Federal Communications Commission v. Consumers’ Research

Issues

Did Congress violate the nondelegation clause when it authorized the Federal Communications Commission (“FCC”) to regulate revenue for the Universal Service Fund, which exists to subsidize access to telecommunications; and, did the FCC unconstitutionally delegate authority to a private entity in the implementation of the Universal Service Fund?

Oral argument:
March 26, 2025
Court below:
United States Court of Appeals for the Fifth Circuit

This case asks the Court to determine if Congress’ delegation of authority to the FCC under 47 U.S.C. § 254 was unconstitutional, and whether the FCC’s delegation to a private entity to implement some § 254 provisions was unconstitutional. The FCC argues that the delegation was not unconstitutional because Congress gave the FCC an “intelligible principle” with which to execute the statute. The FCC further contends that it only used a private entity for advice and maintained ultimate authority when it came to the implementation of the statute. Consumers’ Research argues that the statute only announces vague aspirational policy goals and gives too much legislative power to the FCC. Additionally, Consumers’ Research posits that the private entity’s involvement in the implementation of the statute went beyond advice and amounted to private creation of federal law. This case involves questions regarding the separation of powers and how much leeway agencies have in implementing policy.

Questions as Framed for the Court by the Parties

(1) Whether Congress violated the nondelegation doctrine by authorizing the Federal Communications Commission to determine, within the limits set forth in 47 U.S.C. § 254, the amount that providers must contribute to the Universal Service Fund; (2) whether the FCC violated the nondelegation doctrine by using the financial projections of the private company appointed as the fund's administrator in computing universal service contribution rates; (3) whether the combination of Congress’s conferral of authority on the FCC and the FCC’s delegation of administrative responsibilities to the administrator violates the nondelegation doctrine; and (4) whether this case is moot in light of the challengers' failure to seek preliminary relief before the 5th Circuit.

Facts

It has been a longstanding congressional policy to ensure that all Americans have access to telecommunications services. For many years, Congress achieved this policy by allowing AT&T, which once held a regulated monopoly over the telecommunications industry, to charge urban customers high rates. In return, AT&T provided services to rural Americans, laying telephone wires in areas that it would otherwise be unprofitable do so because customers are few and far between. But then, after AT&T’s monopoly was broken up in the 1980s, the telecommunications market was deregulated and no company could competitively afford to charge urban customers such high rates.

As a result, Congress passed the Telecommunications Act of 1996, which authorized and mandated the Federal Communications Commission (“FCC”) , an independent agency , to establish “specific, predictable, and sufficient . . . mechanisms” to ensure “universal service.” Congress also granted the FCC authority and responsibility to determine what universal service is, instructing it to consider factors such as technological advancement. Since then, the FCC has established four programs to achieve universal service. Two of these programs—the High-Cost Program and the Rural Health Care Program—subsidize phone and internet service in rural communities and phone service for rural healthcare providers, respectively. Two others—the Lifeline Program and E-Rate Program—are directed at low-income areas consumers, with the former subsidizing phone service for individuals, and the latter subsidizing phone and internet service for underserved schools and libraries.

But the FCC does not administer these four programs. Instead, it delegates day-to-day administration to the Universal Service Administrative Company (“USAC”), a private organization run by interest-group representatives. Most importantly, the USAC predicts how much the programs are likely to cost over a coming financial quarter. Based on this calculation, the FCC levies the “USF Tax” which keeps communication services affordable by contributing a portion of revenues earned by telecommunications companies to the USF. And while the FCC can revise USAC’s calculation before it levies the USF Tax, it has never made a substantive revision.

On November 2, 2021, the FCC issued a public notice seeking comment on the proposed USF Tax for the first quarter of 2022. USAC’s proposed tax was 25.2% on revenues, a substantial increase from just 5% in 2000. Some of Respondents commented and argued that the universal service contribution is unconstitutional. One Respondent is Consumers’ Research, a conservative, consumer-protection nonprofit. When the FCC ultimately approved the tax, Respondents sought review of the FCC’s decision in the United States Court of Appeals for the Fifth Circuit . That court, in a three-judge panel, rejected Respondents’ arguments, reasoning that the universal service contribution violates neither the public nor private nondelegation doctrines . However, after a rehearing before the entire court , it held that the universal service contribution violates both together.

The FCC then petitioned the United States Supreme Court for a writ of certiorari on January 29, 2024, which the Court granted on November 22, 2024.

