Consumers' Research v. FCC ( 2023 )


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  • Case: 22-60008     Document: 00516687858        Page: 1    Date Filed: 03/24/2023
    United States Court of Appeals
    for the Fifth Circuit                               United States Court of Appeals
    Fifth Circuit
    FILED
    March 24, 2023
    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.
    On Petition for Review of an Order of the
    Federal Communications Commission
    Agency No. 96-45
    Before Richman, Chief Judge, and Stewart and Haynes, Circuit
    Judges.
    Carl E. Stewart, Circuit Judge:
    Consumers’ Research, along with other entities, (collectively
    “Petitioners”) challenge: (1) the constitutionality of Congress’s delegation
    of administration of the Universal Service Fund (the “USF”) to the Federal
    Communications Commission (the “FCC”); and (2) the FCC’s subsequent
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    No. 22-60008
    reliance on a private entity for ministerial support. Because there are no
    nondelegation doctrine violations, we DENY their petition.
    I.    Background
    Congress enacted § 254 of the Telecommunications Act of 1996,
    which established the USF and entrusted its administration to the FCC.
    Congress passed § 254 to ensure the facilitation of broad access to
    telecommunications services across the country. The USF accomplishes this
    goal by raising funds which are later distributed to people, entities, and
    projects to expand and advance telecommunications services in the nation.
    Funds are raised by periodic contributions to the USF from
    telecommunications carriers, who later pass those costs on to consumers via
    line-item charges in their monthly bills.
    The FCC relies on a private entity, the Universal Service
    Administrative Company (“USAC”), to aid it in its administration of the
    USF. USAC is comprised of industry experts and the FCC tasks it with
    certain ministerial responsibilities, including: (1) collecting self-reported
    income information from telecommunications carriers; (2) compiling data to
    formulate the potential contribution rate for the USF; and (3) proposing a
    quarterly budget to the FCC for the USF’s continued preservation. USAC
    proposals are approved by the FCC either expressly or after fourteen days of
    agency inaction.
    USAC submitted its 2022 first quarter projections to the FCC on
    November 2, 2021. The FCC published these projections for notice-and-
    comment in accordance with the Administrative Procedure Act. On
    November 19, 2021, Petitioners submitted comments challenging the
    constitutionality of the USF and the FCC’s reliance on USAC. The FCC
    weighed the comments and issued a Public Notice of Proposed First Quarter
    2022 Universal Service Contribution Factor (“the Proposal”). Petitioners filed
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    another comment, invoking the same arguments as their November
    comment and seeking the discontinuance of the USF. The FCC,
    nonetheless, approved USAC’s proposal on December 27, 2021. In
    response, Petitioners filed this petition on January 5, 2022.
    On appeal, Petitioners assert that: (1) the Hobbs Act is not a
    jurisdictional bar to their constitutional claims; (2) Section 254 violates the
    nondelegation doctrine because Congress failed to supply the FCC with an
    intelligible principle; and (3) the FCC’s relationship with USAC violates the
    private nondelegation doctrine because the FCC does not adequately
    subordinate USAC in its administration of the USF.
    II.    Standard of Review
    This court reviews constitutional issues stemming from an agency’s
    action de novo. See Huwaei Tech USA, Inc. v. FCC, 
    2 F.4th 421
    , 434 (5th Cir.
    2021). We “hold unlawful and set aside” any agency action that is “contrary
    to constitutional right, power, privilege, or immunity.” 
    Id.
     (citing 
    5 U.S.C. § 706
    (2)(B)).
    III.        Discussion
    A.      Jurisdiction
    The Hobbs Act “provides that a party aggrieved by a rule, regulation,
    or final order . . . must file a petition for judicial review within sixty days.”
    State of Tex. v. United States, 
    749 F.2d 1144
    , 1146 (5th Cir. 1985). This sixty-
    day period “is jurisdictional and cannot be judicially altered or expanded.”
    City of Arlington v. FCC, 
    668 F.3d 229
    , 237 (5th Cir. 2012). However,
    plaintiffs may “challenge . . . a regulation after the limitations period has
    expired if the claim is that the agency has exceeded its constitutional
    authority or statutory authority.” State v. Rettig, 
    987 F.3d 518
    , 529 (5th Cir.
