Broadband Subsidy’s Revenue Seems to Get Support at Arguments

The Federal Communications Commission has “the tailwind of Supreme Court precedent” on its side regarding a third challenge to its authority to fundraise for the federal Universal Service Fund, Judge Kevin C. Newsom of the Eleventh Circuit said at oral arguments Wednesday.

The decades-old fund subsidizes telephone and internet access using money collected from telecommunications companies, dispersing nearly $7.5 billion in non-Covid spending on accessible broadband service last year. Companies typically pass along the cost of the program to consumers via a monthly charge on their telephone bill.

The arguments are the latest sign that the USF might survive appellate review after two sister courts declined to find the mandated contribution from telecommunication companies unconstitutional. However, Newsom suggested that the private non-profit company that helps administer the fund might have too much power.

“Congress placed no formula or meaningful limitations on the amount the FCC can raise,” which is an impermissible delegation of Congress’ taxing authority as its absence doesn’t leave enough of an intelligible principle, Consumers’ Research argued in its brief before the Eleventh Circuit.

Separation of Powers

The revenue-raising nature of the USF is so egregious, the conservative non-profit also argues, that the US Supreme Court should’ve placed stricter guidelines on how Congress can delegate its taxing power, compared to its other enumerated responsibilities, as a nod to the original intent behind the separation of powers.

But the panel—which included Judges Charles R. Wilson and Barbara Lagoa alongside Newsom—noted that the Supreme Court precedent on what Congress has to write to convey an intelligible principle is “lenient.”

And Wilson expressed concern about Consumers’ Research building its case from non-majority opinions.

“The best authority that you can cite in support of your position is a dissent?” Wilson asked when Consumers’ Research cited Justice Neil Gorsuch’s three-member dissent in Gundy v. United States supporting some narrowing of the intelligible principle standard.

“I would say yes, just because we acknowledge the Supreme Court has not adopted that original understanding currently,” Consumers’ Research responded.

If the US Court of Appeals for the Eleventh Circuit rules against Consumers’ Research, it could join the Fifth and Sixth Circuits in deciding the principles Congress left with the FCC in Section 254b of the 1996 Telecommunications Act were enough to avoid a nondelegation violation.

Private Company’s Fact-Finding

However, Judge Newsom’s questions opened the door for Consumers’ Research’s challenge to the role of the Universal Service Administrative Company and to what extent it has discretion to determine what the quarterly contribution factor should be.

“Speaking, again, only for myself, I think that challenge has legs, more legs than perhaps your normal non-delegation argument,” Newsom said.

Newsom had previously written in a concurrence in Laufer v. Arpan LLC that particularly strong powers, like that of enforcement, need to be constrained within the political system.

“There is something that feels sort of instinctively weirder or worse about legislative power being delegated all the way outside the government” to a private party, Newsom said.

The FCC conceded that the Telecommunications Act “doesn’t reference USAC” in the statute, but argued that the law did prohibit disruption to an unnamed predecessor in Section 254j.

“If they specifically mention a particular program,” Lagoa said of the USF’s Lifeline benefit for low-income consumers, “why wouldn’t they mention a private entity?”

The FCC said “it may be possible that we may want the administration of a program to change overtime.”

Boyden Gray & Associates PLLC represents Consumers’ Research. Internal counsel represented the FCC.

The case is Consumers’ Research v. FCC, 11th Cir., No. 22-13315, 6/21/23.