Analysis

LEGISLATIVE NONDELEGATION

The FCC argues that Congress has not impermissibly delegated its legislative powers to the FCC. The FCC contends that Congress can seek assistance from an executive agency, such as the FCC, as long as Congress lays down an “intelligible principle” by which that agency can discern Congress’ general policy and the scope of authority Congress intended to delegate to the agency. The FCC posits that this is not a demanding test and has only been used to strike down two delegations. The FCC claims that the Court’s reluctance to strike down statutes through the nondelegation doctrine is consistent with how the First Congress interpreted the Constitution. Per the FCC, the interpretation of the Constitution by the First Congress is indicative of the Constitution’s true meaning because many of the Constitution’s writers were members of the First Congress. Regarding the statute in question, 47 U.S.C. § 254, the FCC argues that the statute gives the FCC guidance on policy by providing six specific principles within the statute by which the FCC should manage the USF. For example, according to the FCC, the statute provides specific substantial policy guidance by directing the FCC to ensure that telecommunication services are “‘equally available in rural and urban areas,’ and [are] ‘established in important public spaces (schools, healthcare providers, and libraries).’” In this way, the FCC claims, Congress is determining policy which binds the FCC, and Congress is not impermissibly delegating policymaking to the FCC. The FCC also contends that the statute defines the boundaries of the FCC’s authority by identifying the telecommunication providers that must pay the universal service contributions, to what end the FCC can use the funds collected, and which carriers may receive subsidies.

Consumers’ Research argues that 47 U.S.C. § 254 unconstitutionally delegates the legislative power to raise revenue to the FCC. Whether or not the Court considers the revenue-raising scheme to be a tax, Consumers’ Research contends that the power granted by Congress to the FCC is a legislative power and triggers scrutiny under the nondelegation doctrine. Consumers’ Research argues that when a delegation to an agency is purely a legislative one, as is the case here because it involves the legislative power to raise revenue, the nondelegation doctrine demands a more exacting scrutiny regarding the specificity of the delegation in the statute. Consumers’ Research posits that the nondelegation doctrine requires Congress to do more than announce “vague aspirations,” and that it cannot delegate to agencies the task of legislating to reach policy goals. For this reason, Consumers’ Research argues, Congress must set definite guidelines for agencies. According to Consumers’ Research, the statute lacks these guidelines because it sets no limit on how much money the FCC can raise through the funding scheme. Additionally, Consumers’ Research argues, the principles set out in the statute are aspirational because they only say what the FCC “should” do or what the FCC “must consider.” Thus, Consumers’ Research contends that the statute allows the FCC to add its own principles, which amounts to enabling the FCC to determine its own authority.

PRIVATE NONDELEGATION

The FCC argues that it has not impermissibly delegated its Congress-given authority to a private entity, namely, USAC. The FCC contends that the law allows the federal government to solicit non-binding recommendations from organizations, and that the FCC only receives non-binding advice from USAC. USAC, the FCC claims, provides projections of program costs in accordance with rules handed down by the FCC. The FCC further assures that the submitted projections must be approved by the FCC. The FCC asserts that USAC then uses the projected costs and a FCC formula to calculate carrier company contributions. Thus, the FCC contends that this whole process amounts to non-binding advice because a carrier can appeal USAC’s determinations directly to the FCC, and the agency in turn reviews those carriers’ grievances without affording deference to USAC’s original decision. The FCC contends that USAC is prohibited from resolving legal ambiguities itself and must receive guidance from the FCC to resolve those ambiguities. The FCC argues that the nondelegation doctrine only requires that the FCC has the authority to not enact USAC’s advice, whether or not it ends up taking on that advice. In any event, the FCC claims, the FCC conducts “meaningful review of USAC’s actions” and has, at times, departed from USAC’s advice.

Consumers’ Research counters that the FCC’s subdelegation to the USAC is an unconstitutional private delegation. Consumers’ Research contends that the USAC’s actions are not analogous to advice and amount to impermissible government action by a private entity. Per Consumers’ Research, for private entities’ advice to be considered just a recommendation, the agency listening to the private entity’s advice must affirmatively approve that advice for it to have legal effect. However, Consumers’ Research argues, the FCC rules allow cost projections determined by the USAC to go into effect if the FCC does nothing within fourteen days after the USAC’s projections are provided. Consumers’ Research also contends that the FCC does not conduct an independent review of the projections, and, instead, another agency—the Office of Managing Director—simply parrots the projections given by the USAC. Consumers’ Research claims that the FCC’s argument that the theoretical authority to approve or deny private recommendations is enough to pass the nondelegation test is inconsistent with caselaw. Additionally, Consumers’ Research claims that such a simple test would allow private recommendations to go into law without government approval, and would delegate to private entities power akin to that of the federal government.