    2021). “To sustain such a challenge, the claimant must show some direct,
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    final agency action involving the particular plaintiff within [sixty days] of
    filing suit.” 
    Id.
     (quoting Dunn-McCampbell Royalty Int., Inc. v. Nat’l Park
    Serv., 
    112 F.3d 1283
    , 1287 (5th Cir. 1997)). An agency’s action is direct and
    final when two criteria are satisfied: First, the action must mark the
    “consummation of the agency’s decisionmaking process . . . [and] second,
    the action must be one by which rights or obligations have been determined,
    or from which legal consequences will flow.” Dunn-McCampbell, 112 F.3d at
    1287 (internal quotation and citation omitted).
    The FCC contends that Petitioners’ claims are time-barred by the
    Hobbs Act because: (1) any challenge to § 254 should have come when
    Congress originally enacted it and (2) the Proposal is not a direct and final
    agency action which creates legal consequences or new obligations for
    Petitioners. The FCC relies on Dunn-McCampbell, where we foreclosed a
    facial challenge to a National Park Service regulation because “the
    limitations period beg[an] to run when the agency publishe[d] the regulation
    in the Federal Register.” Id. But we also carved out a limited exception in
    that case when we recognized that “an agency’s application of a rule to a
    party creates a new . . . cause of action to the agency’s constitutional or
    statutory authority.” Id. Petitioners assert that they qualify for this exception.
    Whether they are correct depends on our determination that the Proposal:
    (1) constitutes application of a direct and final rule by the FCC; and (2)
    determines Petitioners’ rights or has legal consequences for non-compliance.
    We hold in Petitioners’ favor on both prongs.
    Here, the Proposal qualifies for the Dunn-McCampbell exception
    because it (1) is a direct and final order which consummates the FCC’s
    decisionmaking process; and (2) punishes telecommunications carriers for
    non-compliance. See 112 F.3d at 1287. Regarding prong one, the Proposal is
    distinguishable from the regulation in Dunn-McCampbell. In that case, we
    held that Dunn-McCampbell’s facial challenge was time barred because the
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    “Park Service ha[d] not yet applied the regulations to the companies.” Id. at
    1288–89. So, any challenge he brought before the Park Service ever applied
    the regulation was necessarily a challenge to the regulation itself. The reverse
    is true in the instant case, where the FCC has applied and reapplied § 254’s
    mandatory USF Contributions through its approval of the quarterly
    proposals. Each approval consummates the FCC’s decisionmaking process
    for that quarter and, thus, allows for a constitutional challenge if that
    challenge is brought within the sixty-day time limit.
    Prong two is also satisfied because the Proposal undoubtedly has legal
    consequences which flow to carriers that fail to meet their contribution
    obligations. See 
    47 C.F.R. § 54.713
    (b) (providing that “delinquent” USF
    contributors are subject to “interest at the rate equal to the U.S. prime
    rate . . . plus 3.5 percent, as well as administrative charges of collection
    and/or penalties and charges permitted by the applicable law”). Because
    Petitioners satisfy both Dunn-McCampbell prongs, the Hobbs Act does not
    bar their constitutional claims and we proceed to the merits of their
    nondelegation arguments. 112 F.3d at 1287; Rettig, 987 F.3d at 529.
    B.     Nondelegation
    Article I of the United States Constitution provides that “[a]ll
    legislative Powers herein granted shall be vested in a Congress of the United
    States.” “Accompanying that assignment of power . . . is a bar on its further
    delegation.” Gundy v. United States, 
    139 S. Ct. 2116
    , 2123 (2019) (internal
    quotations and citation omitted). However, the Constitution does not deny
    Congress the necessary “flexibility and practicality” to perform its functions.
    
    Id.
     The Supreme Court has, therefore, recognized that “Congress may
    obtain the assistance of its coordinate Branches . . . and in particular, may
    confer substantial discretion on executive agencies to implement and enforce
    the laws.” 
    Id.
     (quoting Mistretta v. United States, 
    488 U.S. 361
    , 372 (1989)).
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    To that end, the Constitution only requires Congress to provide an
    intelligible principle which adequately guides the Executive agency. See 
    id.
