Background
The Federal Communications Commission uses the Universal Service Fund to subsidize communications services in rural and low-income areas and for schools, libraries, and rural health-care providers. The FCC calculates a quarterly contribution factor that determines how much telecommunications carriers must pay into the fund, relying on financial projections prepared by the Universal Service Administrative Company, a private nonprofit corporation known as USAC.
For the fourth quarter of 2025, the FCC largely adopted USAC’s projections and approved a contribution factor of 38.1%. Consumers’ Research, Cause Based Commerce, and several individual consumers petitioned for review. Among other arguments, they contended that the FCC had established USAC without the specific congressional authorization required by the Government Corporation Control Act.
The Court’s Holding
The Fifth Circuit held that the FCC violated the Government Corporation Control Act by establishing USAC to act as an agency or instrumentality in administering the Universal Service Fund without a federal law specifically authorizing that action. USAC was created at the FCC’s direction, performs the fund’s day-to-day administration, and supplies the projections used to calculate carriers’ required contributions.
The court rejected arguments that the FCC’s general ancillary authority, Congress’s authorization for NECA to administer the Lifeline program, or Congress’s later use of USAC for two temporary pandemic programs supplied or ratified the required authorization. Because the FCC relied on unlawfully established USAC in setting the fourth-quarter 2025 contribution factor, the court granted the petition, vacated the factor, and remanded to the FCC. It did not reach the petitioners’ constitutional or other Administrative Procedure Act arguments.
Key Takeaways
- The Government Corporation Control Act requires specific congressional authorization before a federal agency may establish a corporation to act as an agency or instrumentality.
- The FCC’s broad authority to implement universal-service policy did not specifically authorize it to create USAC as permanent administrator of the Universal Service Fund.
- The petition was timely because each contribution factor reapplied the FCC’s earlier decision to establish and rely on USAC, restarting the Hobbs Act’s 60-day review period.
- Vacatur, rather than remand without vacatur, was warranted because USAC’s projections underpinned the challenged contribution factor and the defect could not be corrected while retaining that agency action.
Why It Matters
The decision invalidates the fourth-quarter 2025 contribution factor on statutory grounds and calls into question the FCC’s ability to continue relying on USAC under the existing legal structure. It also illustrates that an agency’s general authority to implement a federal program does not necessarily satisfy a separate statute requiring specific authorization to create a corporate administrator.
The court left unresolved the petitioners’ challenges under the nondelegation doctrine, the Appointments Clause, and other provisions of the Administrative Procedure Act.