FCC Can’t Limit Cost of In-State Inmate Calls

(CN) – Siding with Wisconsin and a coalition of other states seeking to recover costs, the D.C. Circuit ruled that the Federal Communications Commission cannot cap the amount states and cities can charge inmates to make in-state phone calls.

“This court ruling is a win for state and local government rights,” Wisconsin Attorney General Brad Schimel said in a statement. “Granting Wisconsin and communities the ability to regulate their own prisons and jails will allow the state to continue to provide this service to inmates.”

Last year, Wisconsin, Arizona, Arkansas, Indiana, Kansas, Louisiana, Missouri and Nevada brought a legal challenge in the D.C. Circuit targeting a 2015 FCC rule banning local jails and state prisons from charging inmates more than $0.11 per minute for interstate and intrastate phone calls.

Schimel and other state leaders argued that jails and prisons “incur substantial security-related costs” for inmate calling systems, or ICS, including costs for monitoring calls, escorting prisoners and phone repair techs, and updating ICS based on new technologies.

“The federal rule capping these rates effectively prevented the states and counties from recovering these costs,” Schimel said.

According to the D.C. Circuit’s ruling, filed Tuesday, the challenged FCC order came as a result of “a variety of market failures in the prison and jail payphone industry” that caused inmates and those they called to incur high per-minute charges and ancillary fees for billing and collection services.

The commission decided in 2015 to set permanent caps for rates and fees for both interstate and intrastate inmate phone calls. It had also proposed an outright ban on ancillary fees and regulation of video and other advanced technology services.

According to the ruling, Wisconsin and the other states specifically challenged the FCC’s “caps on intrastate rates, the exclusion of ‘site commissions’ as costs in the agency’s ratemaking methodology, the use of industry-averaged cost data in the FCC’s calculation of rate caps, the imposition of ancillary fee caps, and reporting requirements.” One ICS provider also challenged the commission’s “failure to preempt inconsistent state rates.”

After President Donald Trump was inaugurated this year, the FCC told the D.C. Circuit that due to a change in its composition, “a majority of the current commission does not believe that the agency has the authority to cap intrastate rates under Section 276 of The [Telecommunications] Act,” the opinion states.

Section 276 authorizes the FCC to enforce regulations with the goal of promoting competition, and originated from Bell’s previous domination of the payphone industry. The law allowed the commission to enforce regulations that ensure all payphone providers are compensated for all interstate and intrastate calls.

The D.C. Circuit ruled Tuesday that the FCC’s proposed caps on intrastate rates, use of industry-averaged cost data, and video visitation reporting requirements exceed its statutory authority under the Telecommunications Act.

“The order at issue in this case is legally infirm because it purports to cap intrastate rates based on a ‘just, reasonable and fair’ test that is not enunciated in the statute, conflates distinct grants of authority under § 201 and § 276, and misreads our judicial precedent and the FCC’s own prior orders to support capping already compensatory rates under the guise of ensuring providers are ‘fairly compensated,’” Judge Harry Edwards wrote for the D.C. Circuit’s three-judge panel.

The judge added, “We therefore reverse and vacate the provision in the order that purports to cap intrastate rates as beyond the statutory authority of the commission. We need not decide the precise parameters of the commission’s authority under § 276. We simply hold here that the agency’s attempted exercise of authority in the disputed order cannot stand.”

The appeals court remanded the challenge of ancillary fee caps back to the commission.

“We cannot discern from the record whether ancillary fees can be segregated between interstate and intrastate calls. We are therefore obliged to remand the matter to the FCC for further consideration,” Edwards wrote.

“We are very pleased with this success in court,” Dean Meyer, executive director of Badger State Sheriffs’ Association, said in a statement “This FCC rule would have compromised the safe and secure operations of Wisconsin jails. Thanks to Attorney General Schimel and his team, Wisconsin jail staff, inmates, and victims will be safer.”

The FCC did not immediately respond to an email sent Wednesday requesting comment.

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