A federal appeals court recently sided with the FCC (News - Alert) that the commission can use subsidies designated for one purpose to a related one, which in the end will expand access to the Internet.

The excess subsidies are getting directed to the Connect America Fund – which offers rural areas in the United States more Internet access, Courthouse News Service reported.

"I am pleased that the court of appeals upheld the FCC's ruling, an important victory for our universal service reforms," FCC chairman, Julius Genachowski (News - Alert) said. "The Commission's once-in-a-generation overhaul of the universal service fund created the Connect America Fund to deliver broadband access to unserved rural communities, which lack access to the benefits of broadband, including jobs, opportunities for small businesses, better education and quality healthcare. Funding previously relinquished by some carriers has been used as a fiscally responsible down payment on those reforms. The Court's opinion ensures that the FCC will continue to be able to use funds on hand to rapidly implement the Connect America Fund and spur billions of dollars in private investment, without increasing contributions paid by consumers and businesses."

However, the Rural Cellular Association (RCA) and the Universal Service for America Coalition – argued they should have gotten the money. The RCA claimed the FCC’s order was “unconstitutional” because it violates the Origination Clause and Taxing Clause found in the U.S. Constitution, reports claim.

But a three-judge panel disagreed, explaining that the money will be used to provide telecom access (what the money was mandated for in the first place) and the collected fees are not a tax.

In related news, Frontier Communications will get $71.9 million from the Connect America Fund. The money will be used to provide broadband in underserved or unserved areas, according to a company press release.

The fund was set up so broadband would be expanded to some 18 million Americans who live in rural areas and do not have access to broadband infrastructure.

Frontier will provide broadband service to 92,876 more households which are located in more than half of the 27 states it provides service to. These include Michigan, Oregon, Washington and West Virginia.

"The FCC's Connect America Fund offers Frontier additional resources to drive broadband penetration to rural markets that are hungry for access," Kathleen Quinn Abernathy, executive vice president of External Affairs for Frontier Communications, said in a statement. "The CAF program directly supports broadband infrastructure, a critical first step to offering services to the high-cost, rural parts of our nation. This support will supplement the more than $1.5 billion of private investment made by Frontier over the last two years to deploy an advanced communications network to rural America."

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