A U.S. Supreme Court decision released last Friday clearly resolves concerns, previously raised by the Fifth Circuit, as to the constitutionality of the Universal Service Fund (“USF”) as the funding source for four key FCC programs including E-Rate. Although Congress and the FCC may yet debate aspects of the program — such as the eligibility of hotspots and School bus Wi-Fi — all other aspects of E-Rate are here to stay!
The general consensus, of those who listened to the hearing on the FCC v. Consumers’ Research case last March, was that the Supreme Court would rule in favor of USF (see our newsletter of March 31st). The Court’s decision last week, on a 6-3 vote, was gratifyingly strong. The majority decision, written by Justice Kagan, reads like a love letter to the Universal Service Fund.
Most specifically, the Court held: “The universal-service contribution scheme does not violate the nondelegation doctrine.”
The main constitutionality issue at stake in this case was whether Congress had inappropriately delegated too much authority to the FCC (and in turn to USAC) to implement: (a) the original Communications Act of 1934, which established the original universal service goal; or (b), the updated Telecommunications Act of 1996, which expanded the definition of universal service to include E-Rate and other services.
On this topic, Justice Kagan wrote: “We hold that no impermissible transfer of authority has occurred. Under our nondelegation precedents, 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 the Administrative Company [i.e., USAC] only for non-binding advice. Nothing in those arrangements, either separately or together, violates the Constitution.”
One point of disagreement between the two sides of the underlying argument was whether USF contribution charges are fees or taxes. Consumers’ Research, the Fifth Circuit, and the dissenting Justices, led by Justice Gorsuch, argued that USF charges are taxes, not fees, and, as such, are subject to higher non-delegation standards under Congress’ taxing power. The majority rejected this position. Even if taxes vs. fees were an important distinction in this case, the majority suggests that contribution factors are more appropriately considered fees, defined as charges providing benefits to the payees as well.3
The next-to-last paragraph of the majority opinion serves as a real tribute to the Universal Service Fund and the job that the FCC and USAC have done in administering USF for many years. It reads:
When Congress amended the Communications Act in 1996, it provided the Commission with clear guidance on how to promote universal service using carrier contributions. Congress laid out the “general policy” to be achieved, the “principle[s]” and standards the FCC must use in pursuing that policy, and the “boundaries” the FCC may not cross…Our precedents do not require more. Nor do they prevent the Commission, in carrying out Congress’s policy, from obtaining the Administrator’s assistance in projecting revenues and expenses, so that carriers pay the needed amount. For nearly three decades, the work of Congress and the Commission in establishing universal service programs has led to a more fully connected country. And it has done so while leaving fully intact the separation of powers integral to our Constitution.
With this clear guidance from the Supreme Court, on the constitutionality of the Universal Service Fund, the next step we hope for is bipartisan action from Congress, already underway, to reform the underlying financial pinning of the USF. Last Friday’s initial statements from both the House and the Senate are encouraging:
- Ben Ray Luján (D, NM) and Deb Fischer (R, NE) of the Senate’s USF Working Group stated: “We’re encouraged by the Supreme Court’s ruling on the Universal Service Fund, and we look forward to working together to focus on long-term solutions for the USF, evaluate broadband programs, and help connect unserved and underserved communities across America.”
- Brett Guthrie (R, KY) and Richard Hudson (R, NC) of the House Energy and Commerce Subcommittee, stated: “The Committee on Energy and Commerce can now turn its attention to reforming the USF so it can continue to provide every American with access to the connectivity they need to participate in the 21st century economy.”