    (holding “that a statutory delegation is constitutional as long as Congress lays
    down by legislative act an intelligible principle to which the person or body
    authorized to exercise the delegated authority is directed to conform”)
    (internal quotations and citation omitted).
    The intelligible principle standard is “not demanding.” Id. at 2129.
    The Supreme Court has rarely “second-guess[ed] Congress regarding the
    permissible degree of policy judgment that can be left to those executing or
    applying the law.” Id. Ultimately, “a nondelegation inquiry always begins
    (and often almost ends) with statutory interpretation. The constitutional
    question is whether Congress has supplied an intelligible principle to guide
    the delegee’s use of discretion.” Id. Put differently, we must construe § 254
    to discern what tasks it delegates and what instructions Congress provided
    therein. “Only after [we have] determined [§ 254’s] meaning can [we]
    decide whether the law sufficiently guides executive discretion to accord with
    Article I.” Id
    We recently grappled with the intelligible principle standard in
    Jarkesy v. SEC, 
    34 F.4th 446
     (5th Cir. 2022). 1 In that case, we held that
    Congress failed to provide an intelligible principle when it gave “the SEC the
    ability to determine which subjects of its enforcement actions are entitled to
    Article III proceedings with a jury trial, and which are not.” 
    Id. at 461
    . We
    acknowledged that the Supreme Court “has not in the past several decades
    held that Congress failed to provide a requisite intelligible principle.” 
    Id.
     at
    1
    We have since denied petition to rehear this case before the en banc court. See
    Jarkesy v. SEC, 
    51 F.4th 644
    . On March 8, 2023, the Government filed a petition for a writ
    of certiorari with the Supreme Court. Jarkesy’s response to that petition is due April 10,
    2023.
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    462. But we also noted that the Court had not been presented an instance
    where “Congress offered no guidance whatsoever” to an executive agency in
    that same span of time. 
    Id.
     (emphasis in original). Accordingly, we reasoned
    that “[i]f the intelligible principle standard means anything, it must mean
    that a total absence of guidance is impermissible under the Constitution.” 
    Id.
    In Jarkesy, we stated that the nondelegation doctrine applies where
    Congress has provided “no guidance whatsoever” to an agency, 
    Id. at 462
    (emphasis in original), citing to the most recent (though long ago) Supreme
    Court nondelegation violation decision. See Panama Refining Co. v. Ryan, 
    293 U.S. 388
    , 405 (1935) (holding that there was a nondelegation violation when
    Congress gave the President broad authority to prohibit the transportation of
    oil-related products in interstate commerce, but failed to provide any policy,
    establish any standard, or lay down any rules to direct the President’s
    exercise of this authority).
    Having fleshed out what the intelligible principle standard requires,
    we now examine Petitioners’ assertions that § 254 violates the nondelegation
    doctrine because: (1) Congress failed to provide the FCC with an intelligible
    principle; and (2) to the extent Congress provided intelligible principles, they
    are merely aspirational and place no objective limits on the FCC in its
    administration of the USF.
    1.      Whether Congress Provided Intelligible Principles in § 254
    Petitioners argue that Congress has unconstitutionally delegated its
    authority to the FCC without providing an intelligible principle. For
    example, they point to the absence of a limit on how much the FCC can raise
    for the USF as evidence of a lack of proper guidance. With no objective
    ceiling on the amount that the FCC can raise each quarter, they contend that
    Congress’s alleged intelligible principles fail to place necessary limits on the
    FCC’s ability to assess fees from telecommunications carriers. Also,
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    Petitioners aver that § 254(b)(1)-(7) contains mere public policy statements
    which impose no meaningful limitations on or guidance to the FCC’s
    revenue-raising obligation in its administration of the USF. In sum,
    Petitioners maintain that Congress has not articulated any guidance to the
    FCC in its administration of the USF—and that this failure violates the
    nondelegation doctrine. We disagree.
    Congress passed § 254 for the express purpose of preserving and
    advancing universal telecommunications services. 2 See 
    47 U.S.C. § 254
    (b).
