US: Supreme Court to review legality of FCC funding

The US Supreme Court is set to hear arguments on Wednesday regarding the Federal Communications Commission’s (FCC) funding mechanism for a multi-billion dollar initiative aimed at expanding phone and broadband internet access for low-income and rural Americans.

The case follows a lower court ruling that deemed the funding system unconstitutional, raising questions about federal agency authority.

The FCC, supported by a coalition of telecommunications firms and interest groups, is appealing a decision by the 5th US Circuit Court of Appeals. The court previously found that the FCC’s funding operation imposed a “misbegotten tax” on American consumers, violating the US Constitution’s allocation of legislative powers to Congress. 

This case is among several recent Supreme Court challenges concerning the authority of federal agencies.

A key issue in the case involves the non-delegation doctrine, a legal principle that restricts Congress from transferring its constitutional powers to government agencies.

At the heart of the dispute is the Universal Service Fund, established under the Telecommunications Act of 1996. The fund, which collects approximately $9 billion annually from telecommunications companies, is primarily financed by contributions passed on to consumers.

Additionally, the case involves the private non-delegation doctrine, as the FCC assigned fund administration responsibilities to the Universal Service Administrative Company, a private entity. 

This company determines contribution amounts, collects payments from telecommunications businesses, and distributes funds to beneficiaries, including low-income individuals, rural communities, Native American tribal lands, schools, and libraries.

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A group of challengers, including the conservative organization Consumers’ Research, a telecommunications carrier, and consumers, brought the case to the 5th Circuit in 2022. 

They argued that Congress had effectively granted the FCC unrestricted authority to operate the fund, including raising revenue—a responsibility that constitutionally belongs to Congress. 

Furthermore, they claimed that the FCC unlawfully transferred authority to the Universal Service Administrative Company, allowing it to play an excessive role in determining contribution amounts.

The 5th Circuit, in a 9-7 ruling in 2024, concluded that “the combination of Congress’s sweeping delegation to FCC and FCC’s unauthorized subdelegation” to a private company violated the constitutional principle that legislative powers rest with Congress. 

The ruling did not separately address public and private non-delegation claims but found the overall funding structure unconstitutional.

Federal appellate courts have reached different conclusions regarding this legal issue, leading to the Supreme Court’s review. 

The FCC contends that Congress legally empowered the agency to administer the fund and that the 5th Circuit underestimated the extent of guidance provided in the 1996 law. It also argues that it did not improperly delegate governmental power to the Universal Service Administrative Company.

The FCC, an independent federal agency established in 1934, operates under congressional oversight. In recent years, the Supreme Court, which holds a 6-3 conservative majority, has restricted federal regulatory agencies’ actions in various rulings, though none directly involved the non-delegation doctrine.

(Reuters)

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