A federal appeals court has overturned Ajit Pai's attempt to take broadband subsidies away from tribal residents.

The Pai-led Federal Communications Commission voted 3-2 in November 2017 to make it much harder for tribal residents to obtain a $25-per-month Lifeline subsidy that reduces the cost of Internet or phone service.

The change didn't take effect because in August 2018, the US Court of Appeals for the District of Columbia Circuit stayed the FCC decision pending appeal. The same court followed that up on Friday last week with a ruling that reversed the FCC decision and remanded the matter back to the commission for a new rule-making proceeding.

"[S]ince 2000, low-income consumers living on Tribal lands may receive an additional $25 per month for these services through the Tribal Lifeline program in recognition of the additional hurdles to affordable telecommunications service on Tribal lands," the court's decision noted.

The Pai FCC's 2017 decision would have limited the $25 subsidy to "facilities-based" carriers—those that build their own networks—making it impossible for tribal residents to use the $25 subsidy to buy telecom service from resellers. The move would have dramatically limited tribal residents' options for purchasing subsidized service, but the FCC claimed it was necessary in order to encourage carriers to build their own networks.

The same FCC decision also would have eliminated the $25 subsidy in urban areas, reserving it only for tribal lands in rural areas. The court's decision Friday, in response to an appeal filed by tribal organizations and small wireless carriers, overturned both of these limitations.

A three-judge panel said the FCC failed to consider that facilities-based providers have been leaving the Lifeline program and provided no evidence that banning resellers would spur new broadband deployment. The FCC also failed to properly consider how eliminating the subsidy in urban areas would affect consumers, judges determined.

The judges wrote:

For the following reasons, we grant the petitions for review. The Commission's adoption of these two limitations was arbitrary and capricious by not providing a reasoned explanation for its change of policy that is supported by record evidence. In adopting the Tribal Facilities Requirement, the Commission's decision evinces no consideration of the exodus of facilities-based providers from the Tribal Lifeline program. Neither does it point to evidence that banning resellers from the Tribal Lifeline program would promote network buildout. Nor does it analyze the impact of the facilities requirement on Tribal residents who currently rely on wireless resellers. Further, the Commission ignored that its decision is a fundamental change that adversely affects the access and affordability of service for residents of Tribal lands. Similarly, in adopting the Tribal Rural Limitation, the Commission's decision evinces no consideration of the impact on service access and affordability. Its decision does not examine wireless deployment data related to services to which most Tribal Lifeline recipients subscribe.

In addition, the FCC "failed to provide an adequate opportunity for comment on the proposed limitations," judges wrote.

Lifeline is paid for by Americans through fees imposed on phone bills. The $25 subsidy involved in the court case is provided to low-income Tribal residents in addition to the typical Lifeline subsidy of $9.25 per month.

Senator blasts Pai, hails court ruling

The court's decision was released on the same day of oral arguments in the case against the FCC's net neutrality repeal.

We contacted the FCC today and will update this story if we get a response. The FCC could appeal the ruling.

"This is another example of Chairman Pai pushing his own agenda over the obligations he has to the American public. We saw it with net neutrality, and we're seeing it with Lifeline," Sen. Brian Schatz (D-Hawaii) said in a statement Friday. "He comes in with his mind already made up, ignoring the process he is supposed to take to revisit rules and programs. This is not what Congress intended, and the court is right to overturn the FCC's misguided and unsupported order."

Broadband access in tribal areas is worse than the US as a whole, and tribal access is likely even worse than previously thought because FCC data overstates deployment, according to a September 2018 report by the US Government Accountability Office.

Separately from his tribal Lifeline plan, Pai has proposed kicking resellers out of the Lifeline program nationwide, not just in tribal areas. This would greatly limit poor people's choices, as more than 70 percent of wireless phone users who rely on Lifeline subsidies buy their plans from resellers.

But even Pai's usual supporters criticized that proposal, and Friday's court ruling could make it harder for Pai to kick resellers out of Lifeline entirely.