UPDATE: Another Loss For Consumers’ Research – Sixth Circuit Says The Universal Service Fund Is Constitutional

May 4, 2023 – The U.S. Court of Appeals for the Sixth Circuit has denied Consumer’s Research’s Petition For Review challenging the constitutionality of the Universal Service Fund. Consumers’ Research is now 0 for 2 on its USF legal challenges. This Sixth Circuit loss comes 41 days after a three-judge panel of the U.S. Court of Appeals for the Fifth Circuit completely rejected a nearly identical Petition For Review. There are currently two other Petitions awaiting decisions at the Eleventh Circuit and D.C. Circuit Courts of Appeal.

UPDATE: Fifth Circuit Completely Rejects Consumers’ Research Non-Delegation Challenge To Universal Service Fund

March 24, 2023 – The U.S. Court of Appeals for the Fifth Circuit has denied the Consumers’ Research non-delegation doctrine challenge to the universal service fund and the way the USF is administered by the FCC.

UPDATE: Fifth Circuit Hears Oral Argument In Legal Challenge To USF Contributions – Consumers’ Research Moves Forward With Circuit Split Plot

December 5, 2022 – A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit held an oral argument in Consumers’ Research v. FCC., a legal challenge to the Federal Communications Commission’s (FCC) actions approving the universal service fund (USF) contribution factor and the USF contribution factor for the first quarter of 2022. An audio recording of the oral argument is available online for listening or download.

June 10, 2022 – The Federal Communications Commission (FCC or Commission) has filed its opening brief in Consumers’ Research v. FCC, a legal challenge concerning universal service fund (USF) contributions that is being heard by the U.S. Court Of Appeals For The Fifth Circuit.[1]

In January 2022, Consumers’ Research, Cause Based Commerce, Inc., and 11 individuals filed a Petition For Review with the Court challenging the FCC’s approval of the universal service fund contribution factor for the first quarter of 2022.[2] The group is asking the Court to declare the FCC’s actions, the 1Q USF contribution factor, and the entire USF system unlawful, “[o]n the grounds that they exceed the FCC’s statutory authority and violate the Constitution and other federal laws[.]”[3]

Below is a high-level summary of the FCC’s arguments in its opening Brief For Respondents.

FCC Statement Of Issues – History Of The USF – FCC Legal Authority – FCC Arguments To Dismiss The Petition For Review

The FCC begins by laying out the three core issues that are now before the Court for review:

1. Whether the Court lacks jurisdiction because the petition for review is untimely.

2. Whether section 254 of the Communications Act, 47 U.S.C. § 254, which authorizes the FCC to preserve and advance universal service to all telecommunications subscribers, unconstitutionally delegates legislative power to the FCC.

3. Whether the FCC can rely on a private company to engage in non-policy administration of the universal service funding mechanism.[4]

Next, the FCC presents a succinct summary of the roughly 25-year history of the USF – its creation by Section 254, how it is funded, how it evolves over time, the FCC’s authority, and the Universal Service Administrative Company’s (USAC) role. This summary is prefaced with a reminder of why there is a USF in the first place. In short, the FCC explains that the USF “has benefited millions of Americans” by making “telephone service affordable for low-income consumers and residents of ‘high-cost” rural areas,’” and supporting “the provision of essential telehealth services by rural health care providers, as well as the deployment of internet access services to classrooms and libraries throughout the nation.”[5] That is why the USF was created – to give every American access to reliable, affordable, and advanced communications services.

These initial sections of the FCC’s Brief thoroughly cover the FCC’s statutory authority in 47 U.S.C. § 254, and the FCC’s rules and orders covering the universal service support programs. This information helps solidify the FCC’s three general arguments against the Consumers’ Research group’s claims:

• The Legal Challenge Is Way Too Late – “As a threshold matter, this Court lacks jurisdiction to hear petitioners’ claims. Petitioners are making a facial challenge to FCC rules that were adopted decades ago – rules on which countless parties have relied. The time period for seeking review of those rules has long expired.”[6]

• The FCC Has Legal Authority To Implement The USF – “Even if this case were properly before the Court, petitioners’ claims lack merit. The delegation of authority to the FCC under section 254 is clearly constitutional under controlling Supreme Court precedent because Congress has provided an intelligible principle – indeed, several such principles – limiting the FCC’s discretion in implementing the statute.”[7]

• The FCC’s Use Of USAC To Administer The USF Is Entirely Permissible – “Furthermore, it was entirely permissible for the FCC to rely on USAC (a private entity) for assistance in administering the universal service program. USAC is subordinate to the Commission and performs only ministerial tasks. The Commission makes all universal service policy decisions.”[8]

Argument 1 – The Court Lacks Jurisdiction To Hear This Case Because The Petition For Review Is Untimely

First, the FCC says Consumers’ Research is challenging FCC rules that have been in place for 10 to 25 years. Since the time for challenging a final FCC rule is within 60 days after the rules’ publication, Consumers’ Research is too late. Further, challenging the approval of the 1Q 2022 contribution factor did not reopen the FCC’s consideration of any of the issues raised in the Petition For Review. Thus, “the Court lacks jurisdiction to hear this case because the petition for review is untimely.”

