FCC v. Consumers' Research, Docket No. 24-354

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The Supreme Court dug into a tricky question about who gets to set fees on phone and internet companies to pay for universal service programs. At issue was whether Congress handed too much lawmaking power to the Federal Communications Commission, and then whether the FCC handed too much of its power to a private group that crunches the numbers. Justice Kagan, writing for the Court’s majority, said Congress gave clear instructions on how to calculate those fees and that the FCC still calls the final shots. A few justices disagreed, but the Court rejected the idea that separate steps of delegation added up to an unconstitutional hand-off of power.

Summary of the Case

Congress's 1996 amendments to the Communications Act require every interstate telecommunications carrier to contribute to a Universal Service Fund (USF). This fund subsidizes basic phone and broadband service for low-income consumers, high-cost rural areas, schools, libraries, and rural hospitals. Each quarter, the FCC sets a "contribution factor" - the percentage of carriers' projected revenues to be paid into the USF. In December 2021, the FCC set this factor at 25.2 percent for the first quarter of 2022.

Consumers' Research (representing a carrier, a non-profit, and individual consumers) challenged this system, arguing it violates constitutional principles in two ways: first, that Congress improperly delegated its taxing power to the FCC without clear guidance, and second, that the FCC wrongfully passed that power to a private entity, the Universal Service Administrative Company. The Fifth Circuit agreed with these challenges, ruling the framework unconstitutionally gives legislative power to both the Executive Branch and private actors.

Opinion of the Court

Justice Kagan, writing for the majority (joined by Chief Justice Roberts and Justices Sotomayor, Kavanaugh, Barrett, and Jackson), reversed the Fifth Circuit's decision.

The Court found that Congress provided adequate guidance for the FCC. The law clearly defines universal-service policy, specifies who benefits (rural/high-cost areas, low-income consumers, schools/libraries, rural hospitals), and details what services should be funded (those essential to education/public health/safety, widely subscribed, and affordable). The term "sufficient" in the law imposes both minimum and maximum limits on revenue collection.

Regarding the use of a private administrator, the Court ruled this doesn't violate constitutional principles because the FCC maintains final control - it appoints the administrator's board, approves its budget, and reviews all revenue and expense projections before finalizing the contribution factor.

The Court also rejected the Fifth Circuit's novel "double-layer" theory, noting that public and private delegations involve different constitutional concerns and don't compound to exceed permissible bounds.

Separate Opinions

Justice Kavanaugh, while concurring with the majority, elaborated on the historical and textual foundations of the "intelligible-principle" test. He explained how Congress may delegate detailed administration to the Executive Branch but expressed concerns about delegations to independent agencies.

Justice Jackson, also concurring, questioned whether the private-nondelegation doctrine (which limits delegation to private entities) has clear textual or historical support, suggesting it should be applied cautiously.

Dissenting Opinions

Justice Gorsuch (joined by Justices Thomas and Alito) dissented, arguing that the universal-service "contributions" are actually taxes, and that Congress delegated its taxing power without prescribing any rate or cap - an abdication of legislative responsibility. He contended that the law's qualitative constraints ("evolving service," "sufficient," and various competing "factors" and "principles") don't provide meaningful guidance to the FCC. He criticized the majority's interpretation as inconsistent with the law's language and warned about the separation-of-powers consequences of allowing an agency unfettered taxing authority.

How the FCC's Universal Service Fund Authority Balances Agency Discretion with Congressional Guidance

The 1996 Telecommunications Act restructures universal service funding by defining four specific beneficiary groups: rural and high-cost areas, low-income consumers, schools and libraries, and rural hospitals. The law directs the FCC to subsidize services that meet three key criteria: they must be "essential to education, public health, or safety," "subscribed to by a substantial majority of residential customers," and "affordable."

To guide funding decisions, Congress provided six mandatory principles and authorized additional principles consistent with the Act. To finance these programs, Congress empowered the FCC to require interstate telecommunications carriers to contribute "sufficient" revenue to "preserve and advance" universal service.

The FCC works with a private nonprofit—the Universal Service Administrative Company—to project fund disbursements and carrier revenues each quarter. While the FCC reviews and may revise these projections before setting the final "contribution factor" (the percentage of carrier revenues owed), the use of qualitative terms like "sufficient" and "evolving level," along with multiple factors and principles, gives the FCC considerable discretion. This broad authority is precisely what sparked the constitutional debate in this case.