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Petition Challenges Constitutionality of Roles FCC, USAC Play in Universal Service Fund

The legal brief comes at a time when the FCC studies the future of the fund.

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Illustration from Consumers' Research

WASHINGTON, April 19, 2022 – A petition filed last week is requesting a U.S. appeals court find unconstitutional the process by which the Universal Service Fund is funded and how its administration has been delegated.

The petitioners, including non-profit research house Consumers’ Research and communications service provider Cause Based Commerce Inc., plead to the U.S. court of Appeals for the Fifth Circuit that Congress handed the Federal Communications Commission under the Telecommunications Act of 1996 unfettered delegatory authority to raise revenues for the roughly $8-billion annual program that seeks to expand basic telecommunications services across the country – including to low-income Americans, schools and libraries and rural healthcare.

That offloading of duties with “no formula, ceiling, or other meaningful or objective restrictions” is contrary to the nondelegation doctrine, the petitioners argue, which is a Constitutional limit that does not allow Congress to delegate to other branches its own legislative authority.

“The Framers [of the Constitution] understood ‘that it would frustrate ‘the system of government ordained by the Constitution’ if Congress could merely announce vague aspirations and then assign others the responsibility of adopting legislation to realize its goals,” the petition read.

Congress has improperly given taxation powers and inappropriately delegated power to a private entity, petitioners argue

The petitioners, who name the FCC as a respondent, argue that because the money raised for the fund comes from telecommunications companies, which often pass those costs down to customer voice service bills, Congress has effectively given the FCC taxation powers – a solely legislative authority.

Additionally, they argue that the FCC itself is in violation of the nondelegation doctrine by outsourcing the administration of the USF to a private entity called the Universal Service Administrative Company, which announces the amount needed to be obtained every quarter to meet the fund’s objectives. They argue that because the process for determining the amount and the FCC’s approval of it happens “only days before the new quarter begins,” the FCC has “no option” but to approve whatever USAC says.

“This unaccountable state of affairs has unsurprisingly led to skyrocketing costs, with the contribution rate quintupling since 2002, as well as rampant waste, fraud, and abuse,” the petition said, referring to the percent of voice service revenues that must be collected to support the program.

In one quarter last year, the contribution percentage reached a record high of 33.4 percent of declining voice revenues. Advocates for the USF have been calling for a more sustainable model for the fund, including broadening the contribution base to include broadband revenues and big tech platforms, with others calling for scrapping all that and just adding the required amount from a congressional budget item.

As such, the petitioners say the USF should be floated by money from federal revenues.

“If Congress believes these programs are worthy of funding, it should have to endure the public scrutiny and beneficial debate of raising money and proposing an appropriation for them,” the petition said. “But “[b]y shifting responsibility to a less accountable branch, Congress protects itself from political censure—and deprives the people of the say the framers intended them to have.”

Some argue that general taxation revenues should fund the Universal Service Fund

Advocates of general taxation for the fund, including AT&T and former FCC Chairman Ajit Pai, have often pointed to the added benefit of having congressional oversight to minimize fraud and abuse.

The petitioners have the support of non-profit technology think tank TechFreedom, which filed a brief with the court to boost the position. TechFreedom had by then already submitted comments to the FCC on its study of the future of the USF, arguing that the money should come from general taxation and that the FCC “cannot unilaterally” expand the fund to include contributions from big technology platforms. The FCC’s consultation included a question about that jurisdiction question, with parties including affordable communications advocate Public Knowledge and Carol Mattey, who urged the expansion of the fund to include broadband revenues, arguing that the FCC has jurisdiction to expand the base because it’s in the public interest.

“This double delegation – and, worse, private delegation – has led to lax oversight, runaway budgets, wasteful spending, and outright fraud,” alleged TechFreedom in its brief.

“It was bad enough that Congress handed such broad and ill-defined regulatory power to an independent agency – a government entity not subject to direct control by democratically elected leadership,” TechFreedom said, adding for the FCC to pass that power over to USAC without Congress’s permission  “means that the USF is not subject to any congressionally established procedural guardrails.”

