In June the Fifth Circuit Court found that the Universal Service Fund was unconstitutional because the FCC does not administer the Fund itself but instead turns it over to the Universal Service Administrative Company (USAC). According to the Court, USAC includes members with an incentive to keep the Fund growing and therefore, was illegal. Since this Opinion disputed the findings of three other courts, it was inevitable that the Supreme Court would issue the final opinion on the Universal Service Fund. That process began on November 22, 2024, when the High Court agreed to review the case of “Federal Communications Commission v. Consumers’ Research.”
Most remarkably, the Supreme Court intends to review the case under the so-called “nondelegation doctrine,” which is intended to constrain the ability of Congress to delegate its core legislative powers to agencies or private entities. This is remarkable because the Supreme Court has not rejected a government agency action based on the nondelegation doctrine in 90 years. However, like the Court’s rejection of the Chevron Doctrine which gives deference to an agency’s expertise, it is clear that the conservative Court is intent on reducing government power.
In its review, the Court will consider two main questions:
- Does authorizing the FCC to determine the amount of funds providers to the Universal Service Fund unconstitutionally violate the nondelegation doctrine by vesting too much legislature authority in the hands of the FCC?
- Does the FCC’s subsequent delegation to USAC violate the private nondelegation doctrine?
The Fifth Circuit argues that the FCC’s delegation to USAC clearly violates the Constitution:
Petitioners [Consumer’s Research] contend the universal service contribution mechanism violates the Legislative Vesting Clause. We agree. We (A) explain that the power to levy USF “contributions” is the power to tax—a quintessentially legislative power. Then we (B) explain that Congress through [section 254 of the Telecommunications Act] may have delegated legislative power to FCC because it purported to confer upon FCC the power to tax without supplying an intelligible principle to guide FCC’s discretion. Next, we (C) explain that FCC may have impermissibly delegated the taxing power to private entities. Finally, we (D) explain that we need not definitively answer either delegation question because even if [section] 254 contains an intelligible principle, and even if FCC was permitted to enlist private entities to determine how much universal service tax revenue it should raise, the combination of Congress’s broad delegation to FCC and FCC’s sub delegation to private entities certainly amounts to a constitutional violation. (Fifth Circuit Court of Appeals, Petition for Review from the Federal Communications Commission, Docket 96-45, On Petition for Rehearing En Banc, filed July 24, 2024, at pp. 17-18.).
Conversely, the FCC claims that the USF is a constitutional delegation of congressional power because section 254 provides a number of “intelligible principles” — a key factor in distinguishing permissible grants of discretion from unconstitutional delegations of power — to guide its actions when setting fees.”
In addition, it contends that USAC wields only administrative authority over the Fund, not any policymaking power to set fees or subsidy rates, and in any event is subject to significant Commission control.
Interestingly, the High Court also asked parties to file arguments on whether the Consumer Research Appeal is moot because it did not seek preliminary relief before the Fifth Circuit over its “pocketbook injury” of paying the USF “tax” that may no longer be redressable because of sovereign immunity. Finding the case moot would give the Supreme Court an out for determining the constitutionality of the USF.
Oral arguments for this case will be held next Spring, with a decision expected in June. If the Supreme Court finds the Fund unconstitutional, Congress will have to work quickly to “fix” the Fund or determine a new system for preserving universal service.