On March 24, 2023, the 5th Circuit Court of Appeals held that § 254 of the Telecommunications Act of 1996 (the “Act”) did not violate the nondelegation doctrine or the private nondelegation doctrine, denying the Petitioners challenge to Congress’s delegation of administering the Universal Service Fund (“USF”) to the Federal Communications Commission (“FCC”) and the FCC’s reliance on a private entity to support its administration of the USF on constitutional grounds. Consumers’ Research v. Federal Communications Commission, No. 22-60008 at 2 (5th Cir. 2023). The Act established the USF and tasked the FCC with its administration for the purpose of ensuring “the facilitation of broad access to telecommunications services across the county,” which is accomplished by the USF raising funds that are then distributed across the country to further advancement of telecommunications services. Id. To assist in its administration of the USF, the FCC tasked a private entity, the Universal Service Administrative Company (“USAC”), with “certain ministerial responsibilities” which include collecting self-reported income information from telecommunication carriers, gathering data to put together a potential contribution rate for the USF, and proposing a quarterly budget to the FCC for the USF’s continued operation. Id.
The court found that “[c]ongress passed § 254 for the express purpose of preserving and advancing universal telecommunications services,” to be effectuated by policies which ensure that telecommunications services are:
(1) of decent quality and reasonably priced; (2) equally available in rural and urban areas; (3) supported by state and federal mechanisms; (4) funded in an equitable and nondiscriminatory manner; (5) established in important public spaces (schools, healthcare providers, and libraries; and (6) available broadly across all regions in the nation.
Id. at 8 (citing § 254(b)(1)-(7)). As such, the court concluded that Congress “supplied the FCC with intelligible principles when it tasked the agency with overseeing the USF.” Id. at 9. The court then found that the Act placed sufficient limitations on how the FCC was to implement the intelligible principles, noting that § 254(b) “requires that the FCC only raise enough revenue to satisfy its primary function.” Id. at 10. Specifically, the Act limits distribution of raised funds to telecommunication services that: “(1) are essential to education, public health, or public safety; (2) are being deployed in public telecommunications networks by telecommunications carriers; and (3) are consistent with the public interest, convenience and necessity.” Id. at 11. Because the intelligible principles “sufficiently limit the FCC’s revenue-raising activity,” the court held that § 254 did not violate the nondelegation doctrine. Id. at 12.
Finally, the court found that the FCC did not violate the private nondelegation doctrine “because it wholly subordinates USAC,” observed through four factors identified by the court. First, 47 C.F.R. § 54.702(b) “expressly subordinates USAC to the FCC” by providing that USAC cannot “make any policy, interpret unclear provisions of the statute or rules, or interpret the intent of Congress.” Consumers’ Research, No. 22-60008 at 14 (quoting 47 C.F.R. § 54.702(b)). Second, USAC lacks any rulemaking power, and rather makes “a series of proposals to the FCC…which are not binding on carriers until the FCC approves them.” Id. Third, the FCC permits telecommunication carriers to directly challenge USAC proposals to the agency and provides relief for such challenges. Id. Finally, “the FCC dictates how USAC calculations the USF contribution factor and subsequently reviews of the calculation method after USAC has made its proposal.” Id. These four factors, coupled with the fact that the FCC “only uses USC’s proposals after independent consideration of the collected data and other relevant information,” lead the court to hold that the FCC properly subordinates USAC and did not violate the private nondelegation doctrine. Id.
Jeremy Fetty is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.