FCC Urges Supreme Court Not to Review USF Challenges

WASHINGTON, May 8, 2024 – The Federal Communications Commission urged the Supreme Court not to weigh in on a conservative nonprofit’s challenge to the agency’s Universal Service Fund, an $8-billion annual program to subsidize rural broadband infrastructure and internet bills for low-income households, schools and libraries, and healthcare providers.

The program has been funded since 1996 by fees on voice providers, with the FCC’s Universal Service Administrative Company responsible for collecting and distributing the money based on contribution factors set each quarter by the commission.

Conservative nonprofit Consumers’ Research has taken to challenging those contribution factors in court, alleging in multiple federal appellate courts that the fund is unconstitutional. The group argues that Congress did not put proper guardrails on the FCC’s authority to collect the fund and that the commission abused what authority it does have by delegating the responsibility to USAC.

Last year, the Sixth Circuit and Eleventh Circuit both rejected those arguments on similar grounds, finding that Section 254 of the Telecommunications Act of 1996, which sets out the FCC’s USF responsibilities, is in line with statutes that have survived similar challenges in the past and that the agency exercises enough oversight of USAC that it still functionally controls the fund. 

Consumers’ Research asked the high court to review those opinions after they came down. The Fifth Circuit, which originally also sided with the FCC, agreed in July 2023 to rehear the case with a full panel of judges, and the group argued in a January filing that the notoriously conservative circuit was likely to reverse course and create conflicting precedent. Oral arguments in that case happened in September and a decision has not yet been issued.

The FCC said in a May 3 brief that the potential for a conflict in circuit opinions is not reason enough for the Supreme Court to intervene. 

“[The] Fifth Circuit has not yet issued its decision,” the agency noted. “Once it does so, the parties can determine whether to seek, and this Court can determine whether to grant, certiorari to review that decision. For now, however, the absence of any circuit conflict counsels in favor of denying the petitions for writs of certiorari.”

The FCC emphasized past Supreme Court findings that statutes similar to Section 254 satisfy the nondelegation doctrine, a legal standard which requires Congress to articulate an “intelligible principle” when delegating duties to federal agencies.

Section 254 dictates which entities must pay into the fund, which entities can receive its subsidies, and what those subsidies can be used for, the agency wrote. And it requires the agency to promote universal access to quality telecom services at reasonable prices, with reasonably comparable services and rates in urban and rural areas.

Those “detailed provisions” put the statute “comfortably” within what’s permitted by Supreme Court precedent, the agency wrote, noting that “the nondelegation doctrine permits Congress to rely on abstract, qualitative standards.” 

The commission also pushed back on Consumers’ Research arguments that it does not meaningfully review USAC’s contribution factor calculations.

“On several occasions, including twice in 2023, the Commission has departed from [USAC’s] calculations in setting the quarterly contribution factor,” the agency wrote. “The FCC has also awarded relief when it has disagreed with [USAC’s] calculation of the contribution owed by particular carriers.”

A group of telecom industry groups and consumer advocates, including USTelecom, NTCA, Benton Institute for Broadband & Society, and the National Digital Inclusion Alliance, filed a brief in support of the FCC.

“Petitioners admit that there is no circuit split on the non-delegation doctrine issue,” the groups wrote. Should the Fifth Circuit “create a circuit split by ruling for Petitioners, certiorari may be warranted. That possibility is no basis for certiorari at this point.”

In addition to reaffirming the FCC’s other arguments, the groups urged the Justices to refrain from applying the major questions doctrine in this case. The Supreme Court has been less deferential to federal agencies in recent years, invoking the doctrine to bar them from adopting rules of “vast economic and political significance” without explicit direction from Congress.

“Petitioners here have never invoked the major questions doctrine, so this case would be an especially poor vehicle to reconsider the appropriate judicial mechanism or mechanisms for ensuring that Congress does not improperly divest itself of legislative authority,” they wrote.

Congress set to weigh in

There is broad agreement that the USF does need some reform, as the pool of voice revenue is shrinking and communities and institutions increasingly rely on the broadband supported by the fund. 

A bipartisan working group of lawmakers from both chambers of Congress has been working for the past year on legislation that would reform the fund’s contribution system. Commenters to the group have suggested tapping broadband providers and potentially tech companies like Google and Meta, known as edge providers, for USF funding.

The FCC refrained from imposing USF fees on broadband providers when it reclassified them as telecommunications carriers, citing fears of potential rate hikes when those fees are likely passed on to consumers, although advocates and some broadband trade groups have disputed how likely that rate shock would be. The agency’s chairwoman suggested in January the working group look to edge providers or online advertisers as potential sources of funding.

The fund is also being looked at as a vehicle for keeping the Affordable Connectivity Program afloat in the future, without the instability of congressional appropriations. That program provides 23 million low-income households with a $30 monthly internet discount, but its cash reserves are set to run out this month and lawmakers are scrambling to find legislative solutions.