COMBINATION THEORY

The FCC argues that the Court of Appeals for the Fifth Circuit improperly decided against the FCC because it did not decide the issues of legislative nondelegation or private nondelegation separately, but instead combined the two claims. The FCC argues that the claimed “double-layer delegation” is not an anomaly and points to Sunshine Anthracite Coal Co. v. Adkins . The FCC asserts that, in that case, the Court did not consider the statutory nondelegation and private nondelegation claims together; instead, the Court disposed of each claim separately. In this case, the FCC argues, the permissible vesting of authority from Congress to the FCC could not become impermissible through the subdelegation of ministerial authority to USAC.

Consumers’ Research counters that the combination theory is appropriate, and the Fifth Circuit’s decision should be upheld. First, Consumers’ Research argues that the parties in Sunshine Anthracite Coal Co. never raised the combination theory argument, and the court in that case had no reason to address it because the court easily disposed of both nondelegation claims. In this case, Consumers’ Research posits, the Fifth Circuit was concerned about the legality of both delegations separately, and only then did it rule the combination unconstitutional. Consumers’ Research argues that the combination theory should be adopted by the Court because the cumulative effect of two forms of delegation dilutes the accountability of government action, which is the primary concern of the nondelegation doctrine.

Discussion

PRACTICAL BENEFITS OF THE UNIVERSAL SERVICE FUND PROGRAMS

Colorado and twenty-one States (“Colorado”), in support of the FCC, highlight examples of their states benefiting from USF programs. High-Cost Program subsidies, for example, support broadband access for the “overwhelming majority” of South Dakotans. In Utah, the Rural Health Care Program allows doctors to quickly communicate with specialists in other parts of the state and thus deliver quicker diagnoses and urgent treatments to patients. Lastly, in Colorado, the E-Rate Program allows high schools to bring “rigorous, college-prep curricula” to severely underserved neighborhoods. Public Citizen meanwhile contends that more than just USF programs would be jeopardized if the Supreme Court restricts how much authority Congress can delegate to executive agencies. . Striking down the FCC’s broad authority to create programs “necessary and appropriate” to achieve universal service, Public Citizen contends, would jeopardize a “ubiquitous sort of delegation”: the Consumer Product Safety Commission and the Occupational Safety and Health Administration both have the authority decide what regulations are “reasonably necessary” for consumer and worker safety.

West Virginia and fourteen other states, in support of Consumers’ Research, counter that USF programs would not have to disappear if the Supreme Court held that the Telecommunications Act of 1996 contains an unconstitutional delegation. West Virginia notes that the Court could stay such a judgment and give Congress time to amend the Telecommunications Act to clearly authorize such programs. Additionally, West Virginia stresses that the Court could issue only a prospective judgment, allowing past funding to still flow in the interim. Addressing broader concerns, the National Federation of Independent Business Small Business Legal Center (“NFIB”), insists that a strengthened nondelegation doctrine would not spell the death of delegation and render Congress unable to address the changes of an increasingly complex society. The NFIB proposes that agencies could still use their expertise to “fill up the details” of congressional statutes or create rules that depend on executive factfinding.

UNDERMINING DEMOCRATIC GOVERNANCE

The Lawyers’ Committee for Civil Rights Under Law and eleven other civil-rights organizations (“Lawyer’s Committee”) argue that the USF programs support the connected constitutional values of free expression and democracy. The Lawyers’ Committee contends that the public’s “access to emerging information and reporting on current events” enabled by the USF programs supports a “well-functioning sphere of expression,” which is what the First Amendment seeks to achieve and is “critical to a healthy democracy.” Additionally, a bipartisan group of former FCC commissioners, anticipating arguments that raise the concern of unelected bureaucrats acting on whim, urge that the FCC has always taken care not to act beyond the authority Congress has granted it.

In support of Consumers’ Research, The National Federation of Independent Businesses parries that broad delegations to agencies, like that behind the USF programs, harm our system of representative democracy. Specifically, NFIB contends that broad delegations transfer the power to make important policy decisions to unelected decisionmakers that need not worry about “the possibility of reelection and the threat of ouster.” And for its part, West Virginia argues that the decline in legislation over recent decades indicates that Congress transfers power to agencies to “shirk tough decisions.” TechFreedom, also supporting Consumers’ Research, urges that delegations to private entities, like USAC’s role in calculating the USF tax, pose an even greater threat to democracy than delegations to executive agencies. Private entities, TechFreedom notes, are not subject to due process standards, the Freedom of Information Act , or simple oversight on spending—with that lack of oversight causing the USF Tax to have “ballooned” from 4% in 1998, to “routinely over 35% now.”

Conclusion

Domnick Q. Raimondo and Andrew W. Carpenter

Anna Temchenko

Additional Resources