    To that end, § 254(b) provides that the FCC “shall base policies” on certain
    enumerated principles. 3 Petitioners maintain that these principles offer no
    guidance to the FCC as it attempts to realize § 254(b)’s purpose. Their
    position is untenable. Section 254 expressly requires the FCC to ensure that
    telecommunications services are: (1) of decent quality and reasonably priced;
    (2) equally available in rural and urban areas; (3) supported by state and
    federal mechanisms; (4) funded in an equitable and nondiscriminatory
    manner; (5) established in important public spaces (schools, healthcare
    providers, and libraries); and (6) available broadly across all regions in the
    nation. See § 254(b)(1)-(7). And should the FCC ever conclude that these
    principles were insufficient, the statute enables, and likely obligates, it to add
    principles “consistent with” § 254’s overall purpose. See § 254(b)(7).
    Rather than leave the FCC with “no guidance whatsoever,” Congress
    provided ample direction for the FCC in § 254. Jarkesy, 34 F.4th at 462.
    2
    See also 
    47 U.S.C. § 151
     (noting the FCC’s original purpose of creating policies
    designed “to make available, so far as possible, to all the people of the United States . . . a
    rapid, efficient, Nation-wide . . . wire and radio communication service with adequate
    facilities at reasonable charges”).
    3
    See 
    47 U.S.C. § 254
    (b)(1)-(7) (providing a full list of principles).
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    Ultimately, in enacting § 254, Congress chose to “confer substantial
    discretion” over administration of the USF to the FCC. Gundy, 
    139 S. Ct. at 2139
    . Petitioners take issue with how the FCC uses this discretion—arguing
    that the FCC operates the USF with no guidance from Congress. 4 But if the
    FCC had a question about how to manage the USF, it need only look to § 254
    to find an answer. Therefore, we conclude that Congress supplied the FCC
    with intelligible principles when it tasked the agency with overseeing the
    USF. Having established that § 254 contains intelligible principles, we next
    consider whether those principles adequately limit the FCC’s revenue
    raising function.
    2.      Whether § 254 Properly Limits the FCC
    Petitioners contend that even if Congress provided the FCC with
    intelligible principles we should rule in their favor because those principles
    are nothing more than “vague aspirations” that fail to set objective limits on
    the FCC as they operate the USF. Gundy, 
    139 S. Ct. at 2133
    . They argue
    4
    We note that much of Petitioners’ nondelegation argument relies primarily on the
    dissents of the Supreme Court’s holding in Gundy and this court’s in Rettig, which, of
    course, are not binding on our court. See, e.g., Gundy, 
    139 S. Ct. at 2133, 2134
    , 2135–37
    (Gorsuch, J., joined by Roberts, C.J., and Thomas, J. dissenting); see also Rettig, 993 F.3d
    at 408, 409–10 (5th Cir. 2021) (Ho, J. joined by Jones, Smith, Elrod, and Duncan, JJ.,
    dissenting from denial of rehearing en banc). That some Justices of the Supreme Court and
    some judges of this circuit have opined on whether Congress is permitted to delegate
    “difficult policy choices” is not determinative that Congress impermissibly did so here
    when it delegated administration of the USF to the FCC. Moreover, the mere fact that
    Petitioners dispute the policy choices that the FCC has made in overseeing the USF does
    not translate to a constitutional or statutory violation. See Gundy, 
    139 S. Ct. at 2139
    (“Congress may confer substantial discretion on executive agencies to implement and
    enforce the laws.”). At best, Petitioners argue for different policy choices. But they provide
    no binding law to support such a request.
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    that § 254 is no different than the statute in Panama Refining. 5 In that case,
    the Supreme Court took issue with 
    15 U.S.C. § 701
    ’s generally unhelpful
    guidance to the President as he tried to regulate the interstate hot oil industry.
    See Panama Refining, 
    293 U.S. at 419
     (observing that § 701 failed to “limit[]
    or control[] the authority conferred” to the President). Petitioners argue
    that § 254 similarly fails to limit or control the FCC’s ability to raise revenue
    for the USF. We disagree.
    Here, § 254 provides limitations on the FCC’s revenue-raising ability,
    whereas the statute in Panama Refining is markedly different. In Panama
    Refining, the Supreme Court observed that:
    The Congress left the matter to the President without
    standard or rule, to be dealt with as he pleased. The effort
    by ingenious and diligent construction to supply a
    criterion still permits such a breadth of authorized
    action as essentially to commit to the President the
    functions of a Legislature rather than those of an
    executive or administrative officer executing a
    declared legislative policy.
