The Fifth Circuit Court of Appeals ruled the Universal Service Fund unconstitutional
The U.S. Supreme Court will review a circuit court ruling which held that the Universal Service Fund is unconstitutional.
The U.S. Solicitor General asked SCOTUS to review a Fifth Circuit Court decision from earlier this year, which held that the USF is not constitutional. Attorneys General from more than a dozen U.S. states, meanwhile, also asked for Supreme Court review, on the basis that the current state of how the USF is run “directs core congressional functions—taxing and spending—to an independent agency. And it piles on by giving broad authority in this process to a private entity, rendering the whole process doubly wrong.
“Especially in the face of a plain-as-day circuit split, the Court should act quickly to resolve these issues,” the attorneys general continued. West Virginia’s state AG is leading the case, which includes backing from the states of Alabama, Arkansas, Indiana, Kansas, Louisiana, Missouri, Montana, Nebraska, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia and Arizona.
According to a blog post from law firm Best Best and Krieger, which has been following the case, the Supreme Court would be likely to hear oral arguments in the case this spring and resolve it by June 2025. (More analysis of the case and legal context from Georgetown law professor Steve Vladeck is in this blog post.)
The ruling from the Fifth Circuit on USF constitutionality reversed an earlier decision by a panel of Circuit Court judges. In a ruling in March 2023, that panel ruled that the Federal Communications Commission has the authority to operate the USF and that its current framework for management of the USF was within the bounds of the Constitution. Other legal rulings on USF constitutionality, including recent decisions by two other U.S. Circuit Courts, have previously held that the program operates within constitutional bounds.
The nearly 30-year-old USF, administered by the private Universal Service Administrative Company (USAC), supports telecom services through four programs: the High-Cost Program (also known as the Connect America Fund), which subsidizes the provision of voice and internet services in unserved and underserved rural communities; the Lifeline program to subsidize voice service for low-income consumers; the E-Rate program that subsidizes broadband and Wi-Fi for schools and libraries; and the Rural Health Care Program, which financially supports telecommunications services to connect rural healthcare providers.
The amount that the USF collects and disburses varies by year, but generally is around $7 billion and has been as much as $8 billion.
Essentially, the Fifth Circuit Court ruled that Congress improperly delegated power to “tax” to the Federal Communications Commission, which then further delegated power by enabling the USAC to set USF rates which telecom carriers must contribute and which are passed on to the consumer on their monthly telecom bills. The Court held that the USF fees which are passed on to consumer are essentially a tax, and that in particular, the combination of congressional and agency delegation was unconstitutional.
After the Fifth Circuit made its ruling on USF constitutionality, FCC Chairwoman Jessica Rosenworcel said that: “The opinion reflects a lack of understanding of the statutory scheme that helped create the world’s best and most far-reaching communications network,” and said that the FCC would be pursuing additional court review of the decision.
In light of SCOTUS opting to take up the case for review, Rosenworcel released a statement saying that she was pleased that the Supreme Court would be reviewing the Fifth Circuit’s “misguided decision.”
“For decades, there has been broad, bipartisan support for the Universal Service Fund and the FCC programs that help communications reach the most rural and least-connected households in the United States, as well as hospitals, schools, and libraries nationwide. I am hopeful that the Supreme Court will overturn the decision that put this vital system at risk,” Rosenworcel said.
John Bergmayer, legal director at Public Knowledge (which filed an amicus brief in the case), said in a blog post that he believes the Fifth Circuit’s decision will likely be reversed.
