D.C. Circuit Questions Consumers' Research Over Challenge to FCC 'Rubber-Stamping' USF

A three-judge panel from the U.S. Court of Appeals for the D.C. Circuit pressed Consumers' Research Friday on its challenge of the FCC's Q2 2023 USF contribution factor (case 23-1091). During oral argument, judges also questioned the group and the FCC about Universal Service Administrative Co. calculations to determine quarterly factors and definition of universal service (see 2401100044).

"I think it's just math," said Judge Patricia Millett of how USAC determines contributions. "There are regulations that say it has to be proportionately distributed and everyone should only have to carry their equal share," Millett said. "So, that seems like a pretty significant limitation on what they charge each person." Boyden Gray's Jared Kelson, attorney for Consumers' Research, said terms are "necessarily vague" and cited the "fluctuating" contribution factor as "evidence that there's a lot of discretion that's going into play." Millett pushed back and said changes in the contribution factor suggest that "numbers change and so math calculations change."

Noting the term "universal service" has "been around for 90 years," Millett asked Kelson what was "unconstitutionally vague" about it. "You keep saying these things are vague," Millett said. Kelson said the term has "no objective limitation" and is "a very open-ended, vague phrase." Millet responded, "[It] just seems odd that the thing's been around almost 100 years and someone now is just challenging it." Judge Bradley Garcia sought statutory language the court could review if a party challenged something the FCC deemed to be part of universal service. FCC counsel James Carr cited Section 254(c) of the Communications Act and said the FCC is limited to telecom services.

Millett also pressed Kelson on the group's claim that the FCC "rubber stamps" USAC's calculations when determining quarterly contribution factors. The FCC is "deeming approved a number that they calculate," she said. "They're not deeming approved a number that USAC provided," Millet said, questioning how the process could be improper. Kelson noted the absence of any documentation in the FCC's record that commissioners reviewed USAC's projections before announcing the contribution factor. "Absence of evidence does not mean a burden of proof," Millett said.

When pressed by Millett about whether the group was making an as-applied or facial challenge, Kelson said the group was challenging the Q2 contribution factor and noted that precedent allows parties to raise challenges to the underlying statutory or constitutional authority an agency has. "If we're only looking at this one quarter, you can't prove rubber-stamping," Millett said: "You're telling us now to only look at this single event at which point we have no basis for finding rubber-stamping." Judge Robert Wilkins asked whether current regulations specify the method for calculating the amount of funding an eligible carrier can receive. There is, Carr said, and USAC's projections "have to take into account all of those rules."

Garcia pressed Consumers' Research on its nondelegation challenge, noting an 11th Circuit opinion concluding that USAC has little discretion because "all of the contribution calculating formulas are fixed by FCC regulation" (see 2312140058). Kelson disagreed and said the FCC's guidance to USAC "still allows significant discretion to determine the amount of money to be appropriated." When asked to cite examples of such discretion, Kelson told Garcia that USAC is "the entity that makes the grants in the first place" with its calculations.