On July 24, 2024, the U.S. Court of Appeals for the 5th Circuit in a 9 to 7 en banc ruling of all the judges in the 5th Circuit found the Universal Service Fund (USF), as it is currently administered by the FCC, to be unconstitutional. This ruling comes in the case of Consumers’ Research et al v. Federal Communications Commission. This opinion conflicts with two other cases filed by Consumers’ Research in recent months in other U.S. Courts of Appeal where almost identical challenges to the FCC’s USF process were rejected. The ruling remands the issue back to the FCC for further consideration.
The 5th Circuit found that:
* Contributions to the Universal Service Fund by telecommunications carriers and then passed on to end users constitute a tax, not a fee.
* Congress impermissibly and unconstitutionally delegated authority to the FCC to tax.
* The FCC impermissibly delegated its authority to the Universal Service Administrative Company (USAC) which administers the USF.
* Even if both delegations of authority were permissible, the combination of both delegations exceeds constitutional limits.
Chairwoman Rosenworcel called the decision misguided and wrong and stated that the FCC will pursue all available avenues for review. We expect that the FCC will seek a stay of the 5th Circuit Order and will likely appeal the ruling to the U.S. Supreme Court. A stay of the ruling would allow the USF to continue to operate under the current processes pending the appeal to the U.S. Supreme Court. We will continue to closely watch this important issue and will provide updates as more information becomes available.
