Washington— The Supreme Court on Friday said it will consider the constitutionality of the Federal Communications Commission’s Universal Service Fund, agreeing to review a lower court decision that interfered with the funding mechanism of programs that provide communication services to rural areas, low-income communities and schools, libraries. and hospitals.
The Universal Service Fund was created by Congress in 1996 as part of an overhaul of the Communications Act of 1934, which sought to promote competition and eliminate monopolies in the telecommunications industry. Under the amended law, the FCC created a set of programs supported by the Universal Service Fund that required contributions from telecommunications providers.
The program ensures that schools, libraries, rural health care facilities and rural and low-income customers have access to telecommunications services, and the FCC uses money in these funds to subsidize telephone and broadband services.
The quarterly contribution to the fund is based on the costs that the program will incur, as well as the projected income of the telecommunications operator, a number known as the contribution factor. The company can send the contribution fee to the consumer.
In 1997, the FCC created the Universal Service Administrative Corporation, a private, not-for-profit corporation that administers the fund. The company sends bills and collects contributions from service providers, and disburses money to program beneficiaries.
At the end of 2021, the company proposed that each operator will contribute 25.2% of the interstate and international telecommunications revenue for the first quarter of November 2022. contribution mechanism, arguing that Congress has unconstitutionally delegated legislative power to the FCC, which in turn redelegated power to the Service Universal Administrative Company. He later sought review by the US Court of Appeals for the 5th Circuit.
A three-judge panel rejected the group’s claim that Congress and then the FCC had unconstitutionally authorized it.
But the full complement of judges in the 5th Circuit agreed to rehear the case and in a July decision, sided with the challengers in a 9-7 vote. It was found that when operators seek to recover fund contributions from consumers, they charge consumers a “universal service” tax that appears on their phone bills.
The power to tax is a legislative power, and a majority of the 5th Circuit found that Congress gave the FCC discretion to determine the amount of the universal service contribution. It also ruled that the FCC, “may not cede taxing powers to private entities.”
“American telecommunications consumers are subject to a multi-billion dollar tax that no one voted for. The size of the tax is de facto determined by trade groups run by industry insiders who have no accountability to the public. It depends on projections made by private constituent companies, the beneficiaries, all benefit from each tax increase,” the 5th Circuit found, adding that “the combination of delegation, subdelegation, and confusion of the USF Tax mechanism violates the Constitution.
The 5th Circuit’s decision sparked a wave of pushback from the telecom industry, which warned it would hamper efforts to close the digital divide.
The telecommunications trade group said the decision “could put at risk the availability and affordability of essential communications services for millions of rural Americans, low-income consumers, and community anchor institutions.”
Before the 5th Circuit ruled, the Supreme Court rejected two appeals by Consumer Research over decisions from the 6th and 11th Circuits that rejected its challenge to the Universal Service Fund. But after the 5th Circuit’s decision, the group asked the Supreme Court to reconsider the appeal. The court has not acted on the request.
