Court decision on prison phones a restraint on federal regulators

FOR years, federal officials have expanded and abused their authority by insisting the power to regulate interstate commerce applies even when no state lines are crossed. So it’s a welcome development that the U.S. Court of Appeals for the D.C. Circuit has sided with Oklahoma and thrown out federal regulation of intrastate phone calls.

In 1996, Congress updated a 1934 law and authorized the Federal Communications Commission to regulate the payphone industry so providers would be “fairly compensated for each and every” interstate and intrastate call. That law expressly included inmate telephone services.

For most of the subsequent decades, FCC officials didn’t believe the law allowed them to cap rates when all parties involved in a call reside in the same state — until the Obama administration abruptly decided otherwise in 2015.

A legal challenge quickly ensued, with Oklahoma playing a prominent role.

In siding with Oklahoma and other challengers, the court noted the 1934 law “erects a presumption against” FCC authority over intrastate communications.

While the FCC’s power was greatly expanded in the 1996 revision, the general prohibition regarding instate communications remained intact.

Furthermore, inmate telephone service providers pay “site commissions” to prisons that range between 20 percent and 63 percent of profit (and occasionally higher). That’s one reason inmate calling service providers charge rates and fees as high as $56 for a fourminute call.

Yet when the FCC capped intrastate-call rates, it initially excluded site commission costs from its analysis and only partially accounted for them in later revisions. Thus, providers argued the rates set by the FCC were actually below the cost of service.

And even if one excluded site commissions, providers argued the FCC’s rate caps were still below average documented costs.

The court concluded the FCC “glosses over” statutory language that limits its rate-capping authority and “misquotes” the law to justify its action.

The justices declared the FCC’s cap on in-state rates was based on a test “that is not enunciated in the statute, conflates distinct grants of authority” under federal law, and “misreads our judicial precedent and the FCC’s own prior orders …”

The justices found the FCC’s decision to ignore site-commission costs “makes no sense in light of the undisputed record in this case.”

“On the record before us, we simply cannot comprehend the agency’s reasoning,” they declared.

Similarly, justices concluded the FCC’s method of determining providers’ average costs “is patently unreasonable” because it ensured that calls with above-average costs were automatically unprofitable, which violates the federal requirement that “each and every” interstate and intrastate call be fairly compensated.

According to Attorney General Mike Hunter, the court ruling means Oklahoma prisons could reap $1.2 million annually from inmate calls, while the Oklahoma County Sheriff’s Office will generate about $375,000 per year.

Concern over some inmate phone rates is understandable, and some limits may be defensible, although providers must still make a profit. But those regulatory decisions are best handled by state officials.

No one truly believes a phone call from the prison in McAlester to a home in Poteau is an “interstate” call. So why allow federal regulators to pretend otherwise?