The Federal Communications Commission (FCC) has filed a petition with the U.S. Supreme Court seeking review of a recent decision by the Fifth Circuit Court of Appeals that invalidated the current funding mechanism for the Universal Service Fund (USF). This action satisfies the condition of the Fifth Circuit’s stay order, which allows the FCC to continue collecting USF contributions while the Supreme Court considers the case. 

Background

In May 2024, the Fifth Circuit’s decision in Consumers’ Research v. FCC held that the FCC’s method of collecting contributions from telecommunications carriers to fund the USF violated the nondelegation doctrine. The nondelegation doctrine is a legal principle that prohibits Congress from delegating its legislative power to executive agencies or private entities. (See our analysis of the Fifth Circuit’s decision here).

The Fifth Circuit found that Congress had given the FCC too much discretion in determining the amount of contributions that carriers must make to the USF. The court also held that the FCC had impermissibly delegated its authority to a private company, the Universal Service Administrative Company (USAC), which plays a role in calculating and collecting the contributions.

This decision was met with criticism from USTelecom, the leading association representing broadband service providers and innovators. USTelecom argued that the decision could jeopardize the connectivity of millions of Americans and undermine the FCC’s ability to administer the USF effectively.

The Fifth Circuit’s Stay Order

When the Fifth Circuit declared the USF contribution system unconstitutional, it initially issued a mandate that would have taken effect on September 16, 2024. This meant the FCC would have had to immediately stop collecting the fees used to fund the USF, potentially disrupting service for millions of Americans.

However, recognizing the significant disruption this could cause, the Fifth Circuit issued a stay order on August 27, 2024, temporarily pausing its own ruling. This stay was conditional:

• Condition for the Stay: The Fifth Circuit stated that the stay would remain in effect only if the FCC filed a petition for a writ of certiorari with the Supreme Court by September 30, 2024. Essentially, the court gave the FCC a deadline to seek Supreme Court review.

FCC’s Action

The FCC met this condition by filing its petition with the Supreme Court, ensuring the stay on the Fifth Circuit’s ruling remains in place. This means:

• USF Contributions Continue: Telecommunications carriers can continue to collect and contribute to the USF while the Supreme Court decides whether to hear the case.
• Continued Funding for USF Programs: The vital programs supported by the USF, such as rural broadband deployment and low-income subsidies, can continue to operate without immediate interruption.

Supreme Court Petition

The FCC’s petition to the Supreme Court argues that the Fifth Circuit’s decision was incorrect and that the USF funding mechanism is constitutional. The FCC contends that Congress provided sufficient guidance to the agency in its administration of the USF and that the agency’s reliance on USAC is permissible.

The FCC’s petition raises important questions about the scope of the nondelegation doctrine and the ability of federal agencies to rely on private entities in carrying out their statutory mandates. The Supreme Court’s decision in this case could have significant implications for the future of the USF and other federal programs.

Implications for Clients

If the Supreme Court upholds the Fifth Circuit’s decision, it could disrupt the funding of the USF and jeopardize the availability of affordable telecommunications services in rural and underserved communities. This could have a significant impact on businesses and consumers that rely on these services. In the meantime, pursuant to the Fifth Circuit’s stay order, the USF program remains unaffected and in full force and effect.

We are closely monitoring the developments in this case and will provide updates as they become available. In the meantime, if you have any questions about the implications of this case for your business, please do not hesitate to contact the attorney assigned to your account or, in the alternative, contact Jonathan Marashlian at jsm@commlawgroup.com.