In Global Tel*Link v. FCC, (1) the United States Court of Appeals for the District of Columbia Circuit granted in part and denied in part petitions for review of the FCC's order regulating inmate calling services ("ICS") by setting permanent rate caps and ancillary fee caps for interstate and intrastate ICS calls. (2)
The Communications Act of 1934 ("1934 Act") granted the FCC regulatory authority over interstate telephone services, but left the regulation of intrastate telephone services primarily to the states. (3) This authority over interstate telephone services includes the authority to ensure all charges related to interstate calls are "just and reasonable." (4) The 1934 Act includes a presumption against the FCC's assertion of regulatory authority over intrastate communications. (5) However, the Telecommunications Act of 1996 ("1996 Act") gave the FCC some authority regarding intrastate activities. (6) The 1934 Act's presumption against FCC authority over intrastate communications is still in effect where Congress has remained silent, meaning that the FCC cannot regulate an aspect of intrastate communications that is not governed by the 1996 Act on the grounds that it has an ancillary effect on matters within the Commission's primary jurisdiction. (7)
In an effort to promote competition among payphone service providers, Congress enacted [section] 276 of the 1996 Act, which grants the FCC the authority to regulate, "inmate telephone services in correctional institutions, and any ancillary services." (8) This section further authorizes the FCC to act in a manner that promotes competition in the market. (9) Section 276 also preempts any state requirements that are inconsistent with FCC regulations pursuant to that section. (10)
Correctional facilities obtain telephone services through long-term exclusive contracts, for which payphone providers submit bids. (11) Site commissions, which usually consist of 20% to 63% of the provider's profits, are given considerable weight in a correctional facility's decision to award an ICS contract. (12) Once these contracts are awarded, competition ceases for the duration of the contract and any subsequent contract renewals, granting the ICS provider a locational monopoly. (13) The cost of the site commission is passed on to the inmates and their families. (14)
Concerned with what the FCC viewed as a "prime example of market failure" and ICS fees, the FCC set permanent rate caps for interstate and intrastate ICS calls and imposed other restrictions on ICS providers. (15) The FCC set the rate caps using a ratemaking method based on industry-averaged cost data, which excluded site commissions. (16) Later, the...