TechFreedom furthers its complaint by arguing that USAC directors “are not properly appointed” and the FCC’s “rubber-stamping of USAC’s proposals violates the Administrative Procedure Act.”

The free markets non-profit the Competitive Enterprise Institute and the think tank the Free State Foundation also filed a joint brief with other professors and institutes arguing that the administration of the USF has effectively usurped Congress’s power to levy taxes via the ability of service providers to pass down the cost of the fund to consumers.

“The Constitution does not permit Congress to circumvent the legislative process by allowing an independent agency (guided by a private company owned by an industry trade group) to raise and to spend however much money it wants every quarter for ‘universal service’ at the expense of every American who pays a monthly phone bill,” the joint submission said.

Intervenors named in the case – who are not parties to it but can submit comments to help the court – include the Benton Institute, the National Digital Inclusion Alliance, the Center for Media Justice, the Schools, Health and Libraries Broadband Coalition, the National Telecommunications Cooperative Association, and the Competitive Carriers Association.

FCC

Carrier Association Requests Reconsideration of FCC Decision on 911 Outage Notification

The CCA says the FCC order creates burdens on call providers and 911 special facilities.

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Photo of CCA president and CEO Tim Donovan

WASHINGTON, March 21, 2023 – The Competitive Carriers Association is asking the Federal Communications Commission to reconsider a November decision requiring carriers to provide certain network outage notifications within 30 minutes.

The FCC order mandates that originating call providers notify 911 special facilities – such as emergency call centers called public safety answering points – of outages “no later than within 30 minutes of when the outage that potentially affects 911 service is discovered.” The order also required those providers to keep up-to-date contact information for those special facilities in areas they serve.

In a petition on Friday, the CCA is asking for the FCC to review and implement flexibility in that timing. “The significant new requirements that the Commission has imposed on carriers…are likely to be burdensome and counter-productive not only for carriers, but also 911 special facilities,” the CCA said in its application, though it continues to encourage the commission to retain the “as soon as possible” requirement.

“At a minimum, however, the Commission should start the 30-minute timer (and subsequent timers) when actual originating service provider…notification occurs from its vendor or other underlying provider,” the CCA said, adding even then carriers “would face significant difficulty assessing the outage, identifying the appropriate” public safety answering points to notify, and making the required notifications within 30 minutes.

“Therefore, it would be appropriate to deem [originating call providers] compliant if they begin notifying affected PSAPs that an outage exists within the 30- minute timeframe, and continue to notify any PSAPs that the OSPs could not reach before the expiration of the 30-minutes,” the industry association added.

The association said the problem with the decision is it doesn’t account for the “practical difficulty (if not impossibility)” of getting a vendor notification, determining which of the thousands of answering points may be affected by the outage, and making the required notification in that timeframe. It said carriers frequently don’t get outage notifications from 911 solution vendors within 30 minutes.

“The unnecessarily rigid approach in the [order] will often make compliance an impossibility, and otherwise will require carriers to spend critical time and resources on notifications to PSAPs that are not affected by outages, and will subject PSAPs to frequent notifications regarding outages that do not affect them, with limited actionable information given the short deadline,” the CCA added.

The CCA is also requesting that the commission create and maintain a centralized database with information provided by the 911 special facilities. It notes that the FCC order fails to fully take into consideration the burden its approach will place on carriers, especially smaller ones with limited resources, and PSAPs, who are “likely to experience a recurring deluge of requests for updated contact information from numerous carriers subject to this amorphous standard.”

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FCC

FCC Nominee Gigi Sohn Withdraws from Consideration

Sohn was first nominated in October 2021.

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WASHINGTON, March 7, 2023 – The nominee for the fifth commissioner to the Federal Communications Commission withdrew her candidacy in a statement Tuesday, blaming “dark money political groups” for tainting her career.

“Unfortunately, the American people are the real losers here,” Gigi Sohn said in the statement. “The FCC deadlock, now over two years long, will remain so for a long time. As someone who has advocated for my entire career for affordable, accessible broadband for every American, it is ironic that the 2-2 FCC will remain sidelined at the most consequential opportunity for broadband in our lifetimes.”

