The Federal Communications Commission building in Washington. (Andrew Harnik/AP)

A federal appeals court on Tuesday said regulators went too far in trying to rein in the high cost of phone calls for prison inmates.

In a 2-1 decision, the U.S. Court of Appeals for the D.C. Circuit sided with phone service companies in finding that the Federal Communications Commission had exceeded its authority.

The ruling is a setback for prison reform advocates who have been fighting for years to reduce the prices imposed by a handful of private companies.

“It is profoundly disappointing and will result in serious continuing harm to untold numbers of families and loved ones of incarcerated people,” said Andrew Schwartzman, an attorney with Georgetown University Law Center’s Institute for Public Representation, who defended the rate caps in court. “We have a lot of work to do at the FCC.”

The court was asked to decide whether federal regulators have the authority to cap prices for in-state inmate calls that the judges noted can cost as much as $56 for a four-minute call in some locations.

In general, inmates making calls from state and federal facilities must have accounts with private companies to hold money deposited by family members. The companies then share some of the revenue with the facilities.

In its 39-page opinion, the court acknowledged the “extraordinarily high” rates and lack of competition, but said the commission had misread the law and based its rate caps on “patently unreasonable” calculations.

The majority found the law specifically “directs the commission to ‘ensure that all providers are fairly compensated’” for in-state calls and calls between states, wrote Judge Harry T. Edwards, who was joined by Judge Laurence H. Silberman.

In her dissent, Judge Cornelia T.L. Pillard disputed the assertion that “fairly compensated” is not about fairness to the consumer.

“I cannot agree that a company is ‘fairly compensated’ … when it charges inmates exorbitant prices to use payphones inside prisons and jails, shielded from competition by a contract granting it a facility-wide payphone monopoly,” Pillard wrote.

The issue was first raised more than 15 years ago by a retired nurse in the District who could not afford to call her incarcerated grandson. Federal regulators had pushed since 2013 to lower the costs, saying the prices made it too hard for relatives to stay in touch.

But the commission went in a different direction following a change in the balance of political power at the FCC. Soon after President Trump tapped a new chairman, and just before oral argument at the D.C. Circuit in February, the commission told the court it was abandoning its defense of the agency’s own rules.

The new FCC chairman, Ajit Pai, had voted against the rate caps as a sitting Republican commissioner, and the FCC’s lawyer told the court that the agency does not have the authority to cap in-state calls that account for more than 80 percent of calls.

In a statement Tuesday, Pai said he would work with colleagues, Congress and “all stakeholders to address the problem of high inmate calling rates in a lawful manner.”

A number of states, including New Jersey and New York, have independently lowered rates for inmates. But a coalition of law enforcement officials joined the private companies in opposing the caps because they depend on the shared funds or “site commissions.” Phone-service companies pay more than $460 million in commissions annually to correctional facilities, according to a brief filed by a coalition of advocates for inmates and their families.

The D.C. Circuit found that at least a portion of the site commissions are a legitimate cost to the companies of providing calling services.

In a minor victory for inmate advocates, the court said that the commission can limit additional fees specifically connected to interstate, but not intrastate, calls.

FCC Commissioner Mignon Clyburn, who first pushed for lower rates in 2013, called the court’s decision “deeply disappointing.”

“It is a sad day for the more than 2.7 million children in this country with at least one incarcerated parent,” she said Tuesday in a statement. “But the families who have experienced the pain, anguish and financial burden of trying to communicate with a loved one in jail or prison, are still counting on us, so we will press on.”