The U.S. Supreme Court on Wednesday signaled it is unlikely to upend the federal E-rate program for school internet connections, even as some conservative justices showed sympathy for the legal doctrine that challengers are relying on to attack the E-rate’s funding structure as an unconstitutional tax.
“I am quite concerned about the effects of a decision in your favor on the grounds that you have been pressing,” Justice Samuel A. Alito Jr. told the lawyer arguing for striking down the funding structure of the $9 billion Universal Service Fund. It includes the $4 billion E-rate program that subsidizes telephone service, internet, and related projects in public and private schools. The USF also funds telecom services for rural hospitals, remote communities, and some low-income households.
The case is being watched closely by school groups as a serious threat to the E-rate program.
Alito is a conservative who has previously supported reinvigorating the “nondelegation doctrine,” which asserts that Congress may not delegate significant policy judgments to an executive agency like the Federal Communications Commission, which oversees the Universal Service Fund.
During the nearly three hours of arguments on March 26 in Federal Communications Commission v. Consumers’ Research, Alito expressed concerns about “pretty damning” Government Accountability Office reports of fraud in universal service programs. But he later questioned the broader impact of a sweeping decision undoing the program.
R. Trent McCotter, the lawyer for Consumers’ Research, a Washington-based advocacy group that is leading the challenge to the funding structure, said that “Congress would have an opportunity to take the reins and decide, what do we really want universal service to be?”
The challengers also take issue with the way the FCC, under the Telecommunications Act of 1996, has “subdelegated” the administration of the program to a private organization, the Universal Service Administrative Co. USAC makes quarterly recommendations to the FCC for how much telecommunications companies must contribute to the fund.
The challengers also argue that the FCC rubber stamps the recommendations of USAC, which they contend is dominated by self-interested telecom providers, and the companies pass those required contributions on to their customers, effectively making the structure a tax with no congressional limits.
“Neither the executive, nor private parties, gets to set tax rates,” McCotter said.
1996 statute’s language ‘leaps out at you,’ Kagan says
The court’s three most liberal members, Justices Sonia Sotomayor, Elena Kagan, and Ketanji Brown Jackson, were the most skeptical to the challenge.
Kagan repeated several times that the Universal Service Fund was providing “essential” telecommunications services to education as well as to rural consumers, another key component of the fund.
The text of the 1996 act “leaps out at you,” she said, citing such phrases as “substantial majority of residential customers"; “essential to education, public health, and public safety"; and “available at reasonable and affordable rates.”
Jackson told McCotter that embracing his broad view of nondelegation principles runs the risk that “we judges would be overriding popular” programs enacted by Congress.
Justice Neil M. Gorsuch appeared most sympathetic to the challenge. He repeatedly expressed concerns about the scope and costs of both the current program and potential expansions of it.
The FCC has interpreted the E-rate program “to mean that it can provide mobile Wi-Fi hotspots for off-premises use and in school buses, right?” he said. “Could the FCC use the program to give everybody a mobile hotspot?,” he asked, or even just every “library patron”?
Acting U.S. Solicitor General Sarah M. Harris, representing the FCC and the Trump administration, acknowledged that school bus WiFi and similar projects have been approved, but she said there are cost restraints so that any major new additions to the program would not interfere with “reasonable and affordable rates for universal services.”
Gorsuch even asked, “How about everyone gets a Starlink account,” referring to a satellite-based communications service that is a subsidiary of Elon Musk’s SpaceX.
“I’m not saying everyone in America is getting a Starlink account,” Harris said, suggesting that might go too far.
Justice Amy Coney Barrett asked about a more basic service.
“Could universal service include having the FCC provide every American with a cellphone and a cellphone plan?” she asked.
Harris said “there would be questions” about whether that would be within the bounds of the program.
Later, though, Barrett appeared skeptical of McCotter’s notion that all Congress might need to do to cure the unconstitutional delegation would be to set a limit on the Universal Service Fund, even if it were a huge number, such as $3 trillion.
“That seems a little bit hollow,” Barrett said. “Kind of seems like a meaningless exercise.”
Justice Brett M. Kavanaugh also appeared unconvinced that requiring Congress to set a dollar limit on the program would accomplish anything different from the current statute’s requirement for “sufficient” funding of the program.
“‘Sufficient’ is not good enough but trillion dollar [limit] is?” Kavanaugh told McCotter. “I think a lot of people would say that doesn’t make a lot of sense.”
Paul D. Clement, a former U.S. solicitor general under President George W. Bush, argued on behalf of several private parties supporting the Universal Service Fund, including the Schools, Health, and Libraries Broadband Coalition.
He said there were “massive reliance interests” in the current setup and undoing the funding structure would have “disastrous effects … for all the various beneficiaries of the program.”
“And so, start in rural Alaska, which is very dependent on this program,” Clement said. “Talk about Native American reservations, where people are dependent on this program, both because of the rule and because they’re low income. Talk about all the schools and libraries that benefit from this program. Talk about all the rural health providers.”
“You have very definitive guardrails on the system and huge beneficiaries,” he said.
A decision in the case is expected by late June or early July.
