5th Circuit Presses FCC, Consumers' Research on USF Funding Mechanism

Judges on the 5th U.S. Circuit Court of Appeals questioned the FCC on how the commission structures its Universal Service Fund and oversees the role the Universal Service Administrative Co. plays in determining quarterly contribution factors during an en banc hearing Tuesday. Some pressed Consumers' Research on how the private nondelegation doctrine applied to its challenge of the Q1 2022 USF contribution factor (see 2309010060).

Judge Stephen Higginson pressed both sides on whether USAC’s calculations are ministerial or the result of a private entity making determinations itself. “There is no record cited to show that the FCC is actually reviewing this,” said Consumers’ Research attorney Trent McCotter. The Supreme Court “has long held that Congress must clearly delineate the boundaries of power delegated to an executive agency,” McCotter said, adding there’s a “unique dual layer delegation where the FCC can redefine universal service and add new universal service principles.” FCC Deputy General Counsel Jacob Lewis disagreed, saying it's “a general presumption that an agency can delegate ministerial" tasks.

One judge pressed the FCC on how universal service is designed and the fund is structured. “It looked like to me the USAC group is some of the communications companies, but it's also a lot of the people who stand to benefit from the subsidy,” the judge said: “So there's no incentive to save money or redirect the money unless in a more efficient way.” Lewis noted Congress gave the FCC authority to set up a mechanism to support universal service and there's "no blank check there because that determination is made in light of the multiple, multifarious FCC regulations that describe the boundaries of what services are eligible for universal service."

“The need for oversight ought to be just as great” as it is with other areas, one judge said, asking the FCC which staff oversees USAC: "You can't even identify a particular group within FCC that supervises this behemoth. It's very difficult to see how any supervision is actually occurring.” Lewis noted the Office of Managing Director and Wireline Bureau are “dedicated to this precise process” and responsible for reviewing USAC’s projections. Lewis also noted FCC staff does an annual audit as required by law to "take corrective action if the audit uncovers an overpayment or some other ineligible payment."

Another judge pressed the FCC on whether universal service will be achieved and, if so, when. Otherwise, it’s an “unachievable goal” that will “just go on forever and there’s no real impulse to actually achieve it,” the judge said. Lewis disagreed. “I don’t think Congress understood this to be a program that had an end,” he said, saying efforts through universal service programs to reach remote areas and tribal lands have been a “very difficult task” that the FCC and Congress have “been at for many years.”

"If the court were to rule either on the nondelegation of the private delegate grounds, there would be an enormously disruptive impact on the operation of the program," Lewis said. It would "take an enormous amount of time in any interim," he said, and "all of the carriers and consumers that have relied on this program for decades would find that support withdrawn or disappearing."