The Federal Communications Commission (FCC) notched a key victory in the Fifth Circuit Court of Appeals, as a three-judge panel upheld the constitutionality of the Universal Service Fund (USF) and the agency’s decision to delegate administration of USF programs to a third party. New Street Research’s Blair Levin, who recently warned about the case’s potential impact on the USF, called the ruling “a pretty clear win for the FCC.”
The USF includes four main programs designed to bridge connectivity gaps in different areas and is funded by contributions from eligible telecommunications carriers. Since 1998, the FCC has relied on the Universal Service Administrative Company (USAC) – a private entity – to help run USF programs. Among other things, USAC’s tasks include collecting data from carriers to calculate contribution rates and proposing a quarterly budget to the FCC for the USF.
In court, Consumers’ Research et al argued USF and subsequent delegation of its administration was unconstitutional because Congress failed to provide adequate direction. But the Fifth Circuit rejected that assertion.
“Petitioners maintain that Congress has not articulated any guidance to the FCC in its administration of the USF—and that this failure violates the nondelegation doctrine. We disagree,” the judges wrote. “Congress passed § 254 for the express purpose of preserving and advancing universal telecommunications services… Ultimately, in enacting § 254, Congress chose to ‘confer substantial discretion’ over administration of the USF to the FCC.”
Likewise, the court upheld the FCC’s delegation of responsibility to USAC. While Consumers’ Research et al claimed the FCC violated private nondelegation doctrine, the judges disagreed. They pointed out “USAC does not enjoy the same type of sweeping rulemaking power—instead it makes a series of proposals to the FCC based off expert analysis, which are not binding on carriers until the FCC approves them.”
Levin recently highlighted the risk the Fifth Circuit case represented to the USF. He explained at the time that if the court found it to be unconstitutional, millions of households which rely on subsidies from USF programs could be harmed.
In an interview with Fierce on Friday, The analyst noted two similar court cases – one each in the Sixth and Eleventh Circuits – remain undecided. That means “there’s still a risk factor out there” when it comes to the USF’s future. “But in light of this decision, the risk is going down,” Levin concluded.