11th Circuit Denies Consumers' Research USF Challenge

The FCC didn't violate the nondelegation doctrine when it used the Universal Service Administrative Co. to calculate quarterly USF contribution factors and administer USF programs, a federal court ruled Thursday. In denying Consumers' Research's challenge of the FCC contribution factor (see 2306220062), the 11th Circuit U.S. Court of Appeals noted "all USAC action is subordinate to the FCC, and the FCC retains ultimate decision-making power."

"From the Supreme Court’s guidance, our sister circuits have held that there is no violation of the private nondelegation doctrine where the private entity functions subordinate to an agency, and the agency has authority and surveillance over the entity," the court said. The opinion also noted that Congress "laid out the principles the FCC must follow in bringing universal service to our nation" under Communications Act Section 254, which "provides an intelligible principle and therefore passes constitutional muster." Judge Charles Wilson wrote the opinion; Judges Kevin Newsom and Barbara Lagoa concurred.

The court pressed Consumers' Research on the nondelegation doctrine and intelligible principle under Section 254 during oral argument in June of the group's challenge of the FCC's Q4 2022 contribution factor. Newsom said in his concurring statement that he was "deeply skeptical that today’s result can be squared with constitutional first principles." USF's contribution mechanism "seems suspect," Newsom said, still disagreeing with Consumers' Research that USAC is exercising legislative power in collecting funds. Lagoa expressed similar concerns in a concurring opinion. "However, we are bound to apply the intelligible principle test as set forth by Supreme Court precedent," Lagoa said. Consumers' Research didn't comment. The FCC also declined to comment.

Industry and consumer advocacy groups welcomed the ruling. The Competitive Carriers Association, NTCA and USTelecom said in a joint statement the opinion was a "victory for the many rural and urban consumers and anchor institutions across the country who rely on the services supported by" USF. "The court’s ruling affirms that Congress' directive to the FCC ... to collect contributions in support of this vital fund is constitutional," the groups said: "Other courts considering similar challenges should reach the same conclusion."

"Today's opinion underscores the importance -- and the validity -- of the Congressionally-mandated USF program," said Andrew Schwartzman, Benton Institute for Broadband & Society's senior counselor. The group was an intervenor in the case. "In this decision, the 11th Circuit joins the Sixth Circuit and a panel of the Fifth Circuit in upholding FCC policy and practices," Schwartzman said. The opinion "should be of particular importance to the judges on the Fifth Circuit, who are considering whether to set aside the decision of a three-member panel of that court," he said, adding the "persuasive reasoning of the new opinion should help convince the Fifth Circuit court to leave that panel decision in place."