Federal Communications Commission’s (FCC) May 24, 2021, report and approved order on interstate inmate calling service (ICS) pricing.
At 12 cents a minute for prisons, and 14 cents a minute for bigger correctional facilities with an average daily population (ADP) of 1,000 or more, ICS interstate call costs will be limited at 90 days following their release. The restriction of 21 cents per minute remains in place for smaller prisons, as it was in 2013. Securus and Global Tel*Link (GTL) will continue earning huge profits off the backs of inmates and their families as a result of all of this.
Two 2017 court judgments against the FCC in favor of two big ICS providers overturned the FCC’s prior cap formula, which was used to create the previous cap. The new caps are determined by a different formula from that used to set the previous ceiling, which the US Court of Appeals for DC vacated (DC Cir. 2017). Section 276 of the Telecommunications Act of 1934 stipulated that service providers could not make money on every call if they used an industry-wide average to calculate their projected provider costs.
In order to define a “zone of reasonableness,” within which the new rate limitations are set, the new methodology adds one standard deviation to the industry mean. For locations where their real costs prevent them from providing service financially, providers can apply for an exception from the limitations through the FCC’s waiver procedure. FCC thinks it has addressed the D.C. Circuit is issues in this manner.
In addition, the new regulations do away with the separate cap on collect calls. Since there are so few collect calls these days, the FCC concludes, based on information provided by ICS providers, that the cost difference between delivering them and other types of calls is insignificant. As a result of decades of prepayment for phone calls by inmates and their families, there has been a significant decrease in the usage of collect calls.
Third-party costs that a service provider includes in its invoice are now limited to $6.95 per transaction. The Prison Policy Initiative also endorsed this provision since it pays the expense of adding money to a prisoner’s pre-paid calling account via a Western Union transaction.
Similarly, the FCC has reinstated the regulation that was thrown out by the DC Circuit Court in relation to its prior rate-caps order. A supplier can pass these costs through to its customers without having to add any markup to their invoices, as the court declined to decide on the matter.
Intrastate calls are now subject to interstate limitations unless providers can fairly separate the cost of supplying them from interstate calls in their accounting systems. This is in spite of the requirements of Section 276 that limit FCC power only to international communications. A cost segregation based on information provided by providers to the FCC, which requested it after the D.C. Circuit Court halted the FCC’s earlier attempt to extend interstate limitations to intrastate calls, appears impossible. Outside of the prison phone market, telecom companies do not differentiate between local, interstate, and intrastate calls and simply give flat rate monthly pricing for all phone calls. Discernment is formed only in the setting of jail.
Intrastate prices are actually higher than interstate rates in 45 states, according to the FCC findings. At least two times as high was the rate in 33 of these states. There were 27 states where intrastate calls cost more than 25 times as much as interstate calls for the “first minute.”
With rate limits and transaction fee pass-throughs, suppliers can also reclaim a percentage of any kickback payments they must to the site by law (prison or jail). A ten percent charge for each call is mandated by law in Tennessee, and that money is then sent to the prison or jail. One of the most significant victories for the telecom firms is that it permits them to pass on to their customers the costs associated with paying prison and jail authorities in exchange for monopoly contracts, a practice that has long been illegal.
The FCC, on the other hand, views such “site commission” payments as a portion of “local monopoly profit.” A maximum of two cents per minute, on top of the 12 or 14-cent rate ceiling, is added to the real expenses incurred by the operation in the prison or jail, which are now passed on to customers. No prison or jail has been able to describe exactly what the costs of “security” are in the context of the phone after years of procedures.
For the FCC, this difference was developed in an effort to determine what amount of these payments are meant to repay the facility for its real expenditures, and what portion may be aimed to gain a monopoly-service contract. While the former may be reclaimed, the latter cannot, despite the fact that the technique is widely practiced. Because “everyone is doing it,” the cost of site commission payments is not recoverable, as stated clearly in the ruling. However, this injunction does little to curb the practice, since the lack of customer choice and competition is what drives and feeds the kickbacks to begin with.
Because telcos would be forced to compete with each other for business from the individuals who actually pay the bills, this argument is meaningless. HRDC has consistently argued this argument with the FCC, but to no avail.
And the FCC is especially hesitant to enable companies that have pledged to pay for contracts by offering their services to recover any site commissions that have been paid out. If the FCC’s research shows that these payments are “excessive and unjust,” they should not be modified to maintain existing profitability levels.
The FCC requested cost proof from providers before enacting its order. The amount of money they received was clearly insufficient for what they needed. Providers employed a broad range of methodologies to determine direct and indirect costs, possibly out of fear of disclosing proprietary information to authorities. In the case of GTL, the largest ICS supplier with a 50% market share, all of its direct costs were comprised of bad debts. Because hedge funds control both GTL and Securus, this should not come as a surprise.