    
    293 U.S. at
    418–19 (emphasis added). Section 254 contains no such
    deficiencies, and certainly did not leave the matter to the FCC “without
    standard or rule, to be dealt with as [it] pleased.” 
    Id.
     Instead, § 254 requires
    that the FCC only raise enough revenue to satisfy its primary function.
    See § 254(b).
    5
    See 
    293 U.S. at 417
     (stating that the purpose of the challenges statute was “to
    eliminate unfair competitive practices, to promote the fullest possible utilization of the
    present productive capacity of industries, to avoid undue restriction of production (except
    as may be temporarily required), to increase the consumption of industrial and agricultural
    products by increasing purchasing power, to reduce and relieve unemployment, to improve
    standards of labor, and otherwise to rehabilitate industry and to conserve natural
    resources.”) (internal quotations omitted).
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    For example, § 254(c)(1)(A)-(D) limits distribution of USF funds to
    telecommunications services that: (1) “are essential to education, public
    health,       or   public   safety;” (2) “are being               deployed in         public
    telecommunications networks by telecommunications carriers;” and (3)
    “are consistent with the public interest, convenience, and necessity.”
    Likewise, § 254(b)(5) requires that the FCC ensure there are “specific,
    predictable and sufficient Federal and State mechanisms to preserve and
    advance universal service.” Furthermore, § 254(e) limits distribution of
    USF funds to eligible communication carriers under § 214(e)—and even
    those carriers may only receive support “sufficient to achieve the purposes
    of” § 254. Taken together, these provisions demonstrate that the FCC is not
    in the dark as to the amount of funding it should seek each quarter. Instead,
    § 254 sets out the FCC’s obligations with respect to administration of the
    USF and the FCC, in turn, calculates what funds are necessary to satisfy its
    obligations.
    Ultimately, § 254       reflects        Congress’s      understanding          that
    telecommunications services are constantly evolving. 6 That understanding
    also drove Congress to implement a unique revenue raising mechanism for
    the USF. That the mechanism is unique is not in itself a nondelegation
    violation—especially where Congress has placed identifiable limits on what
    USF distributions can fund. See, e.g., § 254(b)-(e). Congress failed to place
    these limitations on the President in Panama Refining—and that led the
    Supreme Court to hold that a nondelegation violation occurred. But
    Congress did not make that same mistake with § 254, instead, ensuring that
    6
    See, e.g., § 254(c)(1) (providing that “[u]niversal service is an evolving level of
    telecommunications services that the Commission shall establish periodically under this
    section, taking into account advances in telecommunications and information technologies
    and services”).
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    the statute is replete with intelligible principles to guide the FCC. Because
    Congress provided the FCC with numerous intelligible principles for its
    administration of the USF and those principles sufficiently limit the FCC’s
    revenue-raising activity, we hold that § 254 does not violate the
    nondelegation doctrine.
    C.    Private Nondelegation
    The private nondelegation doctrine prevents “governments from
    delegating too much power to private persons and entities.” Boerschig, 872
    F.3d at 707. “Although this so-called private nondelegation doctrine has been
    largely dormant” for nearly a century, “its continuing force is generally
    accepted.” Id.; see also Nat’l Horsemen’s Benevolent & Protective Ass’n v.
    Black, 
    53 F.4th 869
    , 880–82 (5th Cir. 2022) (discussing the evolution of the
    private nondelegation doctrine). Functionally, the doctrine prevents
    agencies from giving private parties the “unrestrained ability to decide
    whether another citizen’s property rights can be restricted” because “any
    resulting deprivation happens without ‘process of law.’” Boerschig, 872 F.3d
    at 708.
    To be clear, agencies “may subdelegate to private entities so long as
    the entities ‘function subordinately to’ the federal agency and the federal
    agency ‘has authority and surveillance over [their] activities.’” Rettig, 987
    F.3d at 532 (quoting Sunshine Anthracite Coal Co. v. Adkins, 
    310 U.S. 381
    , 399
    (1940)). Ultimately, a statute does not violate the private nondelegation
    doctrine if it “‘imposes a standard to guide’ the private party and (2)
    provides ‘review of that determination that prevents the [private party] from
    having the final say.’” 
