Consumers’ Research Launches New Attack on USF Contribution Factor at 5th Circuit
Consumers’ Research and its allies renewed their attack on the legality of the USF contribution factor, filing a petition with the 5th U.S. Circuit Court of Appeals last week challenging it for Q4. Last month, the group withdrew an earlier challenge at the 5th Circuit, but industry observers predicted at the time that it would file a new one (see 2509170072). In August, Consumers’ Research asked the FCC to zero out the factor for Q4 (see 2506130016).
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In a 9-7 en banc decision last year, which sent shock waves through the telecom sector, the 5th Circuit sided with Consumers' Research and found that the USF contribution factor was a "misbegotten tax.” The U.S. Supreme Court rejected that finding, but Consumers’ Research has latched on to certain language in the decision, including a footnote where the court said several provisions in Section 254 of the Communications Act weren't challenged (see 2507150081). The new petition also cited arguments in the dissent to the 6-3 SCOTUS decision (see 2506270054).
USF provisions in the Telecom Act “are unconstitutional under the nondelegation doctrine, as explained by three dissenting Supreme Court Justices” in the June decision, Consumers’ Research said. SCOTUS recently held that criteria Section 254(b)(1)-(6) and (c)(1) of the act “are each mandatory, but the Commission has denied that interpretation for thirty years,” it said. “The Commission cannot simply go about its business as if nothing ever changed. And it cannot provide post hoc justifications, either.”
The petition also included a sustained attack on the Universal Service Administrative Co. “USAC’s involvement in collecting and spending money on the back end for USF amounts to an unconstitutional delegation of Article II executive powers,” it said. “The Commission lacks statutory authority to appoint USAC as the permanent administrator of the USF, which means USAC cannot collect or spend USF moneys for the challenged quarter.” USAC also “violates the Government Corporation Control Act, which bars agencies from creating new corporate agents without express authorization from Congress.”