1. Introduction
The Fifth Circuit held that the Federal Communications Commission violated the Government Corporation Control Act (“GCCA”) by establishing the Universal Service Administrative Company (“USAC”) without specific congressional authorization. Because the FCC relied on USAC’s projections when setting the Fourth Quarter 2025 universal-service contribution factor, the court vacated that factor and remanded the matter to the agency.
The dispute concerns the institutional machinery behind the Universal Service Fund, rather than Congress’s general authority to support nationwide telecommunications access. Under 47 U.S.C. § 254, telecommunications carriers contribute to mechanisms supporting communications services for underserved populations and institutions. The principal programs are Lifeline, High Cost, E-Rate, and Rural Health. Together, they assist low-income consumers, high-cost service areas, schools and libraries, and rural health care facilities.
The petitioners included Consumers’ Research, a consumer-education nonprofit; Cause Based Commerce, Incorporated, a telecommunications reseller that contributes directly to the Fund; and individual consumers. They challenged the FCC and the United States. The National Telecommunications Cooperative Association (“NTCA”), an intervenor, defended the agency’s position and contested the court’s statutory jurisdiction.
The central question was narrow but consequential: Does Congress’s broad authorization to administer universal service permit the FCC to create a corporation for that purpose when another statute specifically restricts agency-created corporations? The court answered no. General administrative authority, preservation of another entity’s limited historical role, and later legislation authorizing USAC’s participation in separate temporary programs did not satisfy the GCCA.
2. Background and Summary of the Opinion
The contribution factor and USAC’s role
The FCC finances universal service through required carrier contributions. It calculates a quarterly contribution factor by comparing projected Fund expenses with contributing carriers’ projected relevant revenues. Each carrier’s obligation is then calculated using that factor. Carriers may pass contribution costs to customers, although the contribution factor is not itself a mandated percentage surcharge on every customer’s entire bill.
USAC supplies the projections used in that calculation. Its responsibilities extend beyond financial advice: it collects contributions, distributes support, and administers program operations under FCC rules. Although organized as a private, nonprofit corporation, USAC was created at the FCC’s direction through the National Exchange Carrier Association (“NECA”), another entity established by the FCC.
For the fourth quarter of 2025, USAC initially projected approximately $2.25 billion in expenses and program demand. The FCC directed USAC to apply $100 million in unused E-Rate funds against projected E-Rate demand, thereby lowering the factor from what USAC’s unadjusted submissions would have produced. The resulting proposed factor was 38.1%. It became effective through deemed approval fourteen days after publication.
The court’s principal conclusions
- The challenge was justiciable. Cause Based Commerce had a direct financial injury from its contribution obligation. Payment of the quarterly contribution did not moot a dispute capable of repetition yet evading review.
- The petition was timely. Although USAC was created in 1997, the FCC’s reliance on it in each quarterly contribution determination constituted a continuing application of that earlier action.
- The FCC established USAC to act as an agency or instrumentality. USAC’s private corporate form did not remove it from the GCCA.
- No identified statute specifically authorized the relevant corporate arrangement. Neither general FCC powers, the Lifeline savings provision, nor legislation concerning separate pandemic-era programs supplied the necessary authorization.
- The contribution factor was unlawful. Reliance on the improperly established corporation caused the FCC to exceed its statutory authority.
- Vacatur was required under circuit precedent. The court granted review, vacated the Fourth Quarter 2025 contribution factor, and remanded.
The court did not decide the petitioners’ alternative challenges concerning delegation of legislative power under particular advanced-service provisions, the Appointments Clause, or the FCC’s alleged failure to address their comments and the Supreme Court’s earlier decision.
3. Precedents Cited and Their Influence
A. Earlier universal-service decisions
FCC v. Consumers' Rsch., 606 U.S. 656 (2025), supplied both the regulatory background and an important boundary. The Supreme Court had rejected the earlier general nondelegation challenge to § 254 and recognized that an agency retaining decision-making authority may obtain advice and assistance from private actors. The Fifth Circuit did not contradict that constitutional conclusion. Instead, it distinguished constitutional permission to receive private assistance from statutory permission to create the assisting corporation.
The Supreme Court also had reserved particular nondelegation questions concerning §§ 254(c)(3) and (h)(2). The present petition raised those questions, but the Fifth Circuit found it unnecessary to resolve them. Justice Gorsuch’s dissent in the earlier Supreme Court case identified possible future challenges; that dissent was not controlling authority for the present holding.
