Supreme Court Upholds $8.6 Billion FCC Telecom Subsidy Fund (1)

The US Supreme Court upheld the $8.6 billion Universal Service Fund, the annual slate of subsidies that helps cover the cost of telecom services for low-income people, rural residents, schools and libraries.

Voting 6-3, the justices rejected contentions that Congress unconstitutionally handed off its taxing powers when it set up the program in 1976. The fund uses a charge imposed on monthly phone bills – in an amount determined by the Federal Communications Commission – to subsidize service for more than 8 million people.

“No impermissible transfer of authority has occurred,” the court majority wrote in its opinion.

The ruling reversed a federal appeals court decision that declared the program unconstitutional, after conservative groups argued the FCC had unconstitutionally handed off its powers to the Universal Service Administrative Co., the private nonprofit entity that runs the program subject to the commission’s oversight.

“Congress sufficiently guided and constrained the discretion that it lodged with the FCC to implement the universal-service contribution scheme,” Justice Elena Kagan said in writing the majority opinion. “And the FCC, in its turn, has retained all decision-making authority within that sphere, relying on the administrative company only for non-binding advice. Nothing in those arrangements, either separately or together, violates the Constitution.”

WATCH: The US Supreme Court upheld, in a 6-3 vote, the $8.6 billion Universal Service Fund. Tyler Kendall reports.

Source: Bloomberg

Small-government advocates had hoped the case would establish new limits on federal regulatory power, building on those the court’s Republican-appointed majority imposed previously. Conservative groups sought to revive the so-called nondelegation doctrine, a rarely successful legal argument that says lawmakers can’t give away their constitutional legislative and taxing powers.

Several conservative justices had expressed interest in revitalizing the doctrine, which the court last invoked in 1935 to blunt President Franklin D. Roosevelt’s New Deal. The Supreme Court has watered down the nondelegation doctrine in recent decades, saying Congress can delegate its powers as long as it lays out an “intelligible principle” for agencies to follow.

But only three of the court’s conservative justices dissented from the majority opinion.

“The Constitution affords only our elected representatives the power to decide which taxes the government can collect and at what rates,” Justice Neil Gorsuch wrote in his dissent. “As this court observed some decades ago, it would represent “a sharp break with our traditions” for Congress to abdicate its responsibilities and “besto[w] on a federal agency the taxing power.”

President Donald Trump’s administration defended the FCC subsidy program. Had the high court struck it down by invoking the nondelegation doctrine, the ruling might have undercut Trump’s defense of his global tariffs. A lower court cited the nondelegation doctrine in declaring those tariffs unlawful.

The telecom industry also backed the fund at the Supreme Court, as did a coalition of schools, libraries and health-care providers. Industry trade groups told the high court that businesses have invested billions of dollars in infrastructure on the assumption that universal service subsidies would continue.

The conservative advocacy organization Consumers’ Research challenged the program, saying Congress should have set a specific tax rate or imposed a cap on the money the FCC could raise.

The case is FCC v. Consumers’ Research, 24-354.

(Updates with details from ruling.)

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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