Rural wireless carriers put the Federal Communications Commission on notice they intend later this month to ask as a federal appeals court to stay a decision capping government subsidies primarily benefiting rural wireless deployment if the agency does not grant a pending motion to put the ruling on hold.

The latest FCC filing by small cellular entities follows on the heels of a legal challenge they recently filed at the U.S. Court of Appeals for the District of Columbia Circuit.

The litigation is being pursued by the Rural Cellular Association, Cellular South Licenses Inc., N.E. Colorado Cellular Inc., the Cellcom Companies, Smith Bagley Inc., Carolina West Wireless Inc., Bluegrass Cellular Inc., MTPCS L.L.C. and Leaco Rural Telephone Cooperative. The group told the FCC it would ask the court to stay the universal service wireless cap decision if the agency does not do so itself by Sept. 22.

Hundreds of millions of dollars are at stake for the cellphone industry, which has leveraged high-cost universal-service funds to help bankroll the cost of wireless construction in rural areas. Those locales tend to lag behind major metropolitan areas in terms of access to cutting-edge communications from a competitive mix of service providers. Wireless operators must be certified as competitive eligible telecommunications carriers (CETCs) to be able to tap into the high-cost universal service fund.

The rural wireless parties previously asked the FCC to reconsider the controversial cap ruling, but withdrew their petition for reconsideration after deciding to seek relief in court.

Rural wireless providers claim the FCC’s targeted cap on a single category of high-cost USF support is based on inaccuracies, faulty assumptions, unsound legal reasoning as well as being at odds with congressional direction and the principle of competitive neutrality. FCC Chairman Kevin Martin said the emergency, interim cap on competitive rural telecom subsidies — one of a series of reforms recommended by a federal-state joint board on universal service — was necessary because of ballooning payments to mostly wireless operators that have grown from $1.5 million in 2000 to more than $1 billion in 2007.

Among the top recipients of the high-cost fund are Alltel Communications L.L.C.; U.S. Cellular Corp.; AT&T Mobility; Rural Cellular Corp., which was recently acquired by Verizon Wireless; and Dobson Communications Corp., which was bought by AT&T Mobility last year. Alltel is awaiting a government review of a proposed $28.1 billion acquisition of the company by No. 2 Verizon Wireless, which does not seek rural wireless subsidies from the universal service high-cost fund.

Meantime, Congress is working on legislation to reform a universal service regime that has failed to keep pace with technological, marketplace and policy developments in the telecom industry.

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