Consumers' Research Makes Challenge to Entire USF: Experts

A petition challenging the FCC USF Q4 contribution factor is likely to fail on procedural grounds but may be part of a bigger challenge to dismantle USF entirely, legal experts said in recent interviews (see 2110010062). Some said it may be an effort to force a reevaluation of the nondelegation doctrine that prohibits Congress from delegating legislative powers to executive branch agencies.

The petition by Consumers’ Research and others with the 6th U.S. Circuit Court of Appeals seeks to vacate FCC Sept. 10 approval of the quarterly contribution factor on grounds the agency exceeded statutory authority by delegating authority to raise and spend money through USF to Universal Service Administrative Co. “Congress unconstitutionally delegated its taxing power to a private entity,” the petition said. USAC “doesn’t comment on policy matters,” emailed a spokesperson. The FCC didn’t comment Tuesday.

The petition is “absolutely” a “frontal challenge to the constitutionality of the entire USF system,” said Benton Institute for Broadband & Society Senior Counselor Andrew Schwartzman. “The goal is unquestionably to throw out the entire system” and the petition is a “step down a path of trying to limit the scope of constitutionality and actions of the FCC and other independent regulatory commissions,” Schwartzman said.

The challenge “isn’t really about universal service,” said New Street Research’s Blair Levin: “This is about a much longer jurisprudential battle about the nature of administrative agencies.” The groups are likely hoping to have the case brought before the Supreme Court for it to revisit the non-delegation doctrine, Levin said. Justice Neil Gorsuch previously proposed that regulations would be upheld “if the federal law permitting the agency to regulate was ‘sufficiently definite and precise to enable Congress, the courts, and the public to ascertain whether Congress’s guidance has been followed.’” Levin previously wrote: “If an appropriate case were to come to the court, Gorsuch’s view would likely be adopted.” That means the public interest standard “would not pass the Gorsuch test,” Levin wrote.

The petition “challenges the Q4 factor but relies, in part, on legal arguments that would apply beyond the Q4 factor,” emailed petitioners’ lead counsel Trent McCotter of Boyden Gray. Consumers’ Research didn’t comment. The group filed comments in September asking that the contribution factor be dropped to zero because the USF is “an unconstitutional tax raised and spent by an unaccountable federal agency” that “delegated almost all authority over this revenue-raising scheme to a private company registered in Delaware.”

Petitioners had the ability to file with either the U.S. Court of Appeals for the D.C. Circuit or wherever their principal place of residence is for this type of challenge. Here, petitioners reside in Ohio, where the 6th Circuit has jurisdiction. They likely chose to file with that court because it’s “more conservative on these kinds of judicial issues,” Schwartzman said.

Part of the group’s case includes whether the contributions are taxes and Congress’ “standardless delegation to the FCC of authority to raise and spend nearly unlimited taxes” is unconstitutional. This “is a misguided attempt,” said Public Knowledge Senior Policy Counsel Jenna Leventoff. The contributions are fees and the solution to the high contribution factor “isn’t abolishing [USF]” in favor of congressional funding, Leventoff said.

If successful, the challenge would have a “dramatic effect” on the FCC and other agencies, Levin said: “It means chaos” in terms of what’s enforceable and what isn’t. Courts have “become much more receptive” to the group’s arguments today than they would have been 25 years ago with the enactment of the Telecom Act, Schwartzman said, but it’s likely the petition will fail on procedural grounds. The groups will have to prove standing and whether there's a reviewable FCC order.