SCOTUS Upholds USF Contribution Scheme; Future Challenges Expected

The decision is “a straightforward victory” but also a “reason for those who are fans of the USF to implore Congress to act” on reform, said Nelson Mullins attorney John Heitmann, who represents the National Lifeline Association. Congressional action is needed to “get ahead of legal challenges, because they're coming,” he said. Justice Elena Kagan wrote the majority opinion, while Justices Samuel Alito and Clarence Thomas joined a dissent authored by Justice Neil Gorsuch. Justices Brett Kavanaugh and Ketanji Brown Jackson wrote concurring opinions.

The FCC’s collection of USF fees through the Universal Service Administrative Co. isn’t an unconstitutional delegation of the power of the agency or Congress, Kagan wrote for the majority. Consumers’ Research argued at the 5th U.S. Circuit Court of Appeals that USF contributions are a tax, and Congress lacks the authority to delegate its tax power to the FCC or USAC. “Properly understood, the universal-service contribution scheme clears the non-delegation bar. The policy it expresses is clear and limiting,” Kagan wrote.

The FCC’s oversight of the USF is tethered to statutory limits on the scope of the program, and the agency retains final control over the USAC’s decisions, Kagan wrote. “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.”

Kagan largely telegraphed her position in oral argument, and the majority opinion maintains the status quo on USF and the non-delegation doctrine without breaking much new ground, attorneys told us. DLA Piper's Peter Karanjia, who represented former FCC commissioners in an amicus filing supporting the agency, said the ruling showed that the court was willing to consider the practicalities of how a statute was implemented rather than just “words on a page.”

Will Hild, executive director of Consumers’ Research, blasted the decision, noting its potential consequences. “The Supreme Court unfortunately got this case wrong and left consumers without the protection against tax increases that our Founders clearly desired,” he said. Carrie Severino, president of the Judicial Crisis Network, said the court’s ruling doesn’t foreclose future challenges based on the non-delegation doctrine. “I am hopeful there will be another case soon where we see the principle revivified.”

Concurring, Dissenting Opinions Give 'Pause'

Kavanaugh’s concurrence and Gorsuch’s dissent appeared to invite future litigation against delegating authority to agencies, attorneys told us.

In the concurrence, Kavanaugh mentioned his backing of the president’s authority to remove FCC commissioners and said he supported the FCC’s authority to implement the USF contribution scheme because he doesn’t consider it an independent agency. “If the FCC were an independent agency, however, the question would be more difficult,” he wrote. “When Congress delegates authority to an independent agency, no democratically elected official is accountable. Whom do the people blame and hold responsible for a bad decision or policy adopted by an independent agency?” SCOTUS should address that problem “in an appropriate case.”

In his dissent, Gorsuch said the majority opinion was “unmoored” from existing law and appeared to invite a future challenge based on the court’s Loper Bright v. Raimondo decision, which knocked down Chevron deference. In a footnote, Gorsuch listed several potential challenges to the USF that aren’t part of the case, including against the FCC’s statutory authority to pass responsibilities to private companies and against the makeup of USAC and the appointment of its members. The USF contribution scheme is “a delegation of Congress’s taxing power unprecedented in this Court’s history,” Gorsuch wrote.

“It is the concurring opinion of Kavanaugh and the dissenting opinion of Gorsuch that give me pause,” said Heitmann. Since Justice Amy Coney Barrett and Chief Justice John Roberts didn’t tip their hands at oral argument and quietly joined the majority, it’s unclear where they would stand on future challenges, Heitmann said. “We don't really get a glimpse into what sort of line-drawing the chief justice or Justice Barrett would do in another case,” he said. “I think that's a reason for us to breathe a sigh of relief, one, and two, roll up our sleeves and get working on Capitol Hill.”

Next Steps

Trade organizations, public interest groups and the three FCC commissioners lauded the ruling Friday, with many calling for immediate action on USF reform, though opinions appeared to differ on the proper venue.

FCC Chairman Brendan Carr said he was “glad to see the Court’s decision today and welcome[d] it as an opportunity to turn the FCC’s focus towards the types of reforms necessary to ensure that all Americans have a fair shot at next-generation connectivity.” Commissioner Anna Gomez said that “only Congress has the authority to reform the Universal Service Fund in a durable, forward-looking way that can withstand future legal challenges.”

Congress and the FCC "must take immediate action to reform the provision of universal service funds and stabilize a contribution factor that continues to inch ever higher,” said Incompas. ACA Connects President Grant Spellmeyer similarly said in a release that the case “underscored the need for Congress to review USF to ensure it is on a sustainable path.” Revati Prasad, executive director of the Benton Institute for Broadband & Society, said that “what matters most is that the Supreme Court has given the green light to the FCC to continue to support internet access to the tens of millions of Americans and the thousands of schools, libraries and rural hospitals” that rely on the USF. Competitive Carriers Association CEO Tim Donovan noted that the USF is “critical” for the group's members, “the broader communications industry, and all Americans who rely on connectivity where it otherwise might not be offered.”

Leaders of the House and Senate Communications subcommittees, who earlier this month jointly relaunched a bipartisan congressional USF working group (see 2506120091), said Friday that the high court upholding the program’s constitutionality paves the way for their work on a legislative revamp. “We’re encouraged by the [ruling and will now be] working together to focus on long-term solutions for the USF, evaluate broadband programs, and help connect unserved and underserved communities across” the U.S., said Senate Communications Chair Deb Fischer, R-Neb., and ranking member Ben Ray Lujan, D-N.M.

House Commerce Committee Chairman Brett Guthrie, R-Ky., and Communications Subcommittee Chairman Richard Hudson, R-N.C., said they’re “glad to see" the decision, which means the panel “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.” House Communications ranking member Doris Matsui, D-Calif., said she's “committed to ensuring [USF] remains resilient for years to come, and I look forward to working with my colleagues on the [working group] to ensure this program is sustainable and meeting Americans’ evolving connectivity needs.”

Many organizations also cited the USF group’s revamp effort. The Leadership Conference on Civil and Human Rights’ Center for Civil Rights and Technology and other backers of the FCC's lapsed affordable connectivity program (ACP) urged lawmakers to restore the initiative as part of a USF retooling. American Association for Public Broadband Executive Director Gigi Sohn said Congress “must move quickly and act not only to expand the number of entities contributing to the fund, but also to expand the subsidy to low-income households to, at a minimum, match the $30 per month that the [ACP] once supported.”

Free State Foundation President Randolph May said Congress “needs to get serious about engaging in a top-to-bottom examination of the program to determine its size and scope going forward, how it should be funded, or whether it should even exist.” Joe Kane, the Information Technology and Innovation Foundation's broadband and spectrum policy director, said USF “reform should start with distribution reform, rather than with seeking to pass through more taxes to consumers to prop up obsolete programs.” The Rural Wireless Association urged lawmakers to pass the Lowering Broadband Costs for Consumers Act (HR-4032/S-1651), which would require the FCC to expand USF's contribution base to include social media platforms, streaming services and most other major edge providers (see 2311160070).