Supreme Court Signals Backing for FCC Universal Service Fund (1)

The US Supreme Court suggested it’s likely to uphold a federal program that uses more than $8 billion in fees imposed on phone bills to subsidize the cost of telecom services for poor people, rural residents, schools and libraries.

Hearing arguments in Washington on the decades-old Universal Service Fund, some conservative justices voiced concern Wednesday that Congress had unconstitutionally handed off its taxing power to the Federal Communications Commission without sufficient limits.

But others questioned what the court would achieve by requiring Congress to impose a cap on the funds the FCC could raise, as the challengers are seeking.

The cap “could be very high,” Justice Brett Kavanaugh said. “And then the question is, what exactly are we accomplishing?”

The case offers the court a chance to impose new limits on regulatory agencies, which the conservative majority has already constrained in other ways. The program’s funding mechanism is being challenged by the conservative advocacy organization Consumers’ Research, which won a federal appeals court decision declaring the fee unconstitutional.

The Trump administration is defending the program, even as it works to decimate other federal agencies with a barrage of job and funding cuts.

Trump Tempers Anti-Regulation Push to Back FCC at Supreme Court

The challengers drew support from Justice Neil Gorsuch, who described the program’s funding mechanism as unprecedented and asked whether the FCC could use it to give everyone in the country an account with Starlink, the satellite-based telecom services provider.

“This is just a straight-up tax, without any numerical limit, any cap, any rate,” Gorsuch said. “And we’ve never approved something like that before.”

But Justice Elena Kagan pointed to other constraints in the law, including its instruction to the FCC that rural areas should get services that are “reasonably comparable” to urban areas.

“There are some real standards in this program,” Kagan said. “What this program covers is things that a substantial majority of residential customers already have, all right? So, it’s not like newfangled, go all get ourselves some Starlink accounts.”

New Deal Link

Big-government foes have eyed the case as a chance to revive the so-called nondelegation doctrine, a legal theory the Supreme Court last invoked in 1935 in two rulings that blunted President Franklin D. Roosevelt’s New Deal. The core of the argument is that the Constitution assigned the legislative and taxing power to Congress – and lawmakers can’t simply hand off that authority.

Although several conservative justices have previously expressed interest in revitalizing that legal doctrine, Justice Amy Coney Barrett on Wednesday suggested she was wary.

“It’s obviously been a long time since we’ve held that something was unconstitutional under the nondelegation doctrine,” she told acting Solicitor General Sarah Harris, the Trump administration’s top Supreme Court lawyer. “Do you think this is an area in which they’re just not judicially manageable standards?”

Barrett also seconded Kavanaugh’s concern that a cap would have little value, saying the request “seems like a meaningless exercise.”

The lawyer for the opponents, Trent McCotter, said an explicit cap would provide “accountability.”

“At least then we know,” McCotter said. “If you think that’s too much, if you think that it’s too little, you know it’s Congress.”

Justice Ketanji Brown Jackson pushed back on that argument. “I’m just wondering whether it is really democracy-enhancing to create a doctrine that, at least in this case, would allow judges to strike down this very popularly enacted law,” she said.

Broad Impact

The administration is defending the fund alongside supporters of the program, including telecom industry associations and a coalition of schools, libraries and health-care providers.

They say a decision striking down the program could have sweeping implications beyond the USF. The case could potentially affect scores of statutes that use broad language like “reasonable rates” or “public interest” to tell regulators what to do.

“The disastrous effects are not just for my clients,” Paul Clement, the lawyer for the industry groups, said Wednesday. “They’re for all the various beneficiaries of this program.”

The fund currently collects a percentage of telecom companies’ revenue from voice services to pay for the universal access programs, but those revenues are shrinking as landline and mobile voice traffic diminishes in favor of internet-based communications.

FCC Chairman Brendan Carr and companies including AT&T Inc. have advocated for making big tech companies, whose business models rely on the underlying internet infrastructure, pay into the fund that promotes internet access.

The lead case is Federal Communications Commission v. Consumers’ Research, 24-354.

(Updates with excerpts from argument starting in 8th paragraph.)

--With assistance from Kelcee Griffis.

To contact the reporter on this story:
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Steve Stroth

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