FCC Broadband Subsidy Scheme to Get Another Look From 5th Cir.

The Fifth Circuit sitting en banc will hear arguments Tuesday about whether Congress failed to properly delegate its revenue-raising authority when it permitted the FCC to charge telecommunications companies to fund a broadband access subsidy.

The arguments come after what observers describe as the appeals court’s recent history of placing strict requirements on agency power. The decades-old Universal Service Fund supports telephone and internet access by subsiding low-income families, rural hospitals, and schools who want to purchase broadband services, as well as funding carriers to develop broadband in otherwise high-cost areas. Companies typically pass along the cost of the program to consumers via a monthly charge on their telephone bill.

If the appeals court agrees with conservative advocacy group Consumers’ Research that the Telecommunications Act of 1996 doesn’t provide the necessary limits—consistent with the non-delegation doctrine—that allow an agency to raise revenue as the FCC has, some industry groups and advocates warn such a ruling could be disruptive.

The Fifth Circuit is also considering whether the private non-profit Universal Service Administrative Company, which helps manage the fund and its programs, was given too much power over its operations in violation of the private non-delegation doctrine.

FCC to Face ‘Activist Court’

Consumers’ Research argues that Section 254 of the Telecommunications Act leaves the FCC with “vague aspirations” that don’t meaningfully limit the agency, and that in the cases where the US Supreme Court has upheld an agency’s revenue-raising statute, the statute had a cap on how much the agency can raise.

The FCC contends that Congress has, since “the earliest days of the Republic,” allowed administrative agencies to “fill up the details” of a legislated program. The agency also points out that the Supreme Court has said that it doesn’t demand “statutes provide a determinate criterion for saying how much is too much.”

A three-judge panel of the Fifth Circuit had held in March that Congress left “numerous intelligible principles” in Section 254, that were sufficient to meet the requirements of the non-delegation doctrine. That decision was vacated when the appeals court decided to rehear the case en banc.

The Sixth Circuit already ruled in the FCC’s favor in May in a case targeting a different quarter’s USF charge, saying the Telecommunications Act offers nuanced guidance while limiting the FCC’s discretion. The Eleventh Circuit held oral arguments in June during which one judge suggested that he had more skepticism of the Universal Service Administrative Company’s role in managing the fund than of the FCC’s overall scheme that supplies revenue for the fund.

Professor William Funk of Lewis & Clark Law School said the Fifth Circuit is “a very activist court with respect to fundamental concepts of administrative law and separation of powers.”

The USAC specifically tells the FCC what the fund’s expenses are and how much revenue telecommunications companies made each quarter. The FCC’s regulations provide that the amount companies have to pay to the USF is statutorily determined by the ratio of expenses from USF programs to those revenues.

Consumers’ Research says that the FCC approves whatever the USAC calculates without any analysis, but the agency says it has occasionally revised the USAC’s calculations in the past. Professor Roderick Hills of New York University Law School said if an agency “has the power to reverse, that’s sufficient” authority to comply with the private non-delegation doctrine.

Schools, Libraries, Households Caught in Middle

Consumers’ Research suggested that the Fifth Circuit could limit relief to it and the other named petitioners, but John Windhausen, Jr., Executive Director of the Schools, Health & Libraries Broadband (SHLB) Coalition said that the appeals court could also enjoin the FCC from collecting money.

“Schools and libraries would be able to continue to purchase their broadband and telecommunication services for a short period of time until the funding runs out,” Windhausen said of such an injunction, but eventually they would have “that dilemma to either pay for the full freight of the cost of their broadband service” or downgrade it.

That could have a big effect in cities like Brownsville, Tex., whose mayor, John Cowen Jr., said its library recently got roughly $245,000 to update its wifi service at its branch locations. Forty-eight percent of households in 2021 in the Brownsville-Harlingen metro area didn’t have access to wired broadband services, according to the US Census Bureau.

Any risk to the USF could also have a negative effect on people who rely on its subsidy for low-income families, the mayor said. In January 2022, USAC reported that over 6 million households received the fund’s Lifeline benefit to defray the costs of phone or internet service.

In an amicus brief, three telecommunications associations said that many of their members “have invested in network infrastructure, made business plans, and offered service plans in reliance on future universal service payments” all of which could be put at risk by a decision in favor of Consumers’ Research.

And while a bipartisan group of lawmakers in Congress filed a brief before the three-judge panel in the FCC’s favor that seeks to defend the 1996 Act, Windhausen said that shouldn’t be taken as a sign Congress would act quickly if the fund’s revenue scheme was ruled an impermissible delegation.

“I don’t think there’s any guarantees of what this Congress can do,” Windhausen said. “And I’m not confident that Congress would rise to the challenge to fix the problem right away.”

Boyden Gray & Associates PLLC represents Consumers’ Research.

The case is Consumers’ Research v. FCC, 5th Cir. en banc, No. 22-60008, oral arguments 9/19/23.