Just last month, Sohn appeared before the Senate commerce committee for a third time and was lambasted by Republican members as an impartial nominee who has made controversial public statements on race and policing and who alleged gave money to members of the committee while being a nominee.

“When I accepted his nomination over sixteen months ago, I could not have imagined that legions of cable and media industry lobbyists, their bought-and-paid-for surrogates, and dark money political groups with bottomless pockets would distort my over 30-year history as a consumer advocate into an absurd caricature of blatant lies,” Sohn’s statement said. “The unrelenting, dishonest and cruel attacks on my character and my career as an advocate for the public interest have taken an enormous toll on me and my family.”

She appealed to the committee to hurry her to the Senate floor for votes so she can get to work on the FCC’s broadband availability map. She said in her statement that her withdrawal also means the commission won’t have the majority to adopt rules on nondiscriminatory access to broadband and to fix the Universal Service Fund programs.

Sohn was nominated for a second time by President Joe Biden in January.

“I hope the President swiftly nominates an individual who puts the American people first over all other interests,” she added in the statement. “The country deserves nothing less.”

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Broadband Mapping & Data

General Agreement on Broadband Label, But Not on Additional Disclosure Requirements

The FCC is considering additional requirements, but that could be burdensome for small providers.

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Screenshot of speakers at the Federal Communications Bar Association event

WASHINGTON, February 15, 2023 — As the comment deadline approaches for the Federal Communications Commission’s broadband “nutrition label” rule, industry experts are largely supportive of the measure, although some disagree over whether the requirements go too far or not far enough.

The FCC is currently considering whether to add additional requirements — such as cybersecurity data and more comprehensive pricing information about bundled plans — to the labels, which were mandated in November and require that providers list performance metrics, cost and other facts to inform purchasers at all points of sale. Other proposed measures aim to improve accessibility by requiring non-English translations, as well as Braille or a QR code with a tactile indicator. The comment deadline is Thursday.

Further requirements could have negative impacts on both consumers and providers, argued Farhan Chughtai, senior policy counsel at broadband consulting company JSI, at a Feb. 6 Federal Communications Bar Association event.

“You don’t want to make the labels too difficult—that’s going to lead to more consumer confusion,” Chughtai said. He pointed to metrics such as network management, network reliability and cybersecurity as topics that might be “too nuanced” for the labels.

Overly complicated labels risk being treated like terms of service agreements, where many users just skip through them, Chughtai said. “Let’s focus on speed, latency, monthly usage.”

Additional requirements would place a disproportionate burden on smaller, rural providers, he added.

Chughtai also pointed to the “point of sale” disclosure requirements as a potential barrier for small providers.

“For some of the larger providers, that documentation can be automated,” he said. “But when you’re talking about a small carrier in Kentucky that has two or three people that are working, that type of communication… could be troublesome. So again, I think that the commission did strike a good balance, but when it comes to implementation, I think there’s ways to continue to refine this.”

Diana Eisner, vice president of policy and advocacy at industry association USTelecom, agreed with Chughtai, adding that both small and large providers “agree that this point of sale documentation is problematic.”

The FCC should work with industry and consumer groups to continuously fine-tune the label requirements, Chughtai said.

Debate on current version of label

“I think the commission really struck the right balance largely of making sure that consumers can see the information in a snapshot—they’re not overloaded with irrelevant information,” Eisner said.

Consumer advocates are generally excited about the label, said Jonathan Schwantes, senior policy counsel at Consumer Reports. “I think the commission gets it mostly right,” he said.

However, Schwantes voiced concerns about the label’s scope, saying that they were intended to educate consumers in addition to serving as a comparison shopping tool.

“I’m concerned that existing consumers may never see the label unless you’re moving or you decide to change or maybe if you’re lucky enough to have a competing provider,” he said. “Based on the [FCC’s Communications Marketplace] report that came out right at the end of last year, there are still many millions of Americans who only have one choice of broadband provider.”

Schwantes noted that he and several other consumer groups attempted to address this issue by advocating for the labels’ inclusion on monthly service bills, but such a requirement failed to make it into the FCC’s mandate.

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