FCC v. Consumer Research (Nondelegation Doctrine)

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FCC v. Consumers’ Research 

The Communications Act of 1934 established the FCC and instructed it to make available to “all the people of the United States,” reliable communications services “at reasonable charges.” 47 U. S. C. §151. That objective is today known as “universal service.” The universal-service project arose from the concern that pure market mechanisms would leave some population segments—such as the poor and those in rural areas—without access to needed communications services. Under the 1934 Act, the FCC pursued universal service primarily through implicit subsidies, using its rate-regulation authority to lower costs for some consumers at the expense of others. 

Congress created a new framework of this Act in 1996. Section 254 now requires every carrier to "contribute" to the Universal Service Fund. The FCC then uses this money to pay for universal service programs. The statutory scheme designates certain beneficiaries of these subsidies--such as low-income consumers, rural areas and hospitals, schools, and libraries. It also provides details for how to determine what services should be accessible. To determine what to subsize, the FCC “shall consider the extent to which” a service is “essential to education, public health, or public safety” and has “been subscribed to by a substantial majority of residential customers.” §§254(c)(1)(A)–(B). It also must determine if a service can be provided at an affordable rate.  §254(b)(1). There are also certain principles the FCC is told to base its policies, including Section 254 also sets forth “principles” on which the FCC “shall base” its universal-service policies. §254(b). Among other things, those principles direct that all consumers, “including low-income consumers” and those in “rural” areas, should have access to quality services at affordable prices. See ibid. The FCC also may add “other principles” found both “consistent with” the Act and “necessary and appropriate for the protection of the public interest, convenience, and necessity.” §254(b)(7). To calculate how much carriers must contribute to the Fund, the FCC has devised a formula, known as the “contribution factor.” That factor is a fraction, expressed as a percentage, whose numerator is the Fund’s projected quarterly expenses (the subsidy payments it will make plus overhead) and whose denominator is contributing carriers’ total projected quarterly revenue. A carrier must pay into the Fund an amount equal to its own projected revenue multiplied by the contribution factor. §54.709(a)(3). The FCC has appointed the Universal Service Administrative Company, a private, not-for-profit corporation, as the Fund’s “permanent Administrator.” §54.701(a). The Administrator manages the Fund’s day-to-day operations and also plays a role in producing the financial projections that end up determining the contribution factor. See §§54.702, 54.709(a)(2)–(3). Each quarter, the Administrator projects the Fund’s expenses, adds up revenue estimates it receives from carriers, and submits those figures to the Commission for approval and eventual use in calculating the contribution factor. See §§54.709(a)(2)–(3). 

The FCC has appointed the Universal Service Administrative Company, a private, not-for-profit corporation, as the Fund’s “permanent Administrator.” §54.701(a). The Administrator manages the Fund’s day-to-day operations and also plays a role in producing the financial projections that end up determining the contribution factor. See §§54.702, 54.709(a)(2)–(3). In the full Fifth Circuit’s view, the combination of Congress’s delegation to the FCC and the FCC’s “subdelegation” to the Administrator violated the Constitution, even if neither delegation did so independently. 

Held: The universal-service contribution