The U.S. Supreme Court has upheld the Federal Communications Commission’s universal service fund (USF) framework. In a 6-3 decision issued, the Court held that the USF funding mechanism does not violate the Constitution’s nondelegation doctrine. In upholding the USF funding mechanism, the Court has enabled the USF to continue to operate and provide funding for its supported programs in an uninterrupted manner.
The USF
Broadly, the USF is a single fund that provides support for four subsidy programs: high-cost; schools and libraries (known as E-Rate); low-income consumers; and rural health care. The USF is funded by payments from telecommunications carriers based on a portion of revenues from their interstate and international telecommunications services, the “contribution factor.” The USF is a demand-dependent fund; that is, the contribution factor is designed to generate sufficient funding to support the amount needed to fund the four programs. Carriers may pass their USF contribution payments on to their consumers.
In 1998, the FCC designated the Universal Service Administrative Company (USAC) to administer the USF. USAC performs the day-to-day functions necessary to collect USF contributions and to disburse USF payments to the fund’s recipients. USAC carries out these responsibilities subject to FCC direction, oversight, and approval.
Lower Court Decisions
Consumers’ Research, a conservative non-profit organization, challenged the constitutionality of the contribution factor in multiple courts. Two circuit courts of appeals, the 6th Circuit and the 11th Circuit, found the contribution factor to be lawful. Later, the 5th Circuit Court of Appeals found it unlawful. The government sought review of the 5th Circuit’s decision, and today’s Supreme Court decision resolves this circuit split.
The Supreme Court Decision – FCC v. Consumers’ Research
In today’s decision, the Supreme Court upheld the USF contribution mechanism. The Court found that the universal service provisions in the Communications Act are consistent with the constitutional non-delegation doctrine, both in terms of Congress delegating authority to the FCC and in terms of the FCC delegating responsibility to USAC. Specifically, the Court found that Congress “sufficiently guided and constrained the discretion that it lodged with the FCC to implement the universal service contribution scheme. And the FCC, in its turn, has retained all decision-making authority within that sphere, relying on [USAC] only for non-binding advice.”
What Comes Next?
In the short term, the USF will continue to operate as it has. USAC, under FCC supervision, will continue to assess contributions based on carriers’ interstate and international revenues and to disburse funds to high-cost, E-Rate, low-income, and rural health care program beneficiaries.
In the long term, Congress and the FCC will continue to examine potential USF reform. Whether and when such reform might occur, and what it would look like, is uncertain.
