Supreme Court Backs FCC's Defense of Fund for Expanded Telecom Access

The U.S. Supreme Court on Friday endorsed the way the Federal Communications Commission funds its multi-billion dollar program to expand phone and broadband internet access to low-income and rural Americans and other beneficiaries.

The 6-3 ruling overturned a lower court's decision that the FCC's funding mechanism employing mandatory contributions from telecommunications companies had effectively levied a "misbegotten tax" on consumers in violation of the U.S. Constitution's vesting of legislative authority in Congress.

The fund has been used to expand service to low-income Americans and people living in rural areas and Native American tribal lands, as well as other beneficiaries such as schools and libraries.

A law called the Telecommunications Act passed by Congress in 1996 authorized the FCC to operate a "Universal Service Fund," to be drawn from regular contributions by telecommunications companies. The fund draws around $9 billion annually, with the vast majority of telecommunications companies passing on the cost to customers.

The law lays out six principles to guide the fund's operation, including that "quality services should be available at just, reasonable and affordable rates," that "access to advanced telecommunications and information services should be provided in all regions of the nation," and requiring that "sufficient" mechanisms be in place to "preserve and advance universal service."

At issue in the case was a legal principle called the non-delegation doctrine that involves limits on the ability of Congress to confer powers derived from the Constitution to government agencies like the FCC.

The FCC's handoff of authority to the Universal Service Administrative Company, the private company that administers the fund, involves a related concept called the private non-delegation doctrine. The FCC appointed the company to help determine contribution amounts, collect payments from telecommunications businesses and deliver funding to beneficiaries.

A set of challengers comprising the conservative group Consumers' Research, a telecommunications carrier and consumers asked the New Orleans-based 5th U.S. Circuit Court of Appeals in 2022 to review the legality of the funding mechanism.

They argued that Congress effectively handed off legislative power to the FCC by giving the agency open-ended latitude to operate the fund. They also argued that the FCC had unlawfully transferred authority to the Universal Service Administrative Company and given it an outsized role in determining contribution amounts to be paid by telecommunications companies.

The 5th Circuit in 2024 concluded that "the combination of Congress's sweeping delegation to FCC and FCC's unauthorized subdelegation" to the private company violated the Constitution's provision giving the legislative power to Congress.

The FCC was established as an independent federal agency in 1934 and is overseen by Congress.

The Supreme Court heard arguments in the case on March 26. The Supreme Court, which has a 6-3 conservative majority, has reined in the actions of federal regulatory agencies in a series of rulings in recent years, though those cases did not involve the non-delegation doctrine.