Tex. Off. of Pub. Util. Couns. v. FCC, 183 F.3d 393 (5th Cir. 1999), served two purposes. It described the subsidy arrangements preceding the 1996 telecommunications reforms, and it recognized the FCC’s broad ancillary authority under § 154(i). The present opinion accepted that breadth while holding that it could not overcome the GCCA’s specific-authorization requirement.
Wis. Bell, Inc. v. United States ex rel. Heath, 604 U.S. 140 (2025), supported the description of E-Rate and USAC’s day-to-day collection and distribution functions. Its significance here was factual and institutional: USAC does substantially more than offer occasional advice. The court did not derive its GCCA interpretation from a holding in that case.
B. Independent judicial review of statutory authority
Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024), supplied the standard of review. Courts must exercise independent judgment in determining whether an agency acted within its statutory authority. Accordingly, the FCC’s interpretation of its corporate-creation powers did not control the court’s reading of the GCCA.
C. Jurisdiction, standing, and mootness
United States v. Pedroza-Rocha, 933 F.3d 490 (5th Cir. 2019), quoting Bass v. Denney, 171 F.3d 1016 (5th Cir. 1999), established the court’s continuing obligation to examine its own jurisdiction, even without a party’s request. This explains why the opinion addressed both Article III jurisdiction and the Hobbs Act before reaching the merits.
Biden v. Nebraska, 600 U.S. 477 (2023), established that one petitioner with standing is enough and restated the requirements of injury, traceability, and redressability. Lujan v. Defs. of Wildlife, 504 U.S. 555 (1992), provided the underlying standing framework. Friends of the Earth, Inc. v. Laidlaw Env't Servs. (TOC), Inc., 528 U.S. 167 (2000), supplied the rule that standing is assessed when litigation begins.
Applying those principles, the panel relied on Consumers' Rsch. v. FCC, 109 F.4th 743 (5th Cir. 2024) (en banc), reversed on other grounds, 606 U.S. 656 (2025), and the corresponding standing analysis in Consumers' Rsch. v. FCC, 67 F.4th 773 (6th Cir. 2023). Cause Based Commerce’s mandatory payment was a classic financial injury attributable to the challenged factor and redressable through its invalidation. The opinion’s use of the earlier Fifth Circuit decision did not revive its rejected constitutional disposition.
Kingdomware Techs., Inc. v. United States, 579 U.S. 162 (2016), appeared through the Supreme Court’s earlier universal-service decision as support for the “capable of repetition, yet evading review” exception to mootness. Quarterly factors expire too quickly for ordinary litigation to conclude, but the same underlying dispute can recur.
D. Timeliness and continuing application
City of Arlington v. FCC, 668 F.3d 229 (5th Cir. 2012), supported treating the Hobbs Act’s sixty-day filing requirement as jurisdictional. NTCA relied on that deadline to argue that a challenge concerning USAC’s 1997 establishment came decades too late.
The decisive response came from Functional Music, Inc. v. FCC, 274 F.2d 543 (D.C. Cir. 1958). That decision distinguishes an untimely direct challenge to an old rule from review of a later agency action applying it. The court held that using USAC’s projections in a new contribution determination effectively reapplied the earlier corporate-establishment action.
The Sixth Circuit’s Consumers' Rsch. v. FCC, 67 F.4th 773, and the Eleventh Circuit’s Consumers' Rsch. v. FCC, 88 F.4th 917 (11th Cir. 2023), reinforced the conclusion that each new contribution factor starts a fresh review period. These decisions supported timely review of a current application; they did not themselves establish the present GCCA merits holding.
E. Government corporations and statutory recodification
Lebron v. Nat'l R.R. Passenger Corp., 513 U.S. 374 (1995), provided the historical account explaining the GCCA’s enactment. The proliferation of government-created corporations, and concerns about their accountability, prompted Congress to restrict agency authority to establish them.
Lebron v. Nat'l R.R. Passenger Corp. also supplied an analogy concerning corporations created for governmental objectives and controlled through governmental appointees. The Fifth Circuit did not simply transplant its constitutional test into the GCCA. Instead, it interpreted the GCCA’s own language and used Lebron v. Nat'l R.R. Passenger Corp. to reinforce the significance of governmental purpose and control.
In re Benjamin, 932 F.3d 293 (5th Cir. 2019), quoting In re Bayou Shores SNF, LLC, 828 F.3d 1297 (11th Cir. 2016), supplied the recodification canon: statutory reorganization ordinarily does not change substance without a clear indication. That principle helped establish that Congress’s 1982 removal of the express words “or instrumentality” did not narrow the GCCA. Congress expressly disclaimed substantive change, and Title 31 separately defines “agency” to include an instrumentality.
