Confusion, Uncertainty, and Fear: How the FCC’s Increased Reliance on Adjudication Is Harming Carriers, Competition, Consumers, and Investment

By Jonathan Marashlian, Jacqueline R. Hankins, Seth L. Williams, and Keenan P. Adamchak

In recent years, the Federal Communications Commission has increasingly relied on informal adjudications to craft industry-wide regulatory policies, arguably creating new regulations in the process. This trend is particularly noticeable in the context of the Universal Service Fund contribution duties imposed on both interstate and international communications service providers. By legislating through informal adjudication, the FCC created a litany of challenges for the industry it regulates, including increased uncertainty, fear, and a slew of competitive harms caused by inconsistent and shifting regulatory positions adopted in ad hoc adjudications. In addition, the courts, which should otherwise operate as a “check” on the scope of the FCC’s authority,  have increasingly become ineffective by dismissing appeals of agency adjudicatory decisions having industry-wide impact on standing and procedural grounds. This has effectively given the FCC unbridled authority to utilize the informal adjudicatory process in a manner that leaves many regulated entities with little opportunity to participate in the process. The FCC’s reliance on adjudications to move the regulatory goalposts is unmistakably manifested in the evolution of USF contribution policies.

This Article explores the phenomenon by tracing the slow, but steady erosion of the “contamination theory” from the Computer II  decision to Pulver.com, Brand X, InterCall, WebEx, and beyond. Recognizing the broad discretion enjoyed by the FCC in deciding whether to develop USF contribution policies via rulemaking or adjudication, this Article culminates in the conclusion that the industry and consumers it serves would greatly benefit from shifting the FCC’s current predisposition towards adjudications in favor of increased use of the rulemaking process. Whether through increased judicial oversight or the implementation of new policymaking procedures, change is long overdue. A shift back to rulemaking or, minimally, opening the courtroom doors to a larger swath of aggrieved parties, would serve the public interest by promoting transparency, predictability, and participation in the regulatory process.