The U.S. Supreme Court on Friday spared the federal E-rate program for school internet connections from dismantling or major disruption by ruling against a lawsuit that challenged its funding structure.
In a 6-3 decision in Federal Communications Commission v. Consumers’ Research, the high court upheld the funding mechanism for the $9 billion Universal Service Fund, which distributes as much as $4 billion annually under the E-rate program to connect schools and libraries to the internet.
“Under our nondelegation precedents, Congress sufficiently guided and constrained the discretion that it lodged with the FCC to implement the universal-service contribution scheme,” Justice Elena Kagan wrote for the majority. “And the FCC, in its turn, has retained all decision-making authority within that sphere, relying on the [Universal Service] Administrative Company only for non-binding advice. Nothing in those arrangements, either separately or together, violates the Constitution.”
Her opinion was joined by Chief Justice John G. Roberts Jr. and Justices Sonia Sotomayor, Brett M. Kavanaugh, Amy Coney Barrett, and Ketanji Brown Jackson.
Justice Neil M. Gorsuch dissented, joined by Justices Clarence Thomas and Samuel A. Alito Jr. Gorsuch said the decision “defies the Constitution’s command that Congress ‘may not transfer to another branch ‘powers which are strictly and exclusively legislative.’”
A ‘misbegotten’ and unconstitutional tax, lower court ruled
Consumers’ Research, an advocacy group based in Vienna, Va., challenged the funding mechanism in several lawsuits around the country, arguing that the funding mechanism is an unconstitutional “delegation” of taxing power to the Federal Communications Commission. And the FCC, in turn, has “sub-delegated” the actual authority to set rates to the private Universal Service Administrative Co., the private entity that collects mandatory contributions from all telecom providers, the challengers argued. The telecom companies pass those costs along to their customers as fees on their monthly bills.
In 2024, the full U.S. Court of Appeals for the 5th Circuit, in New Orleans, struck down the funding mechanism as a “misbegotten” and unconstitutional tax on consumers.
The challenge to the funding structure is based on an obscure legal concept, embraced by many conservatives, called the nondelegation doctrine. It means Congress may not delegate significant policy judgments to an executive agency like the FCC.
Consumers’ Research argued to the court that the power to tax lies with Congress and that the mandatory contributions to the Universal Service Fund passed along to consumers are an unauthorized tax.
Two U.S. solicitors general defended the funding structure on behalf of the FCC, both under President Joe Biden’s administration and when the case was argued in March after President Donald Trump had returned to the White House.
The 5th Circuit decision was a cause for alarm in the education community.
The Schools, Health, and Libraries Broadband Coalition also defended the structure in the Supreme Court. The coalition, representing individual school districts and public libraries, industry providers, and other members, said in a brief that just in the last two years, more than 106,000 schools, public and private, received E-rate funding, benefiting more than 54 million students.
The coalition argued that Congress made the key policy decision directing the FCC on how to run the Universal Service Fund. It also argued that the 5th Circuit court had misunderstood the scope of the USAC’s duties and that the FCC retains oversight over actions such as approving mandatory contribution amounts for the fund.
The coalition on Friday called the decision a significant victory for “efforts to close the digital divide.”
“This decision protects the broadband connections that students, veterans, job seekers, healthcare providers, and rural families rely on every day,” said Joseph Wender, the executive director of the coalition.
Some 20 other education groups, led by AASA, the School Superintendents Association, filed a friend-of-the-court brief that said the E-rate program provided $3.26 billion in discounts to schools in 2024, with the schools having to shoulder only some $970 million for projects.
The school groups’ brief said a decision upholding the 5th Circuit “would devastate schools and libraries and the students and communities they serve.”
Another coalition that includes AASA and other leading education groups, known as EdLiNC, responded to the decision by saying it provided “much-needed certainty and stability for schools, libraries, and the students and patrons they serve. At a time when robust internet access is more essential than ever for teaching, learning, and workforce development, the Court has safeguarded a lifeline that communities across the country depend on.”
At oral argument in the case in March, several conservative justices appeared open to the nondelegation doctrine arguments of the challengers, and some expressed concerns about government reports detailing fraud in a number of Universal Service Fund programs. But in general, the justices appeared hesitant to upend the program.
A ‘connected country’ and Wi-Fi on school buses
Kagan, in the majority opinion, said there was “no impermissible transfer of authority” between Congress and the FCC or between the FCC and the Universal Service Administrative Co.
She said that the court’s precedents do not prevent the FCC from carrying out goals approved by Congress of universal service for telecommunications markets that otherwise might be underserved by carriers.
And neither do they prevent the FCC from obtaining from USAC “in projecting revenues and expenses, so that carriers pay the needed amount.”
“For nearly three decades, the work of Congress and the Commission in establishing universal-service programs has led to a more fully connected country,” Kagan said. “And it has done so while leaving fully intact the separation of powers integral to our Constitution.”
Kavanaugh and Jackson each wrote short concurrences.
Gorsuch, in his dissent, discussed an example of what he called “uncapped” aspects of the universal service program that he mentioned at oral argument: a 2024 announcement by the FCC that it would begin funding “Wi-Fi hotspots and services to be used off-premises by students, school staff, and library patrons.”
He suggested that the FCC might even approve “take-home hotspots to anyone with a library card” or “take-home Starlink devices,” a reference to a satellite communications service by a company founded by Elon Musk.
He suggested the legislative provisions that would authorize those applications of universal service might still be subject to challenge under nondelegation principles because the majority was unwilling to “bless such a lavish delegation of taxing authority.”
