A US appeals court has blocked the Federal Communications Commission's attempt to take a broadband subsidy away from Tribal areas.

The FCC decision, originally slated to take effect later this year, would have made it difficult or impossible for Tribal residents to obtain a $25-per-month Lifeline subsidy that reduces the cost of Internet or phone service for poor people. But on Friday, a court stayed the FCC decision pending appeal, saying that Tribal organizations and small wireless carriers are likely to win their case against the commission.

"Petitioners have demonstrated a likelihood of success on the merits of their arguments that the facilities-based and rural areas limitations contained in the Order are arbitrary and capricious," said the stay order issued by the US Court of Appeals for the District of Columbia Circuit. "In particular, petitioners contend that the Federal Communications Commission failed to account for a lack of alternative service providers for many tribal customers."

The tribes and small carriers that sued the FCC "have shown a substantial risk that tribal populations will suffer widespread loss of vital telecommunications services absent a stay," the court said. The FCC hasn't proven that its plan won't result in "mass disconnection," the court also said.

The court ruling was welcomed by the Crow Creek Sioux Tribe and Oceti Sakowin Tribal Utility Authority, which are among the groups suing the FCC. Several small carriers and the non-profit National Lifeline Association are also plaintiffs in the lawsuit.

"Our people have long suffered from flawed federal government policies and actions, so the Court's decision... is an important step in righting past injustices and allowing residents of Tribal lands to obtain critical Lifeline services," Oceti Sakowin Tribal Utility Authority Executive Director Joe RedCloud said in a statement distributed to media.

FCC trying to kick resellers out of Lifeline

The FCC's November 2017 vote would have eliminated the $25 subsidy entirely for Tribal residents who live in urban areas, leaving them with just the basic $9.25-per-month Lifeline subsidy. The FCC claimed that the extra $25 subsidy isn't required to make service affordable in urban settings.

In rural areas, the FCC vote would have barred Tribal residents from using the $25 subsidy to buy telecom service from resellers. Because most Lifeline users buy from resellers instead of carriers that build and operate their own networks, this move would have dramatically limited rural Tribal residents' options for purchasing subsidized service. Resellers are often the primary providers of Lifeline service in Tribal lands and are sometimes the only Lifeline providers in those areas, Crow Creek Sioux Tribe attorney Gene DeJordy said.

The court's stay blocks implementation of both those changes, allowing the $25 subsidy to remain available in urban areas and from resellers.

In a related but not-yet-finalized move, FCC Chairman Ajit Pai has proposed kicking resellers out of the Lifeline program throughout the US. This would limit availability of the basic $9.25 subsidy both in Tribal areas and in the rest of the US.

The tribes and small carriers that sued the FCC were able to show the court that the FCC's Lifeline changes would result in people losing telecom service, the court's stay order said. "Petitioners have provided evidence that many tribal customers will lose access to vital telecommunications services under the Order's new eligibility requirements, and the Order fails to meaningfully consider this effect," the order said.

Despite trying to limit Lifeline access, Pai claims that his top priority as FCC chairman is "closing the digital divide and bringing the benefits of the Internet age to all Americans."

Lifeline has more than 12 million subscribers and is paid for by Americans through fees imposed on phone bills.

No evidence to support FCC claim

Pai claims that limiting the use of subsidies to buy service from resellers will encourage carriers to build their own networks.

But the court said the FCC provided no compelling evidence to support that claim:

Furthermore, the Federal Communications Commission has not shown that the historical record supports its assertion that these new requirements will encourage development of communications infrastructure in underserved areas, thus preventing mass disconnection. On the contrary, petitioners credibly assert that providers have generally declined to offer Lifeline service in many tribal regions in the nearly two decades since the implementation of the Tribal Lifeline program, and furthermore that the Order's new eligibility requirements do not attract providers to expand into those previously ignored regions.

Besides harming Tribal residents, the FCC decision could threaten the viability of small carriers, the court order said.

The small carriers "have shown that implementation of the Order will result in substantial, unrecoverable losses in revenue that may indeed threaten the future existence of their businesses," the stay order said. "In addition, the tribal petitioners have shown that implementation of the Order is likely to result in a major reduction, or outright elimination, of critical telecommunications services for many tribal residents, which are vital for day-to-day medical, educational, family care, and other functions."

Pai's FCC opposed the stay in a court filing, writing that tribes and small carriers "have not shown that implementation of the Order will cause them irreparable harm. On the other hand, delaying the FCC’s Tribal Lifeline reforms will harm the public by wasting public funds on areas and providers that should not be eligible for enhanced subsidies."

The FCC also said its plan will "limit the risk of waste, fraud and abuse of the Lifeline program." But the court's stay order said the FCC "identified no evidence of fraud or misuse of funds in the aspects of the program at issue here."

Now that the stay order is in effect, the next step is for the court to schedule oral arguments.