The U.S. Supreme Court on March 26 considered whether it should uphold a lower court ruling that invalidated an $8-billion-a-year broadband subsidy for rural and low-income regions.

The case is actually two cases. One is Federal Communications Commission v. Consumers’ Research. The other is Schools, Health & Libraries Broadband Coalition v. Consumers’ Research.

On July 24, 2024, the U.S. Court of Appeals for the Fifth Circuit held that the Universal Service Fund was unconstitutional because it improperly took the taxing power away from Congress.

The fund was authorized by Congress in the Telecommunications Act of 1996 to provide subsidies for telecommunications services, including internet service, according to the Federal Communications Commission (FCC). The fund provides subsidies for telephone companies serving high-cost regions, low-income customers, rural health care providers, schools, and libraries.

The program is supported by a tax on telephone service and is administered by the Universal Service Administrative Company, a private company created by the FCC. The tax is collected through line-item charges that appear on monthly telephone bills.

The Fifth Circuit held that the system used to support the fund violates the nondelegation doctrine, which states that Congress may not delegate its legislative powers to other entities, including private organizations and administrative agencies.

In other words, the court found that Congress had given too much of its authority to the FCC and that the agency had yielded too much of its authority to the Universal Service Administrative Company.

On behalf of the FCC, then-Solicitor General Elizabeth Prelogar argued in its petition that the Fifth Circuit’s ruling should be overturned.

“[The decision] invalidates the system that the Commission has used for a quarter century to implement an important Act of Congress,” she wrote. “If left in place, the decision will upend the universal service programs, to the detriment of millions of consumers nationwide.”

The respondent, Consumers’ Research, a nonprofit organization based in Vienna, Virginia, filed a brief arguing in favor of the Fifth Circuit’s decision.

After describing the Universal Service Fund as “a multibillion-dollar social welfare program with an appropriation from federal revenues,” the group stated that it was a problem that “Congress imposed no formula, ceiling, or other meaningful restrictions on how much money can be raised for the [fund].”

Although Congress created a body of universal service “principles … they are so amorphous and non-binding that courts—adopting the FCC’s own language—have long labeled them ‘aspirational only,’” the group stated.

Congress gave the FCC power “to redefine ‘universal service’ and ‘universal service principles’ as often as it wishes, giving the agency even broader authority to raise billions of dollars in taxes for a program designed to benefit the country more broadly,” it stated.

Acting Solicitor General Sarah Harris told the justices during oral argument on March 26 that Section 254 of the Telecommunications Act was not an example of “delegation running riot” because Congress spelled out specifically what the FCC had to do.

For example, Congress directed the FCC on “what policy to follow to give all Americans access to basic telecommunications services at reasonable charges,” and told the agency to do it “by charging carriers a fee, then reimbursing carriers that serve universal service programs,” she said.

According to the attorney for Consumers’ Research, Trent McCotter, “this case is about taxation without representation.”

“Every year Americans pay billions for the Universal Service Fund,” he said. “The rate has increased tenfold. The amount collected is now 20 times the size of the FCC’s entire annual budget.”

Justice Neil Gorsuch weighed in, saying the tax in this case is “unlike any other tax” that the Supreme Court has ever approved.

Paul Clement, attorney for the Schools, Health & Libraries Broadband Coalition, which represents telecommunications companies, said the 1996 law “is fully consistent” with all of the Supreme Court’s precedents.

“This is simply not the right vehicle for this court to revamp its nondelegation doctrine,” he said.

Justice Elena Kagan said the subsidy program is not open-ended and is constrained by Congress.

“There are some real standards in this program,” she said.

“The FCC can’t do anything by way of this program that is not basically geared towards getting those who live in very rural areas or who are very low-income … access to services that all the rest of us have. That’s the nature of the program, and that’s the limit of the program.”

The Supreme Court is expected to rule on the case by the end of June.

This article by Matthew Vadum appeared March 27, 2025, in The Epoch Times.