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Consumers' Research v. Federal Communications Commission

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Consumers' Research v. Federal Communications Commission, No. 21-3886 (2023), was a court ruling at the United States Court of Appeals for the Sixth Circuit, on a challenge by Consumers' Research, a free-market advocacy organization, against the Federal Communications Commission's Universal Service Fund program. The ruling was one of several at various American courts brought by the same litigants; the Sixth Circuit was the first to rule that the funding program does not violate the United States Constitution.[1]

Consumers' Research v. Federal Communications Commission
CourtUnited States Court of Appeals for the Sixth Circuit
Full case name Consumers' Research: Cause Based Commerce, Inc.; Joseph Bayly; Jeremy Roth; Deanna Roth; Lynn Gibbs; Paul Gibbs: petitioners v. Federal Communications Commission, United States of America: respondents
DecidedMay 4, 2023
CitationsConsumers' Research v. Federal Communications Commission, No. 21-3886 (6th Cir. May 4, 2023)
Court membership
Judges sittingKaren Nelson Moore, Eric L. Clay, Jane Branstetter Stranch
Case opinions
Affirmed 3-0 that the Federal Communications Commission's universal service funding program is constitutional.

Background

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The Federal Communications Commission (FCC) administers a universal service program, as authorized by Congress in the Telecommunications Act of 1996. All telephone service customers in the United States pay a monthly fee, and the resulting Universal Service Fund is used by the FCC to subsidize discounts for financially disadvantaged subscribers, build network infrastructure in underserved areas. connect rural hospitals, and support computer labs at public schools and libraries.[2][3] The fund's budget had reached as high as $10 billion per year by the 2020s.[4] The fund is administered by a quasi-private entity called the Universal Service Administration Company (USAC).[1]

The Universal Service Fund has generated controversy among government watchdogs and fiscal conservatives due to its apparent waste. Critics have questioned whether billions of dollars per year are still necessary to advance the FCC's goals of filling gaps in the American telephone network and assisting disadvantaged consumers.[5] The commission's management of the funds is lightly regulated with little oversight from other parts of the American government.[6] The funds are allocated inefficiently among various types of communications networks, with a focus on landline telephone services as opposed to others that are more popular with, or needed by, modern consumers.[7]

Other critics have accused the FCC of forwarding funds to private corporations to build network infrastructure, but with insufficient oversight of whether those companies use the funds in the public interest.[8] There have been several documented cases of fraud in the use of such funds, both by private companies that build infrastructure, and by the recipients of government assistance such as schools.[9] By the late 2010s, the universal service program became a matter of geopolitical and national security concern as well, with some politicians questioning whether funds should subsidize purchases of network components from foreign telecommunications companies of concern, particularly those from China.[10]

In 2023, Consumers' Research, a free-market advocacy organization, filed suit in the Fifth,[11] Sixth,[1] Eleventh,[12] and District of Columbia Circuit Courts[13] on behalf of telephone consumers in each respective region. The group claimed that the FCC's universal service program should be struck down as an unconstitutional delegation of fundraising functions from Congress to the commission,[14] and that allowing the USAC to administer the program's finances was an unconstitutional transfer of government power to the private sector.[12]

The Sixth Circuit proceeding was the first in which a ruling was reached.

Sixth Circuit opinion

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The Sixth Circuit reviewed the complaint in March 2023.[1] The court focused on the legality of the FCC's universal service program as authorized by law in the Telecommunications Act of 1996. Section 254 of that act requires the structures of fee collection and budgetary oversight by the FCC that are at issue in the complaint.[1] The use of the quasi-private USAC had already been held as constitutional by the D.C. Circuit in 2012.[15]

Given the "intelligible principle" laid out in the 1996 Act, Congress had intended the FCC to act as it then did in subsequent years when administering the universal service program, and those clear instructions from Congress negated arguments about delegation of power to the commission.[1] Per Supreme Court precedent, due to the complexity of governmental functions, no constitutional violation exists "so long as Congress provides an administrative agency with standards guiding its actions such that a court could ascertain whether the will of Congress has been obeyed."[16] The universal service charge for consumers was also found to be a fee and not a tax, again reducing the applicability of the nondelgation doctrine because only the direct collection of taxes by the government are a matter of constitutional authority.[1]

