans.

The challengers, led by the advocacy group Consumers' Research, have won at the 5th Circuit before. In 2024, the full appeals court ruled the fund's structure unconstitutional, and the U.S. Supreme Court reversed that decision on June 27, 2025. The challengers then contested the rate for the last quarter of 2025, and the panel decided that case on the USAC question alone.

The ruling comes as the FCC is separately reviewing whether to shrink or end E-Rate, the school and library internet discount that sent $203.5 million to Alaska last year.

Liberty Capital's earnings release the same day announced the company's first quarterly dividend, 37.5 cents a share, payable Dec. 15, and a plan to buy back up to $100 million of its stock. Revenue rose 4% from a year earlier, to $267 million. "These capital allocation initiatives reflect our confidence in the ongoing cash generating power of the business," CEO Ron Duncan said. The release lists "legal challenges to and changes in the Universal Service Fund programs" among the company's risks but doesn't mention the ruling.