The event focused on a July ruling from the Fifth U.S. Circuit Court of Appeals, which found that using telecommunication fees to fill the Universal Service Fund (USF) is unconstitutional. The decision could affect the Federal Communications Commission’s (FCC) E-rate program, as it relies on USF to help schools throughout the nation pay for broadband Internet and other telecommunication services.
Hosted by the nonprofit Schools, Health and Libraries Broadband Coalition (SHLB), the webinar featured attorneys Sean Lev and Andy Schwartzman. Lev is a former general counsel of the FCC, acting general counsel of the Department of Energy and also serves as counsel to SHLB. Schwartzman is senior counselor at the nonprofit Benton Institute for Broadband and Society.
During the webinar, both lawyers emphasized the recent ruling will have no near-term effects on E-rate. However, it does create uncertainty about the funding source for the program in the future.
At the heart of the issue is the Fifth Circuit’s assertion that the universal service fee on consumer phone bills is a “misbegotten tax.” The fee has provided funding for FCC universal service programs such as E-rate for nearly 30 years. If the July ruling stands, Congress will need to find a new way to fund these programs in order to maintain them.
The case against the FCC was spearheaded by Consumers’ Research, a nonprofit organization that aims “to tell corporate America: Focus on your customers, not woke politicians,” according to its website. By labeling the universal service charge a tax rather than a fee, that group opens the door to an argument based on the nondelegation doctrine, Lev and Schwartzman said.
According to this doctrine, Congress is vested with “all legislative powers” — such as the power to impose taxes — and cannot delegate those powers to an outside entity. The Fifth Circuit ruling contends that Congress delegated its taxing power to the FCC, which subdelegated that power to the Universal Service Administrative Company, a not-for-profit corporation that manages USF and its related programs with FCC oversight.
“This seems to be an agenda-driven case more than a focus on USF per say,” Lev said. “These are not people who are paying a lot of money into the USF fund. They are people who have a desire to bring a nondelegation case and perhaps move the law in the direction they would like from a libertarian perspective.”
Prior to the Fifth Circuit decision, Consumers’ Research brought the same case to two other circuit courts, both of which ruled in favor of the FCC, maintaining that the funding mechanism for USF is constitutional. As far as next steps, Lev said one option would be for the FCC to seek a stay pending Supreme Court review of this issue.
“You have a split of circuits as to the constitutionality of a major federal program. If the government wants to seek Supreme Court review in such cases, their chances of getting that review are generally quite high,” Lev said. “There’s an obvious practical problem when you have one circuit saying the program is unlawful and two other circuits saying it’s lawful.”
A second option would be for the FCC to try to amend its rules regarding USF “if it thinks that would make a difference in the court’s analysis,” Lev said. Regardless of how the case plays out, Schwartzman said he believes strong bipartisan support for E-rate and the other universal service programs will ensure their survival.
“The distribution of the money and the existing programs are reasonably well accepted and reasonably popular, and I don’t think that there will be major, major changes in any kind of legislation or what the FCC does as to how those programs operate going forward,” Schwartzman said. “I would assume E-rate will be alive and well for a long time to come one way or another.”
