In oral arguments held on March 26, 2024, most justices at the U.S. Supreme Court appeared sympathetic to the FCC’s argument that the federal universal service fund (USF) is a lawful mechanism for ensuring equitable telecommunications services to low-income and rural areas. Moreover, the justices also seemed supportive of the agency’s delegating of authority to the Universal Service Administrative Company (USAC), the private company that administers the fund, and computes quarterly contribution amounts, collects payments from USF contributors and sends funds to recipients. Here is the background of the case which led to the Supreme Court intervention.
In June 2024, disagreeing with other courts, the Fifth Circuit Court of Appeals found that the Universal Service Fund was unconstitutional because the FCC does not administer the Fund itself but instead turns it over to USAC. According to the Court, USAC includes members with an incentive to keep the Fund growing and therefore, is illegal. Because of the split decisions in the courts, the Supreme Court decided it would hear the case. Surprisingly it decided to determine the Fund’s legality 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 such as the FCC or USAC. In other words, the nondelegation doctrine ensures that lawmaking is done by the lawmakers (Congress). Specifically, the High Court sought to determine:
Does authorizing the FCC to determine the amount of funds providers to the Universal Service Fund must contribute 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?
During the oral argument it appeared the majority of justices had various concerns about finding the USF unlawful. For example, when challengers to the Fund argued that there were too few constraints on the FCC’s operation of the Fund, Elana Kagen noted that there were limits on the Commission.
The FCC can’t do anything by way of this program that is not basically geared towards getting those who live in very rural areas or who are very low-income get access to services that all the rest of us have.
Most justices appeared concerned that if the USF was found unlawful it would bring mass chaos to the telecommunications industry. But a couple of the conservative justices claimed that the Fund was unlawful because it has no cap and could continue to increase through the years with no ceiling. Other justices argued against a cap on the grounds that they would have no way to determine an appropriate cap nor would choosing a high cap be meaningful. As Justice Brett Kavanaugh noted, “the cap could be very high, and then the question is, what exactly are we accomplishing.”
Finally, arguments were made that the USAC was given unlimited power by the FCC to run the Fund and with the members with incentives to continue increasing it, the Fund in the majority, they were sure to continue. However, the justices noted that USAC simply ran the Commission’s dollar figures based on the criteria provided by the FCC. It did not have the ability to change the USF criteria nor the dollar value of the Fund.
The Supreme Court is expected to decide this case by the end of June. Most legal experts forecast a 6-3 or 7-2 decision supporting the Fund. An alternative outcome would be disastrous for both the industry and the recipients of universal service benefits. It would plunge telecom into years of legal haggling and uncertainty and would stifle investment and infrastructure improvements. Let’s hope it doesn’t happen!
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