WASHINGTON — The Federal Communications Commission, now with a majority of Republican members, is expected to roll back Obama-era regulations that capped the cost of prisoner phone calls.

But first, a federal appeals court in Washington, DC, has to figure out what to do with a pending legal challenge to those regulations — regulations that the FCC was defending until last month, when the political makeup of the commission shifted from majority Democrat to majority Republican.

In 2015, the FCC approved limits on the per-minute rates and other fees that private companies can charge prisoners for phone calls. It was a 3-2 decision, with the majority of commissioners, all Democrats, finding that market competition had failed to keep costs down, and that expensive calls made it harder for inmates to maintain a connection with loved ones — bonds that studies showed reduced the likelihood of reoffending.

The private companies that contract with state and local governments to provide phone services at prisons and jails are challenging those regulations in the US Court of Appeals for the DC Circuit, arguing that the commission lacked authority to set caps, and, even if it did have that authority, the new rates were too low. The FCC filed briefs defending the regulations in 2016.

But in January, circumstances changed. One Democrat on the commission, Jessica Rosenworcel, reached the end of her term. Another, former chairman Tom Wheeler, stepped down on Jan. 20. That left the commission with three members: two Republicans, who had dissented from the 2015 rate caps, and one Democrat. Only three commissioners can belong to the same political party at one time. Trump has yet to announce picks to fill the two open seats; he could choose one more Republican, and one member from another party.

Trump in January named Ajit Pai, a Republican and member of the commission since 2012, as the new chairman. On Jan. 31, an agency lawyer for the FCC notified the DC Circuit that it would no longer defend two key elements of the regulations: the caps on per-minute rates for intrastate calls — the regulations set rates as low as 11 cents per minute — and the methodology that the commission used in crafting those rates. According to prisoner rights advocacy groups, intrastate calls make up approximately 80 percent of all prisoner calls.

The Justice Department on Feb. 2 told the court it would defer to the agency's decision.

The intrastate rate caps set by the 2015 regulations were put on hold by the DC Circuit while it considered the case.



But the FCC's decision to step away from the rate caps didn't end the litigation. The DC Circuit went ahead with arguments scheduled for Monday, with an attorney representing prisoner rights advocacy groups taking up that defense. The commission is still defending parts of the 2015 regulations that limit fees for other services that are part of the prison phone call system, such as setting up an account or getting billing statements, as well.



The change in the government's position proved confusing at times for both the lawyers and the judges Monday, as they grappled with the the FCC's decision to switch sides. The arguments touched on how much legal weight the judges should give the FCC's Jan. 31 letter; whether the court should vacate the regulations or send them back to the FCC for further action, if the judges found the regulations were unlawful; and what the court should do about a revised version of the regulations the FCC adopted in 2016, which are being challenged in a separate case.

"This case is really strange," Judge Laurence Silberman, one of the three judges hearing the case, said at one point.



Michael Kellogg, arguing for the phone service providers, told the judges that the FCC had wrongly grounded its authority for setting the rate caps in a section of federal law that called for providers to be "fairly compensated" — a law that Kellogg said that was intended to protect providers, not to give the FCC broad authority to limit rates.

Between the costs of providing phone services and the "site commissions" providers had to pay state and local governments as part of their contracts, the rate caps put the providers "under water," Kellogg said.



The court also heard from Oklahoma deputy solicitor general Mithun Mansinghani, representing a group of state and local governments, who argued the FCC was wrong not to include the site commissions in calculating call rates. In the 2015 regulations, the Democratic majority found that site commissions distorted the market for prisoner phone call services, and wanted to discourage them, without an outright prohibition.

Mansinghani said state and local governments took a risk in providing phone calls to prisoners — inmates could make calls that furthered criminal activity, he said — and in return should be able to balance that risk by using phone services to generate revenue.

Andrew Schwartzman of the Institute for Public Representation at Georgetown University Law Center argued for the prisoner rights advocacy groups. He said that when the law stated that phone call providers should be “fairly compensated," that was not the same as saying that they should be "unfairly overcompensated."

The FCC's Jan. 31 letter, announcing it would not defend the caps, didn't end the case because the regulations were still in place, Schwartzman argued. The revised regulations in 2016 also didn't knock out the case, he said, because although the new version took into account site commissions if they were related to the actual costs of phone call services, it didn't change the earlier legal conclusion that site commissions unrelated to costs were unreasonable.

The 2016 revisions slightly increased some of the rate caps. Phone service providers filed a new set of cases in the DC Circuit challenging those regulations, which were consolidated into one case. The court put those regulations on hold as well.

In early January, the DC Circuit had asked the parties in the fight over the 2015 regulations if the court should delay arguments, given the "impending" changes in the FCC's makeup. Two of the three judges on the panel ultimately decided the court should hear arguments. Silberman disagreed, writing at the time that it was "silly" to go forward because it was clear that the soon-to-be majority had opposed the regulations.

Judges Harry Edwards and Cornelia Pillard also heard the case.

