A federal appeals court has upheld the constitutionality of the way the Federal Communications Commission hands out billions of dollars in subsidies for broadband and other advanced communications services.

At issue were the Universal Service Fund (USF) and the FCC’s use of a private company, the Universal Service Administrative Co. (USAC), to administer the distribution of those funds to subsidize broadband and phone service to high-cost areas and low-income households nationwide.

Suing the FCC were phone provider Consumers’ Research and a group of its subscribers.

In an opinion released Friday (March 24) rejecting a challenge to that authority, the 5th U.S. Circuit Court of Appeals concluded that the FCC did sufficient due diligence on USAC proposals, which the agency independently considers based on data it collects and other relevant information, and that the regulator was sufficiently in charge not to run afoul of the law.

The challenge was principally based on the assertion that USAC was not “sufficiently subordinate” to the FCC to pass constitutional muster.

The 5th Circuit pointed out that federal agencies are allowed to “reasonably condition” their actions on “determinations by outside parties.” In the case of the USF and USAC, the conditions were reasonable and thus USAC was properly subordinate to the FCC.

“To be clear,” the court said, “agencies may delegate to private entities so long as the entities function subordinately to the federal agency and the agency has authority and surveillance” over its activities.

The USAC makes recommendations to the FCC, which are not binding until the commission signs off on them, the court pointed out. The FCC also allows telecoms to challenge USAC proposals directly to the regulator and “often” grants relief, the court said. The FCC also dictates the amount of the contribution telecoms have to make to the fund. 

All of that shows the FCC has sufficient control of the process for the delegation not to run afoul of the private nondelegation doctrine (under Article I of the Constiution) that prevents the delegation of or regulatory oversight to private entities, the court said.

Andrew Schwartzman represented the Benton Institute for Broadband & Society, which filed a brief in the case in support of the FCC. 

“Coming from one of the more conservative courts in the country, this decision is a ringing ratification of the system Congress established to ensure that all Americans have affordable access to telecommunications service and advanced services like broadband,” he said after the decision was issued. “This should not come as a surprise but once the USF was subjected to a legal challenge, the Benton Institute for Broadband & Society joined with its allies to defend this critical mechanism for ensuring universal broadband service.” 

"NaLA is pleased with this decision [because] the USF and Lifeline in particular provides targeted support to low-income Americans who struggle to afford essential communications services necessary to participate in our digital society," said David Dorwart, chairman of the National Lifeline Association. "NaLA is proud to serve these consumers and ensure they can connect to family, community, jobs, education, telehealth and other service using our members’ mobile voice and broadband solutions."

"We are pleased to see the Fifth Circuit uphold the FCC's authority to administer the Universal Service Fund," said Angie Kronenberg, presdient of INCOMPAS, whose members include edge providers rooting for as universal service as possible. "This is a big win for the FCC and a big win for the millions of Americans who rely on this program. While we are delighted at today's result, we believe reforms to the USF are necessary to ensure this critical service can continue to exist."■

NCTA: The Internet & Television Association has nominated Charter Communications VP, regulatory affairs Christine Sanquist to the Universal Service Administration Co., which oversees billions of dollars in the agency's Universal Service Fund broadband subsidies.

By law, the USAC's board of directors has to have a representative from a cable operator, a post currently held by Comcast VP, regulatory affairs Beth Choroser, whose term expires at the end of this year.

Sanquist's duties at Charter include dealing with the USAC and other federal subsidy programs supporting broadband and voice. Those programs include the Rural Digital Opportunity Fund, the Affordable Connectivity Program, the Rural Health Care program, and the E-Rate program, which covers rural, low-income and educational subsidies.

Before joining Charter, Sanquist was an associate in the Communications, Internet and Technology group at law firm Jenner & Block LLP.

She also has past history with the FCC, beginning her career there as an intern in the office of commissioner (and later chair) Mignon Clyburn and then as an attorney in the Wireline Competition Bureau. ▪️

The FCC has take the first step toward providing more accurate data on where broadband is, and isn't.

The commission has been under pressure from both sides of the aisle in Congress to improve data collection, and FCC chair Ajit Pai has conceded the data has to get better, particularly so that Universal Service Fund broadband subsidies can be targeted to where they are most needed, furthering his goal of weeding out waste, as well as fraud and abuse, in subsidy programs.

The commission voted unanimously, with two partial dissents by the Democrats, on a Report & Order Thursday (Aug. 1) to create a new Digital Opportunity Data Collection regime based on geospatial broadband coverage maps provided by fixed Internet service providers--it does not apply to mobile broadband, at least not yet.

The Universal Service Administrative Company (USAC) will be charged with the new data collection, and will have to create a portal for collecting the carrier data and allow for crowdsourced challenges to the maps.

Related: Free Press Optimistic About FCC Broadband Data Update

For the time being, the FCC will also continue to collect form 477 data based on census blocks, but at the same time will require fixed broadband suppliers to also provide coverage maps based on shapefiles (in this case the shape is a polygon), which NCTA-The Internet & Television Association had proposed.

NCTA had also suggested retaining the census block-based 477 reporting in the interim so the FCC could still do an apples-to-apples comparison of deployment trends "not associated with the shift in reporting methods."

