FCC asks court to uphold constitutionality of nationwide rural phone and internet subsidies

Petitions of the week

The Petitions of the Week column highlights some of the cert petitions recently filed in the Supreme Court. A list of all petitions we’re watching is available here.

Last Monday, the justices heard oral argument in a case about a federal program that offers discounted phone and internet service to public schools and libraries. The E-rate program is part of a major initiative by the Federal Communications Commission that authorizes a nonprofit to collect fees from telecommunications providers to subsidize phone and internet service in rural areas. This week, we highlight petitions that ask the court to consider, among other things, whether the FCC’s initiative is unconstitutional because it requires both a federal agency and a private company to wield power that properly belongs to Congress.

This is not the first time that the justices have been asked to consider a constitutional challenge to the structure of the initiative, known as the Universal Service Fund. An interest group called Consumers’ Research has filed a series of these challenges in federal courts around the country. After the U.S. Courts of Appeals for the 6th and 11th Circuits rebuffed two of those challenges last year, the group asked the justices to weigh in. The justices declined both requests in June.

The playing field changed in July, however, when Consumers’ Research prevailed in front of the conservative U.S. Court of Appeals for the 5th Circuit. That ruling created a divide among the federal courts of appeals, known as a circuit split.

Ensuring equal access to telecommunications has been a core mission of the FCC since its creation in 1934. For much of the 20th century, the country’s sole provider of phone, telegraph, and radio services was the American Telephone and Telegraph Company — known today as AT&T. To ensure connectivity in rural areas, the FCC required AT&T to charge rural customers less, allowing the company to recoup revenue by charging higher rates in cities.

AT&T’s monopoly came to an end during the 1980s. In turn, and with the advent of the internet, Congress in 1996 empowered the FCC to pursue a more flexible program for ensuring rural telecommunications access. Rather than negotiating a patchwork of prices with each phone or internet provider, the FCC could now require all providers to contribute to a single fund, known as the Universal Service Fund, which would then be used to provide cheaper rates to customers in need. Today, the fund provides access not only to households and hospitals in rural areas, but also to low-income families in cities and public schools and libraries.

The latter program was at issue in last Monday’s oral arguments — specifically, whether Wisconsin Bell, a midwestern offspring of the former AT&T monopoly, can be sued under an anti-fraud statute for overcharging schools and libraries for phone and internet service.

To administer all of these various Universal Service Fund programs, Congress also authorized the FCC to set up a private nonprofit to collect fees from providers and hand out reimbursements to consumers. Although formally independent, the Universal Service Administration Company is functionally controlled by the FCC. The agency chooses the USAC’s board of directors, allocates its budget, and sets guidelines for carrying out each of the fund’s programs.

The challenge brought by Consumers’ Research to the Universal Service Fund is two-fold. First, it argues that Congress essentially ceded its taxing power to the FCC by giving the agency discretion to set the fees that telecommunications providers pour into the fund — in violation of the nondelegation doctrine, the principle that Congress cannot delegate its power to legislate to other branches of government. And second, it contends that the FCC delegated too much policymaking authority to the private company that administers the fund, in part because the agency relies on the company’s own projections when setting fees — which, the group says, violates the private nondelegation doctrine, the principle that the government cannot delegate its powers to private entities.

Initially, three-judge panels of the 5th, 6th, and 11th Circuits all disagreed with Consumers’ Research on both points in a series of rulings last year. However, the full 5th Circuit later agreed to rehear the case and ultimately changed course. By a vote of 9-7, the full court of appeals concluded that “the combination of Congress’s sweeping delegation to FCC and FCC’s unauthorized subdelegation to” the nonprofit violates the Constitution.

In Federal Communications Commission v. Consumers’ Research, the agency asks the justices to grant review of the 5th Circuit’s ruling and uphold the Universal Service Fund as constitutional. The FCC argues that the fund is a constitutional delegation of congressional power because the relevant statute provides a number of “intelligible principles” – a key factor in distinguishing permissible grants of discretion from unconstitutional delegations of power – to guide the FCC’s actions when setting fees. In addition, it contends that the private company 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 agency control.

In Schools, Health & Libraries Broadband Coalition v. Consumers’ Research, a number of trade associations representing groups that receive Universal Service funding similarly ask the justices to weigh in on the 5th Circuit’s ruling.

Consumers’ Research insists that the 5th Circuit’s decision is correct and that the fund is unconstitutional. But it agrees that the Supreme Court should take up the question, and it urges the justices to grant rehearing in both of its petitions seeking review of the 6th and 11th Circuit’s rulings and decide the issue either in those cases alone or consolidated with the government’s .

The FCC counters that the court should review only the 5th Circuit’s decision. But in the alternative, the FCC suggests, the justices could hold all four petitions for their forthcoming decision in the Wisconsin Bell case, and then send all four cases back in light of that ruling.

A list of this week’s featured petitions is below:

Consumers’ Research v. Federal Communications Commission
23-456
Issues: (1) Whether 47 U.S.C. § 254 violates the nondelegation doctrine by imposing no limit on the Federal Communications Commission’s power to raise revenue for the Universal Service Fund; and (2) whether the FCC violated the private nondelegation doctrine by transferring its revenue-raising power to a private company run by industry interest groups.

Consumers’ Research v. Federal Communications Commission
23-743
Issues: (1) Whether 47 U.S.C. § 254 violates the nondelegation doctrine by imposing no limit on the Federal Communications Commission’s power to raise revenue for the Universal Service Fund; and (2) whether the FCC violated the private nondelegation doctrine by transferring its revenue-raising power to a private company run by industry interest groups.

Little v. Hecox
24-38
Issue: Whether laws that seek to protect women’s and girls’ sports by limiting participation to women and girls based on sex violate the equal protection clause of the 14th Amendment.

West Virginia v. B.P.J.
24-43
Issues: (1) Whether Title IX of the Education Amendments of 1972 prevents a state from consistently designating girls’ and boys’ sports teams based on biological sex determined at birth; and (2) whether the equal protection clause of the 14th Amendment prevents a state from offering separate boys’ and girls’ sports teams based on biological sex determined at birth.

Federal Communications Commission v. Consumers’ Research
24-354
Issues: (1) Whether Congress violated the nondelegation doctrine by authorizing the Federal Communications Commission to determine, within the limits set forth in 47 U.S.C. § 254, the amount that providers must contribute to the Universal Service Fund; (2) whether the FCC violated the nondelegation doctrine by using the financial projections of the private company appointed as the fund’s administrator in computing universal service contribution rates; and (3) whether the combination of Congress’s conferral of authority on the FCC and the FCC’s delegation of administrative responsibilities to the administrator violates the nondelegation doctrine.

Schools, Health & Libraries Broadband Coalition v. Consumers’ Research
24-422
Issues: (1) Whether Congress violated the nondelegation doctrine by authorizing the Federal Communications Commission to determine, within the limits set forth in 47 U.S.C. § 254, the amount that providers must contribute to the Universal Service Fund; (2) whether the FCC violated the nondelegation doctrine by using the financial projections of the private company appointed as the fund’s administrator in computing universal service contribution rates; and (3) whether the combination of Congress’s conferral of authority on the FCC and the FCC’s delegation of administrative responsibilities to the administrator violates the nondelegation doctrine.