On June 27, 2025, the U.S. Supreme Court issued a decision affirming the constitutionality of the Federal Communications Commission’s (FCC) administration of the Universal Service Fund (Fund), including the E-Rate program. The Court’s ruling preserves the FCC’s authority to collect and distribute funds aimed at ensuring affordable access to telecommunications and internet services for schools and libraries nationwide.
Background
Established under the Telecommunications Act of 1996, the Fund aims to provide affordable telecommunications services across the United States, particularly to rural, low-income, and underserved areas. The Fund supports various programs, including the E-Rate program, which helps schools and libraries receive affordable internet access and telecommunications services.
The Fund is financed through mandatory contributions from telecommunications carriers, which often pass these costs onto consumers. The FCC oversees the Fund, while the Universal Service Administrative Company (USAC), a private nonprofit entity, manages its day-to-day operations.
Previous Rulings
In recent years, several entities, led by Consumers’ Research, have contested the constitutionality of the Fund’s structure. These entities argue that Congress’ delegation of authority to the FCC to determine contribution amounts violates the nondelegation doctrine, which prohibits Congress from transferring its legislative powers without clear guidelines. Additionally, they contend that the FCC’s reliance on USAC for administering the Fund amounts to an improper delegation of governmental authority to a private entity, infringing upon the private nondelegation doctrine.
The FCC, on the other hand, maintains that the Fund represents a lawful delegation of congressional power because the Telecommunications Act provides a number of “intelligible principles” — a key factor in distinguishing permissible grants of discretion from unconstitutional delegations of power — to guide the FCC’s actions when setting fees. The FCC also emphasizes that USAC only carries out administrative tasks related to the Fund, not any policymaking power to set fees or subsidy rates, and in any event is subject to significant agency control.
The challenges have led to differing opinions in the appellate courts. The Fifth Circuit Court of Appeals ruled that the funding mechanism was unconstitutional due to excessive delegation of authority to the FCC and USAC, a private entity. Conversely, the Sixth and Eleventh Circuits upheld the Fund’s structure, finding that Section 254 of the Telecommunications Act provided clear guidance on how the FCC should regulate the Fund, thereby satisfying constitutional requirements.
Supreme Court’s Decision
Given the circuit split, the Supreme Court granted certiorari to address: (1) whether Congress violated the U.S. Constitution in the way that it delegated power to the FCC to collect Fund money; and (2) whether the FCC violated the U.S. Constitution by letting USAC make those collection decisions. In a 6-3 decision, the Court reversed the Fifth Circuit and upheld the constitutionality of the Universal Service Fund’s structure. Writing for the majority, Justice Elena Kagan concluded that the statutory delegation to the FCC and the FCC’s reliance on USAC were both constitutionally permissible.
On the first question—whether Congress unconstitutionally delegated its legislative authority—the Court held that Section 254 of the Telecommunications Act meets constitutional standards under the nondelegation doctrine. Although the statute does not specify a fixed dollar amount or contribution rate, it directs the FCC to collect only what is “sufficient” to support clearly defined universal service programs. The Court found this standard to be both meaningful and limiting, especially when combined with the statute’s detailed policy goals and criteria. These include ensuring affordable access to essential communications services for low-income individuals, rural communities, schools, libraries, and health care providers, and limiting subsidies to services that are affordable, widely subscribed to, and essential to public health, education, or safety. The Court concluded that these statutory instructions provide an adequate “intelligible principle” to guide the FCC’s discretion.
On the second question—whether the FCC violated the Constitution by relying on USAC to implement the Fund—the Court ruled that the FCC did not unlawfully delegate governmental authority to a private entity. USAC’s role, the Court explained, is limited to administrative and technical functions, such as collecting carrier revenue estimates and projecting quarterly program costs. Critically, the FCC retains final authority over all material decisions, including approval of contribution levels and calculation of the contribution factor. Because USAC operates under FCC supervision and lacks independent policymaking authority, the Court found that the arrangement complies with constitutional limits on delegating power to private actors.
In sum, the Court’s decision upholds the Universal Service Fund and preserves the FCC’s current regulatory approach. As a result, those participating in the E-Rate program can continue to use and benefit from the program.
FCC v. Consumers’ Research, 606 U.S. ___ (2025).
Note: Although the Supreme Court upheld the constitutionality of the E-Rate program’s funding structure, participation in the program may constitute acceptance of federal funds. It could trigger compliance with federal laws and regulations that would not otherwise apply. In a separate February 2025 decision, the Supreme Court allowed a False Claims Act case involving E-Rate to proceed but did not rule on whether participation in the E-Rate program constitutes acceptance of federal funds—that question remains unresolved.