“Today’s FCC action to improve its broadband data collection practices is a significant victory for consumers that will meaningfully improve the accuracy of broadband maps and enable the Commission to more efficiently target resources to areas that lack broadband access," said NCTA. "Our industry is committed to quickly moving forward with providing the Commission the more granular data and will continue to work with policymakers on solutions that will connect all Americans to the internet.”

USTelecom had wanted the FCC to implement a database of broadband-addressable locations, or what USTelecom called a “Broadband Serviceable Location Fabric” overlay at the same time so the FCC could better pinpoint how many and exactly where service wasn't available. The FCC likes the fabric idea, but said it did not want to wait until that database was developed and its data set of structures and locations served and unserved was available before it started collecting the polygonal shapefile data.

“The Rural Digital Opportunity Fund is a once in a generation opportunity to expand broadband service, and today the FCC made clear it should be governed by the best and most granular broadband availability maps we can deploy," said USTelecom President Jonathan Spalter. "We all know we have to get this right, and that is why we are excited to work with the Commission in nailing down the critical next steps and sequencing to ensure broadband support can be directed to rural communities and enterprises as quickly, efficiently, accurately, and sustainably as possible.”

The FCC will also establish a mechanism for the public to crowdsource the accuracy of the maps. NCTA has said that should only be a supplement to the process. "[T]he Commission will need to determine under what circumstances the results of such testing would be relevant in the proposed crowdsourcing process," NCTA blogged before the decision.

The FCC is asking about how to implement USTelecom's overlay "fabric." NCTA said that is worthy of consideration, but that the "suggested benefit comes at a significant financial and administrative cost to the Commission and providers and there are numerous questions about whether, and how, it will work in the real world. 

In addition to the R&O, which is a final decision, the FCC approve a Further Notice of Proposed Rulemaking seeking comment on whether it should sunset the for, 477 collection, how it can apply the regime to mobile, and technical standards for carriers that might help them supply more precise data. 

NCTA is advising the FCC not to dramatically expand the data collection, saying that the FCC "shouldn't let the mythical perfect in mapping be the enemy of the very good in identifying the unserved."

Chairman Pai framed the new broadband mapping effort as "identifying the declining the number of people without access" by going beyond the census-block level reporting instituted by his predecessors. He said a key is to no longer identify a census block as served if only one person in that block is served. He said it would paint the clearest picture yet of who has broadband and who doesn't.

"[T]oday, we get rid of the Christmas tree and stop driving the Pinto. We’ve heard the message loud and clear that these data sets are no longer good enough," said commissioner Brendan Carr. He said no nibbling around the edges would do and the FCC was starting over. "It is time to kick the Christmas tree to the curb," he said. 

Commissioner Jessica Rosenworcel agreed: "today’s effort to improve the data collection that informs our nation’s broadband maps comes not a moment too soon. Bring it. We need to fix this mess." Rosenworcel dissented in part, however, because of various flaws she saw in the item. One was that the item did not address the existing National Broadband Map. Another was giving USAC the responsibility of overseeing the maps.

But she applauded the effort as a start, and for its use of crowdsourcing.

Commissioner Michael O'Rielly also had problems with USAC overseeing the collection given its work load and his longstanding concerns with USAC's competency and transparency--he has proposed outsourcing USAC's functions.

Commissioner Geoffrey Starks was generally supportive, saying it was a "nudge" in the right direction, but also had issues. “I believe that the order and NPRM, by adopting shapefile reporting and by proposing to create a broadband location fabric, asks many of the right questions as it begins the process of establishing the Digital Opportunity Data Collection. However, while the item makes a few relatively minor fixes to the Commission’s Form 477 data collection, it does not address the most glaring problems with it.”

“The FCC has taken a good first step toward improving the accuracy of its broadband-deployment data," said Free Press research director S. Derek Turner. "The new Digital Opportunity Data Collection process should address the most common complaint about past agency mapping efforts: the potential for overstating deployment in certain rural areas. Free Press has long called for better broadband deployment data from the FCC, and we’re cautiously optimistic that today’s reforms will enhance accuracy while maintaining the public’s full access to this critical information."

"We’re pleased to see the FCC today take a step forward on improving the accuracy of broadband mapping," a Microsoft spokesperson said. "The measures proposed around granularity, leveraging crowdsourcing to obtain additional data including usage information and related efforts to improve accuracy closely mirror our suggestions. If fully enacted, this should provide a more accurate view of where coverage is still lagging and enable the FCC to provide funds that ensure the areas that most need support are receiving it." But the company also says there is more work to be done.

"[W]e encourage the FCC to take the opportunity to improve Form 477 [the current broadband data collection framework]. It’s important that the most accurate data methodology is used to distribute funds and assess progress. We encourage the FCC to act to bring this into alignment, and Congress to continue its work on proposedlegislation that also addresses these important issues. "

“ACA Connects has long agreed with the FCC and many Members of Congress that the FCC’s current broadband deployment data collection needs to be improved by making it more granular and accurate," said ACA Connects President Matt Polka. "At the same time, any new collection requirements should not swamp the many hundreds of small broadband providers that must file with new obligations they are simply not equipped to handle. Based on those objectives, ACA Connects believes today’s action by the FCC, requiring broadband providers to file geospatial coverage data and enhancing this information with crowdsourcing, is a reasonable step forward. That said, the FCC now needs to get the details of the collection correct, including by ensuring smaller providers can easily comply.”