    Id.
     (alteration in original) (quoting Carter v. Carter
    Coal Co., 
    298 U.S. 238
    , 310−311 (1936)).
    Our decision in National Horsemen provides a timely comparator to
    the instant case. 
    53 F.4th 869
     (5th Cir. 2022). There, multiple organizations
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    sued the Federal Trade Commission (“FTC”), alleging that the Horseracing
    Integrity and Safety Act’s (“HISA”) regulatory scheme violated the private
    nondelegation doctrine by giving government power to the Horseracing
    Integrity and Safety Authority (the “Authority”) without adequate agency
    supervision. 
    Id.
     On appeal, we held that the FTC’s relationship with the
    Authority violated the private nondelegation doctrine.
    We first noted that, under HISA, the Authority had “sweeping
    rulemaking power,” with the ability to establish, enforce, and punish all
    entities involved in the horseracing industry. Id. at 882. We also observed
    that “HISA’s generous grant of authority to the Authority to craft entire
    industry programs strongly suggests it is the Authority, not the FTC, that is
    in the saddle.” Id. at 883 (internal quotations omitted). Finally, we
    highlighted that the FTC had no authority to conduct independent review of
    the Authority’s policy choices and did not possess final say on what rules the
    Authority promulgated. See id. at 884. Instead, the FTC could only
    “recommend changes to the Authority’s rules (and then, only to the extent
    that the rules are inconsistent with HISA).” Id. at 888. After considering the
    lack of oversight and control the FTC exercised over the Authority, we ruled
    against the FTC and held its redelegation of Congressional power
    unconstitutional.
    In this case, Petitioners argue that the FCC violated the private
    nondelegation doctrine when it redelegated its authority over the USF to
    USAC, a private entity. They aver that the FCC does not oversee USAC in
    its performance of its duties. For example, they highlight that the FCC rarely
    exercises its power to alter USAC’s proposed contribution factor under §
    54.709(a)(3). They assert that one reason that the FCC does not exercise this
    authority is because the statute affords the agency just fourteen days to
    review and alter any USAC determinations before they become binding on
    the telecommunications carriers. To Petitioners, such a small window for
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    review renders the FCC’s oversight over USAC meaningless. They suggest
    that the FCC is a rubber stamp for USAC’s proposals and that USAC
    effectively administers the USF. We disagree.
    Here, the FCC has not violated the private nondelegation doctrine
    because it wholly subordinates USAC. First, federal statutory law expressly
    subordinates USAC to the FCC. See 
    47 C.F.R. § 54.702
    (b) (providing that
    USAC “may not make policy, interpret unclear provisions of the statute or
    rules, or interpret the intent of Congress”). Second, unlike in National
    Horsemen, USAC does not enjoy the same type of sweeping rulemaking
    power—instead it makes a series of proposals to the FCC based off expert
    analysis, which are not binding on carriers until the FCC approves them. See
    
    47 C.F.R. § 54.709
    (a). Third, the FCC permits telecommunications carriers
    to challenge USAC proposals directly to the agency and often grants relief to
    those challenges. 7 Fourth, the FCC dictates how USAC calculates the USF
    contribution factor and subsequently reviews the calculation method after
    USAC makes a proposal. See 
    47 C.F.R. §§ 54.709
    (a)(2)-(3); 54.711(a).
    Ultimately, the FCC only uses USAC’s proposals after independent
    consideration of the collected data and other relevant information. We have
    expressly upheld these types of arrangements. See Rettig, 987 F.3d at 531
    (noting that agencies are permitted to “reasonably condition” their actions
    “on an outside party’s determination of some issue”). Because the FCC
    properly subordinates USAC, it has not violated the private nondelegation
    doctrine.
    7
    See, e.g., Streamlined Resol. of Requests Related to Actions by the Universal Serv.
    Admin. Co., DA 22-448, 
    2022 WL 1302467
     (WCB rel. April 29, 2022); Alpaugh Unified
    Sch. Dist., 22 FCC Rcd. 6035 (2007)).
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    IV.    Conclusion
    For the foregoing reasons we DENY the petition.
    15