F. Limits on ancillary and implied authority
Iowa Utils. Bd. v. FCC, 120 F.3d 753 (8th Cir. 1997), appeared within the Fifth Circuit’s earlier explanation of § 154(i) as a source of ancillary regulatory authority. AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366 (1999), appeared as that decision’s subsequent history. The opinion did not treat either case as independently authorizing USAC’s creation.
N. Am. Telecomms. Ass'n v. FCC, 772 F.2d 1282 (7th Cir. 1985), supplied the limiting proposition that § 154(i) is not “infinitely elastic.” Together with the GCCA’s text, that proposition defeated the argument that broadly useful administrative arrangements necessarily fall within the FCC’s powers.
United States v. Vargas, 74 F.4th 673 (5th Cir. 2023) (en banc), explained the expressio unius canon: expressly including one matter can support an inference that omitted matters were excluded. Congress preserved NECA’s administration of Lifeline under one specific regulation but did not preserve its broader Fund role under the neighboring regulation. That selective reference weakened the claim of implied authorization for USAC.
The earlier en banc Consumers' Rsch. v. FCC, 109 F.4th 743, contained a similar textual observation. Judge Newsom’s concurrence in Consumers' Rsch. v. FCC, 88 F.4th 917, likewise questioned whether § 254(j) could support USAC’s participation. The concurrence was persuasive commentary, not a binding holding of the Eleventh Circuit.
G. Congressional ratification
Kovac v. Wray, 109 F.4th 331 (5th Cir. 2024), quoting Swayne & Hoyt, Ltd. v. United States, 300 U.S. 297 (1937), established that Congress can ratify official action that lacked authorization when taken. The panel therefore considered the FCC’s ratification argument as legally possible, rather than rejecting ratification categorically.
Nat'l Religious Broads. v. FCC, 138 F.4th 282 (5th Cir. 2025), quoting CFTC v. Schor, 478 U.S. 833 (1986), distinguished congressional silence from affirmative legislation adopting an administrative arrangement. The problem here was scope: Congress’s positive legislation concerned USAC’s work on two separate temporary programs, not its permanent administration of the Universal Service Fund.
H. Vacatur and binding circuit precedent
Data Mktg. P'ship, LP v. United States Dep't of Lab., 45 F.4th 846 (5th Cir. 2022), supplied the default rule favoring vacatur of unlawful agency action. Chamber of Com. v. SEC, 88 F.4th 1115 (5th Cir. 2023), drawing on Texas v. United States, 50 F.4th 498 (5th Cir. 2022), identified the circumstances supporting departure: a serious possibility that the agency can cure the defect on remand and disruptive consequences from vacatur.
Mercado v. Lynch, 823 F.3d 276 (5th Cir. 2016), quoting Jacobs v. Nat'l Drug Intel. Ctr., 548 F.3d 375 (5th Cir. 2008), required the panel to follow existing circuit precedent absent an intervening legal change. United States v. Alcantar, 733 F.3d 143 (5th Cir. 2013), supplied the additional requirement that a Supreme Court decision effect an unequivocal change, rather than merely hint at a future one.
Justice Gorsuch’s concurrence in United States v. Texas, 599 U.S. 670 (2023), questioned whether the APA authorizes universal vacatur. But Trump v. CASA, Inc., 606 U.S. 831 (2025), expressly left that question unresolved. Neither displaced binding Fifth Circuit remedial precedent. The opinion’s references to scholarship by Mila Sohoni and John Harrison similarly supplied context for the debate, not governing rules.
I. Administrative decisions and documentary evidence
The court also relied on agency records as evidence of what the FCC had actually done. In re Fed.-State Joint Bd. on Universal Serv., 12 FCC Rcd. 8776 (1997), documented NECA’s initial temporary appointment. In re Changes to the Bd. of Dirs. of the Nat'l Exch. Carrier Assoc., Inc., 12 FCC Rcd. 18400 (1997), documented the FCC’s direction to create USAC and assigned its functions. Comm'n Approves Incorporation Documents for Universal Serv. Admin. Co., Schs. and Librs. Corp., & Rural Health Care Corp., 12 FCC Rcd. 14094 (1997), established FCC approval of the incorporation documents and its instruction that they be filed in Delaware.
The later In re Changes to the Bd. of Dirs. of the Nat'l Exch. Carrier Assoc., Inc., 13 FCC Rcd. 25058 (1998), articulated the implied-authorization theory rejected by the court. In re Affordable Connectivity Program Emergency Broadband Benefit Program, 37 FCC Rcd. 484 (2022), and In re Establishing Emergency Connectivity Fund to Close the Homework Gap, 36 FCC Rcd. 8696 (2021), described the temporary programs invoked in the ratification argument. These agency materials established institutional history and program scope; they could not themselves supply congressional authorization.