For clarity, the FCC wraps up its argument by explaining to the Consumers’ Research group how it should go about making this challenge: “file a petition for rulemaking to amend or repeal the FCC’s contribution factor rules and then seek review of any Commission disposition of that petition. Alternatively, petitioners can raise their constitutional challenges as a defense to an action to enforce contribution payments.”[9]

Argument 2 – The FCC Has Legal Authority To Implement The USF

The FCC’s second main argument addresses the Consumers’ Research group’s claim that the FCC has exceeded its statutory authority and violated the non-delegation doctrine, and these actions violate the Constitution and federal laws.[10] Basically, the FCC says no, you’re wrong. Read the statute. With Section 254, Congress has provided the FCC with “an intelligible principle to which” the FCC “is directed to conform.”[11] The FCC explains that multiple provisions in Section 254 “limit the FCC’s discretion to implement the universal service program.”[12] They “intelligibly confine the FCC’s discretion to increase the size and scope of its universal service program and the amount of fees it collects to finance the program.”[13] Therefore, the delegation of authority to the FCC under Section 254 is Constitutional. (The FCC also addressed the Consumers’ Research arguments that the Court should apply a different test based on the “original understanding” of nondelegation, and the Court should apply a stricter standard of review than the intelligible principle test because Section 254 delegates “taxing power” to the FCC.)

Argument 3 – The FCC’s Use Of USAC To Administer The USF Is Entirely Permissible

Finally, the FCC addressed the Consumers’ Research group’s claim that “[t]o the extent Congress permitted the FCC to re-delegate (or de facto re-delegate) to a private company the authority to raise and spend nearly unlimited money via the [USF], Congress unconstitutionally delegated its legislative power to a private entity – [USAC] – in contravention of Article I, section 1 of the Constitution.”[14] In response, the FCC explains that this claim fails because USAC does not exercise government power; USAC has no policymaking role in administering the universal service programs; and USAC is subject to extensive FCC oversight.[15] At any rate, the FCC says, USAC’s primary function is to conduct routine fact gathering and present the results to the FCC, a role that “is permissible because the Commission retains ‘final reviewing authority’ and ‘reviews and accepts’ USAC’s input.”[16]

Why Would Someone Want To Destroy The Most Important Means Of Expanding Access To Communications And Broadband Services And Technologies In This Country?

In its Petition For Review, the Consumers’ Research group notes that “[t]o date, no court has addressed the validity of the Approval or the Proposed USF Tax Factor.”[17] Well why do you think that is? This raises an important question though. Why would someone want to do away with perhaps the most important means of expanding access to communications and broadband services and technologies in this country. Imagine wanting to destroy the system that expands access to broadband services – something that is a major factor driving U.S. economic growth, enables access to healthcare services and education, and generally provides all Americans with a better quality of life. It makes no sense…

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[1] Consumers’ Research, et al v. FCC, et al, Case: 22-60008, Brief For Respondents, Document: 00516353031 (5th Cir., filed June. 10, 2022) (FCC Brief), https://docs.fcc.gov/public/attachments/DOC-384241A1.pdf.

[2] Consumers’ Research, et al v. FCC, et al, Case: 22-60008, Petition For Review, Document: 00516155519 (5th Cir., filed Jan. 5, 2022) (Petition For Review), https://aboutblaw.com/08Y. The universal service contribution factor for the first quarter of 2022 was deemed approved by the FCC on December 27, 2021.

[3] Petition For Review at p. 4.

[4] FCC Brief at p. 2.

[5] Id. at p. 2.

[6] Id. at p. 3.

[7] Id.

[8] Id. at pp. 3-4.

[9] Id. at p. 21.

[10] See Petition For Review at pp. 4-5.

[11] FCC Brief at p. 21.

[12] Id.

[13] Id. at p. 22.

[14] Petition For Review at p. 4.

[15] FCC Brief at p. 23.

[16] Id. at p. 24.

[17] Petition For Review at p. 3.