Supreme Court Takes a Close Look at USF Contributions

It was to be one hour of oral arguments about the Federal Communications Commission’s (FCC’s) Universal Service Fund (USF) program, considering whether Congress delegated too much of its authority when it created the program in the Telecommunications Act of 1996. Instead, U.S. Supreme Court justices spent more than two and a half hours peppering attorneys with questions about the nature of USF, whether the statute fails to set limits on the amount of funding it can collect and whether those fees are, in fact, taxes on the American public that Congress never debated. “At its heart, this case is about taxation without representation. Every year, Americans pay billions for the Universal Service Fund. The rate has increased 10-fold, and the rate is now 20 times the size of the FCC’s entire annual budget,” said R. Trent McCotter, attorney representing Consumers’ Research. During oral arguments, McCotter also claimed that Section 254 of the 1996 Telecommunications Act places no limit on the amount the FCC could collect in fees, which currently total about $9 billion annually. The act specifies that telecommunications carriers must pay a percentage of their interstate revenues into the fund. The contribution rate is currently more than a third of those revenues. Carriers then pass that expense on to consumers. During questioning, Supreme Court Justice Neil Gorsuch said his belief that the USF contribution system “is so clearly a tax.” But he was open to arguments that the system was constitutional regardless of whether it was a tax or a fee. Acting Solicitor General Sarah Harris referred repeatedly to case law, especially the 1989 case Skinner v. Mid-America Pipeline Co., where the court has approved similar revenue-collecting systems established by federal agencies.