4. Analysis of the Court’s Legal Reasoning
A. The GCCA imposes an independent limit on agency organization
The governing provision, 31 U.S.C. § 9102, permits an agency to “establish or acquire a corporation to act as an agency” only under a federal law “specifically authorizing the action.” The court organized its inquiry around three questions:
- Did the FCC establish or acquire USAC?
- Was USAC established to act as an agency, including an instrumentality?
- Did Congress specifically authorize that action?
This structure matters because a valid statutory objective does not automatically validate every organizational means selected to pursue it. Section 254 directs the FCC to preserve and advance universal service. Section 9102 separately limits the use of agency-created corporations. Both provisions must be respected.
B. Creation through an intermediary remained FCC establishment
NECA formally incorporated USAC under Delaware law, but the FCC directed the creation, approved the incorporation documents, and instructed NECA to file them. The parties did not contest that this amounted to establishment by the FCC.
The reasoning looks to institutional substance rather than the identity appearing on corporate paperwork. An agency cannot avoid the GCCA merely by directing an intermediary to perform the incorporation. State-law incorporation likewise does not answer the separate federal question of authority to establish the corporation.
C. “Agency” includes an instrumentality serving governmental purposes
The FCC could not escape § 9102 by emphasizing that USAC is private rather than a conventional federal department. The original 1945 provision expressly covered corporations acting as an “agency or instrumentality.” Congress’s nonsubstantive recodification and the definition in 31 U.S.C. § 101 preserved that coverage.
The court understood an instrumentality as a means used to accomplish a governmental end. USAC was created to administer the universal-service mechanisms, collect and distribute funds, and help calculate contribution requirements. FCC control and accountability reinforced that characterization: the FCC chairman selected board members, and USAC was accountable to the agency.
The October 17, 2024 memorandum of understanding was particularly telling. It described USAC’s sole purpose as assisting the FCC with program administration “as an agent and instrumentality of the FCC.” The court used that language as corroborating evidence, not as the sole basis for classification.
Importantly, the holding concerns agency status for the GCCA’s purposes. It does not automatically determine USAC’s status under every constitutional provision or federal statute.
D. An advisory function does not eliminate the statutory restriction
The FCC emphasized that USAC’s projections were advisory and that the agency retained final authority. That argument addressed the wrong legal limitation. Retained governmental control may prevent an unconstitutional transfer of governmental power, but it does not authorize creation of a corporation forbidden by statute.
The distinction is especially significant because the FCC actually adjusted USAC’s proposal. The court’s holding therefore did not depend on finding that the agency mechanically accepted every recommendation. Even meaningful supervision did not cure the absence of specific corporate-creation authority.
E. None of the three asserted authorizations satisfied the GCCA
1. General ancillary authority
Section 154(i) permits acts, rules, and orders necessary to execute the FCC’s functions. Read with § 254, it provides substantial implementation authority. But a general grant to carry out statutory responsibilities is not the specific authorization demanded by § 9102.
The court did not require any particular statutory formula or necessarily insist that Congress name USAC. Its conclusion was that the provisions identified by respondents did not specifically authorize the relevant corporate establishment.
2. Preservation of NECA’s Lifeline role
Section 254(j) preserves the collection, distribution, and administration of Lifeline under specified preexisting regulations. Respondents argued that Congress’s recognition of NECA’s role implicitly authorized use of an independent administrator more broadly, including its later-created subsidiary.
The court identified two unsupported expansions: from NECA to USAC, and from one preserved program to the entire Fund. Congress referred to the Lifeline regulation, 47 C.F.R. § 69.117, but omitted neighboring § 69.116, which concerned broader pre-1996 Fund administration. That specificity undermined, rather than supported, the proposed implication.
The opinion’s suggestion that Congress may have intended to exclude private administration beyond Lifeline strengthens its reasoning. Nevertheless, the necessary holding is narrower: § 254(j) did not specifically authorize USAC’s establishment and Fund-wide role. The decision should not be read as resolving every possible arrangement involving private administrative assistance.
3. Later pandemic-program legislation
Congress expressly authorized USAC’s participation in the Affordable Connectivity Program and the Emergency Connectivity Fund. But neither program formed part of the Universal Service Fund, and both were temporary measures that ended in June 2024.
Those enactments recognized USAC and authorized particular work. They did not ratify its permanent Fund-administration role. The governing distinction is between legislative approval of an entity’s participation in specified programs and legislative approval of its broader institutional mandate.