So, the FCC tried to figure out which expenditures were really “indirect” and then divided them out among the various facilities according to “minutes of use.” Because their contracts do not cover a single facility, a number of service providers objected to this approach. Because their own calculations were so shoddy, the FCC punished them for insisting on a different computation.
First time international calls have been limited at the same prices as interstate calls, plus a sum equivalent to the provider’s real cost to terminate the call overseas, as part of the new rule. Securus Technologies, a major ICS supplier, proposed the change, which was adopted into law by this regulation. The Human Rights Defense Center’s proposal to restrict international call add-ons at 5 cents per minute was similarly rejected because of a lack of proof.
The Federal Communications Commission (FCC) is attempting to strike a balance between the right of providers to make a profit and the right of customers—prisoners and their family members—to be shielded from the high pricing that can be imposed by a monopoly.
More than one provider disagreed with claims of monopoly at the facilities in which they operate, saying that they must compete with other providers for the facility’s contract, which was raised in response to the comments phase. As the FCC noted, a successful bid would simply mean larger site commission payments to the prison or jail without decreasing the fees paid by inmates and their contacts. So it is a race to get control of the monopoly, not a race to provide customers with a fair chance to buy and sell.
34 percent of inmates’ families, according to the FCC, had to take out loans in order to keep in touch with their relatives. In view of the established linkages between reduced recidivism rates, better mental health care for inmates, and cheaper costs of imprisonment, this concerned the commissioners particularly.
According to the FCC, the cost of operating in jails is 22% greater than in prisons, with the cost increasing as the jail size decreases. Smaller prisons also have a bigger standard deviation. FCC is not prepared to implement its new criteria for “zones of reasonableness” in smaller jails because of these reasons.
The FCC, on the other hand, is doubtful that the National Sheriff’s Association (NSA) has not already included in certain facility expenditures in its cost projections. For a some time, the new profit caps were the subject of heated debate over whether or not they were unconstitutional government “thefts.” The FCC is adamant that it does not.
But the FCC is sure that decreasing call charges will boost call volume while saving inmates and their loved ones $1.3 million a year over the next decade. Welfare gains of $9 million are more than enough to compensate for the anticipated expenses that providers would experience as a result of the new limitations.
Additional benefits include reduced crime and cheaper foster care expenditures over the following decade, all of which stem from keeping inmates linked to loved ones so that they do not become recidivists.
A total of $32 million has been gained as a result of this. In any case, these numbers were not taken at face value. In the case of GTL, the $6 million cost estimate to adjust to the new laws was a major issue. The FCC, on the other hand, dismissed it because it lacked evidence to back up its concerns.
The Wireline Competition Bureau and the Office of Economics and Analysis were deputized to gather data from all providers, as well as additional data on the cost discrepancies between big and small jails, for a period of 120 days.
Whether or whether facility expenditures alleged to be recovered through site commission payments are actually inflated due to unrelated causes worries the FCC. If a facility’s ICS provision takes a lot longer than expected, it is possible that some of those expenses have already been accounted for elsewhere and are being unfairly exploited to increase recoverable site commission payments. Alternately, it is possible that they are simply fabricating evidence and making things up as they go along in order to retain control of the telecom industry’s uncontrolled revenue flow.
The FCC is also looking for feedback on how to make ICS better for inmates with TRS who are handicapped (telecommunication relay services).
An 18-year bureaucratic battle that began in 2003 when Martha Wright complained that she was being subjected to “excessive” prisoner call rates and filed a federal lawsuit in the District of Colombia challenging those fees has been brought to an end with new regulations. The court ruled that it lacked jurisdiction to hear the case, so it forwarded it to the FCC, where it has sat for over two decades, with only the FCC taking action on occasion. Following a fourth-year “urgency” amendment, the FCC took another five years to issue its first notice seeking comment on rate caps in 2012, leading to its order the following year capping ICS rates at 21 cents per minute for interstate debit and credit card calls and 25 cents per minute for collect. As a result of Human Rights Defense Center’s Prison Phone Justice campaign and other advocacy groups’ efforts, the FCC began taking action on prison phone concerns in 2012.
After a second notice soliciting comments on new rate caps and fees limitations in 2014, new 2015 per-minute call rate ceilings were implemented: 11 cents for prisons, 14 cents for jails with ADP of 1,000 or more, 16 cents for jails with ADP of 350 to 999, and 22 cents for jails with an ADP of less than 350. No extra fees or expenses should be added to prison and jail phone calls, according to HRDC’s long-standing position. Today, many jails are charging less than that amount, and as mentioned in this issue of PLN, Connecticut has become the first state to allow free phone calls to inmates. Doing so has previously been accomplished in prison facilities around the United States.
2016 saw a two-cent-per-minute increase in the maximum on recoverable site commissions. But the D.C. Circuit Court threw out the whole regulation in 2017 and left the 2013 limitations in effect until this new rule was established.