Universal Service Fund

Today, the Supreme Court issued its decision in FCC v. Consumers’ Research (No. 24-354), upholding the constitutionality of the Universal Service Fund (“USF”).  The Court in a 6-3 majority opinion penned by Justice Kagan explained that the USF does not violate the “public nondelegation doctrine” or the “private nondelegation doctrine” because Congress provided adequate guideposts and guardrails for the Federal Communication Commission (“FCC”) to implement the USF, and because the FCC had not impermissibly subdelegated its implementation authority to a private entity.  Because the Court upheld the USF, it is unlikely that there will be any immediate implications for the telecommunications industry more broadly.  That said, in analyzing the legal issues, the Court clarified several limits on the FCC’s USF authority, which could constrain the scope of the USF program in the future, and likewise could serve as the basis for future legal challenges should the FCC transgress those limits.

Consumers’ Research Decision

This case involved the FCC’s authority to subsidize programs designed to further “universal service.”  Those subsidies are paid for by telecommunication carriers, who are each required to contribute an amount equal to a percentage of their projected annual revenues.  A not-for-profit corporation established by the FCC (the “Universal Service Administrative Company” or “USAC”) calculates and recommends this quarterly contribution percentage (or “contribution factor”), which the FCC then reviews and approves.  Consumers’ Research challenged this structure as violating both the nondelegation doctrine—a legal doctrine that generally prevents Congress from delegating legislative authority to federal agencies—and the private-delegation doctrine—which prohibits federal agencies from delegating their sovereign authorities to private individuals or entities.  In earlier proceedings, the Fifth Circuit held that the USF was unconstitutional and relied on a novel theory that the combination of Congress’s delegation to the FCC and the FCC’s sub-delegation to USAC was unconstitutional.  The Supreme Court reversed that ruling in today’s decision.Continue Reading Supreme Court Upholds Constitutionality of the Universal Service Fund

On July 24, 2024, the U.S. Court of Appeals for the Fifth Circuit struck down the Federal Universal Service Fund (USF) in Consumers’ Research et al. v. FCC.  In a 9-7 en banc decision, the majority reversed an earlier decision by a three-judge panel and held that the program created by the Federal Communications Commission (FCC) based on provisions in the 1996 Telecommunications Act constitutes an unlawful delegation of taxing power from Congress and thus violates Article I, § 1 of the Constitution.

The USF is a system for subsidizing telecommunications service to low-income households and high-cost areas by assessing telecommunications carriers; it also provides support to schools and libraries as well as rural health care facilities.  USF accomplishes this through four main mechanisms: the High-Cost Program, which provides support to certain telephone companies that serve high-cost areas; the Low Income Support Program, which subsidizes monthly telephone and broadband service for low-income customers; the E-rate Program, which subsidizes the provision of broadband connectivity and Wi-Fi to schools and libraries; and the Rural Health Care Program, which subsidizes the provision of telecommunications services to rural healthcare providers.Continue Reading Fifth Circuit Holds Federal Universal Service Fund Program Unconstitutional, Creates Circuit Split

On June 10, 2024, the U.S. Supreme Court denied a petition for a writ of certiorari in Consumers’ Research et al. v. Federal Communications Commission et al.  In its petition, the advocacy group Consumers’ Research, along with a small carrier and a five individuals, sought the Supreme Court’s review of the constitutionality of…

Continue Reading U.S. Supreme Court Declines to Review Constitutional Challenges to Federal Universal Service Fund Program