F. The unlawful arrangement affected the challenged contribution factor
The court connected the establishment violation to a current reviewable action: USAC’s projections supplied the foundation for the Fourth Quarter 2025 factor. Apart from the E-Rate adjustment, the FCC adopted those projections. The court consequently treated the factor itself as agency action exceeding statutory authority under 5 U.S.C. § 706(2)(C).
This step gives the decision practical force. The GCCA violation was not merely a historical organizational irregularity; it rendered unlawful the current agency determination built on the unauthorized arrangement.
G. Vacatur followed from the seriousness of the defect
The panel characterized reliance on USAC as a serious procedural deficiency that could not be corrected on remand in the challenged determination. A further explanation of the same calculation would not supply the missing congressional authorization.
Under the circuit’s framework, leaving unlawful action temporarily in place requires both a serious possibility of correction and disruptive consequences from vacatur. The court found the corrective possibility lacking and ordered vacatur. Its conclusion concerns this contribution factor; it does not establish that the FCC can never devise a lawful future administrative mechanism.
5. Potential Impact and Limits
Implications for universal-service administration
The decision exposes contribution determinations relying on the same arrangement to further challenges, subject to jurisdictional and procedural requirements. It also creates pressure for a lawful administrative solution, potentially through specific legislation or a differently authorized structure.
Those are prospective possibilities, not remedies ordered by the court. The judgment vacates the Fourth Quarter 2025 factor. It does not expressly dissolve USAC, invalidate every historical factor, order refunds, terminate the four universal-service programs, or prescribe a replacement administrator.
Implications for other agency-created corporations
The broader lesson is that private incorporation does not insulate an agency-created entity from federal organizational restrictions. Agencies using corporations to perform governmental functions must identify authority satisfying the GCCA, rather than relying solely on general implementation powers.
The decision does not categorically prohibit private contractors, consultants, or outside advice. Its reasoning focuses on corporations established or acquired by an agency to act as governmental instrumentalities.
Implications for judicial review
The continuing-application analysis permits timely challenges to new agency actions that implement longstanding arrangements. It does not create an unlimited right to attack any old order at any time: a petitioner still needs a reviewable current action, a timely petition, standing, and a sufficient connection to the challenged arrangement.
Constitutional questions remain open
The opinion illustrates how statutory limits can resolve a dispute without deciding constitutional questions. The earlier Supreme Court ruling remains distinct from this GCCA holding, and the advanced-service delegation and Appointments Clause arguments remain undecided here.
As circuit precedent, the decision guides courts within the Fifth Circuit and may persuade other courts. Its reasoning does not itself bind every other federal circuit, even though the challenged FCC factor was a nationwide agency determination.
6. Complex Concepts Simplified
- Instrumentality
- An organization used as a means to carry out governmental objectives. Under the GCCA analysis here, private corporate status did not prevent USAC from being an FCC instrumentality.
- Specific authorization versus general authority
- Permission to accomplish a broad mission is not necessarily permission to use every organizational device. Congress separately restricted agency-created corporations.
- De novo review
- The court interprets the governing statutes independently rather than accepting the agency’s legal interpretation as controlling.
- Standing and mootness
- Standing asks whether a petitioner had a sufficiently concrete, judicially redressable injury when filing. Mootness asks whether a live dispute remains afterward. Recurring, short-lived contribution factors can remain reviewable despite expiration of the particular quarter.
- Continuing application
- A new agency decision applying an old arrangement may permit review of that arrangement as part of the timely challenge to the new decision.
- Ratification
- Congress can subsequently approve previously unauthorized action. But approval of specified activities does not automatically validate a broader institutional role.
- Vacatur and remand
- Vacatur sets aside the challenged agency action. Remand returns the matter to the agency for further proceedings.
- Rule of orderliness
- A Fifth Circuit panel generally must follow earlier circuit precedent unless an authorized intervening legal development displaces it. Judicial skepticism alone is insufficient.
7. Conclusion
Consumers' Research v. FCC establishes that the FCC’s broad universal-service responsibilities do not substitute for the specific congressional authorization required to establish a corporation acting as its instrumentality. USAC’s private form, advisory contribution calculations, and participation in separately authorized programs did not cure that statutory deficiency.
The decision’s central significance is the separation of authority to pursue a governmental objective from authority to create the institution used to pursue it. Applying that distinction, the Fifth Circuit vacated the Fourth Quarter 2025 contribution factor while leaving the alternative constitutional challenges and the design of a lawful future arrangement unresolved.