The U. S. Supreme Court has upheld the constitutionality of the $9 billion federal universal service fund (USF) which funds several telecommunications programs, including the federal high-cost fund which subsidizes the cost of telecommunications access to rural areas, the Federal Communications Commission's (FCC) Lifeline affordability program, the E-Rate program for schools and libraries, as well as telecom subsidies for rural hospitals and health care facilities. The program was created under the Telecommunications Act of 1996 and is funded by a USF surcharge on telephone bills.
The Fifth Circuit Court of Appeals held that the funding mechanism for the program was unconstitutional, among other reasons, because it violated the “non-delegation doctrine.” The Fifth Circuit held the delegation of responsibility for administering the program to the Universal Service Administrative Company (USAC) was an unlawful delegation of government power to private interests. The decision created a conflict with two other circuit courts that had previously upheld the program against similar challenges.
Writing for a 6-3 majority, Justice Kagan held that the way Congress and in turn the FCC delegates responsibility for establishing the amount of the “contribution factor” from service providers (which is then passed through to customers as a surcharge) was not unconstitutionally open ended, ambiguous or lacking in sufficient agency oversight. It therefore did not violate the non-delegation doctrine, which limits the delegation of government authority to private interests.
For further information or analysis about the Supreme Court’s decision, contact Tony Mendoza.
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