Thus, the Sixth Circuit rejected the Consumers' Research arguments about the constitutionality of the FCC's universal service program.[13]

Impact and subsequent events

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In September 2023, related litigation at the Fifth Circuit also resulted in the rejection of the Consumers' Research delegation argument,[11][13] though some judges questioned whether the FCC's universal service program may still violate the Constitution, on the grounds that the Telecommunications Act of 1996 neglected to set clear limits on how much money the commission could raise.[4][17] The Eleventh Circuit also rejected the Consumers' Research argument in December 2023, concluding that the universal service program was legal per the instructions from Congress in the 1996 Act.[12]

In late 2023, Consumers' Research appealed its losses at the Fifth and Sixth Circuits to the United States Supreme Court, with additional arguments on separation of powers, oversight of government funds, and the FCC's ability to manage such a budget under the major questions doctrine.[13]

References

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  1. ^ a b c d e f g ''Consumers' Research v. Federal Communications Commission'', No. 21-3886 (6th Cir., 2023).
  2. ^ "Universal Service | Federal Communications Commission". www.fcc.gov. Retrieved 2024-01-18.
  3. ^ Jayakar, K. (2009). Universal Service. In Schejter, A. (2009). And communications for all: A policy agenda for a new administration. Lanham, MD: Lexington Books.
  4. ^ a b Zoppo, Avalon (19 September 2023). "5th Circuit Seems Skeptical of FCC Telecom Fund's Constitutionality". National Law Journal. Retrieved 2024-01-18.
  5. ^ Foley, Sean M. (1998). "The Brewing Controversy over Internet Service Providers and the Universal Service Fund: A Third Generation Interpretation of Section 254". CommLaw Conspectus. 6: 245–259 – via Columbia School of Law.
  6. ^ McCarthy, Kieren (May 4, 2018). "FCC shifts its $8bn pot of gold, sparks fears of corporate money grab". The Register. Retrieved 2018-05-30.
  7. ^ Frieden, Rob (July 30, 2012). "Killing with Kindness: Fatal Flaws in the $5.7 Billion Universal Service Funding Mission and What Should Be Done to Narrow the Digital Divide". SSRN 2119666.
  8. ^ Nicosia, Mareesa. "Faster Internet at School: What's Next for $4 Billion E-rate Fund Under New FCC Chief Ajit Pai?".
  9. ^ Mcauliffe, Katie (2017-02-14). "Fraud still plagues the FCC's Universal Service Fund".
  10. ^ Feinberg, Andrew (May 21, 2018). "ZTE Not Part of China Trade Talks, Will Not be Let off 'Scot-Free' if Export Ban is Lifted, Kudlow Says". Broadbandbreakfast.com. Retrieved May 30, 2018.
  11. ^ a b ''Consumers' Research v. Federal Communications Commission'', 63 F.4th 441 (5th Cir., 2023).
  12. ^ a b c ''Consumers' Research v. Federal Communications Commission'', No. 22-13315 (11th Cir., 2023).
  13. ^ a b c d Umanah, Ufonobong (20 June 2023). "Tough Path for Challenge to FCC Broadband Fee Revenue". www.bloomberglaw.com. Retrieved 2024-01-18.
  14. ^ Buehler, Katie (1 November 2023). "FCC Subsidy Challengers Take Fight To High Court". Law360. Retrieved 2024-01-18.
  15. ^ Rural Cellular Association v. Federal Communications Commission, 685 F.3d 1083 (D.C. Cir., 2012).
  16. ^ Skinner v. Mid-America Pipeline Co., 490 U.S. 212 (S. Ct., 1989).
  17. ^ Umanah, Ufonobong (18 September 2023). "FCC Broadband Subsidy Scheme to Get Another Look From 5th Cir". news.bloomberglaw.com. Retrieved 2024-01-18.
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