____________ FILED July 24, 2024 No. 22-60008 Lyle W. Cayce ____________ Clerk Consumers’ Research; Cause Based Commerce, Incorporated; Kersten Conway; Suzanne Bettac; Robert Kull; Kwang Ja Kerby; Tom Kirby; Joseph Bayly; Jeremy Roth; Deanna Roth; Lynn Gibbs; Paul Gibbs; Rhonda Thomas,

Petitioners,

versus Federal Communications Commission; United States of America,

Respondents. ______________________________

Petition for Review from the Federal Communications Commission Agency No. 96-45 ______________________________

ON PETITION FOR REHEARING EN BANC No. 22-60008

Before Richman, Chief Judge, and Jones, Smith, Stewart, Elrod, Southwick, Haynes, Graves, Higginson, Willett, Ho, Duncan, Engelhardt, Oldham, Wilson, and Douglas, Circuit Judges.* Andrew S. Oldham, Circuit Judge, joined by Jones, Smith, Elrod, Willett, Ho, Duncan, Engelhardt, and Wilson, Circuit Judges: In the Telecommunications Act of 1996, Congress delegated its taxing power to the Federal Communications Commission. FCC then subdelegated the taxing power to a private corporation. That private corporation, in turn, relied on for-profit telecommunications companies to determine how much American citizens would be forced to pay for the “universal service” tax that appears on cell phone bills across the Nation. We hold this misbegotten tax violates Article I, § 1 of the Constitution. I. A. Congress has long “pursued a policy of providing ‘universal’ [telecommunications] service to all residents and businesses in the United States.” Ronald J. Krotoszynski, Jr., Reconsidering the Nondelegation Doctrine: Universal Service, the Power to Tax, and the Ratification Doctrine, 80 Ind. L.J. 239, 279 (2005). For half a century Congress pursued this policy through a complicated cross-subsidy regime. Back when the old AT&T was a regulated monopoly, Congress allowed it to charge supra-competitive rates to urban customers in exchange for requiring it to provide services it might not otherwise provide to high-cost rural customers. But “[f]or obvious reasons, this system of implicit subsidies can work well only under regulated

_____________________ * Judge Ramirez joined the court after this case was submitted and did not participate in the decision.

2 No. 22-60008

conditions. In a competitive environment, a carrier that tries to subsidize below-cost rates to rural customers with above-cost rates to urban customers is vulnerable to a competitor that offers at-cost rates to urban customers.” Tex. Off. of Pub. Util. Couns. v. FCC (“TOPUC I”), 183 F.3d 393, 406 (5th Cir. 1999). So when Congress deregulated AT&T and other telecommunications companies, it had to abandon the old way of pursuing universal service. Congress’s new way is 47 U.S.C. § 254. Section 254 authorizes FCC to establish “specific, predictable, and sufficient . . . mechanisms to preserve and advance universal service.” Id. § 254(b)(5). Pursuant to this grant of authority, FCC levies “contributions” to a Universal Service Fund (“USF”) from telecommunications carriers, id. § 254(b)(4), and it distributes the monies raised to people, entities, and projects to expand and advance telecommunications services. FCC regulations expressly permit carriers to pass these “contributions” through to their customers, see 47 C.F.R. § 54.712(a), and the overwhelming majority of carriers do so, see FCC,