Lowering Prison Phone Rates Poses Complex Challenges for FCC

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By Paul Barbagallo

Once considered doable, lowering the rates for telephone calls that many of the nation's 1.6 million prison inmates make to stay in contact with their friends and families has proven to be a rigorous and challenging task for the Federal Communications Commission.

The biggest question the FCC now finds itself grappling with is whether to impose a rate cap, which would provide a welcome reprieve for the loved ones of prisoners who pay as much as $17 for a 15-minute call.

Another question is whether that new rate should be applicable to both interstate and intrastate calls, the latter of which has been the province of state regulators, not the FCC.

A third and perhaps thornier question is whether the agency should eliminate, or at least set new terms for, the “commissions” paid by the telephone companies to the state corrections departments in what amounts to a legal kickback and the single biggest contributor to the high rates.

“We've got our work cut out for us,” acting FCC Chairwoman Mignon Clyburn warned in remarks during a July 10 workshop at agency headquarters on the matter (134 TCM, 7/12/13). “It's not as simple as just reducing rates. We need to do so in a way that doesn't jeopardize any security concerns or drive prices down so low that providers leave the market or service is degraded.”

Continuing, Clyburn added: “Of the many complex issues to tackle are the costs to provide service in small facilities versus large ones and the argument that the rates should consider those costs. There's the impact on all rates--both local and long distance. And there are ongoing contractual issues--would the commission affect rates in current contracts or only once a new contract is out for bid? These complicated issues will require a collective engagement. Specifically, the FCC and the states need to work together on this one.”

FCC Guided by 'Just and Reasonable' Standard

The statutory provision that will govern any FCC action is Section 201(b) of the Communications Act, which states that “all charges, practices, classifications, and regulations for and in connection with communication service shall be just and reasonable, and any such charge, practice, classification, or regulation that is unjust and unreasonable is declared to be unlawful…”

Lee Petro, counsel at Drinker, Biddle, and Reath LLP who is representing the woman who filed the original petition for rate reform with the FCC--Washington, D.C. resident Martha Wright--said the statute clearly gives the agency the authority to regulate prison phone rates and fees, and also to address the issue of commissions.

“We have seen other cases where the FCC has been very involved in setting rates and terms of contracts,” Petro told BNA. “There's really no reason why you would draw the line in this case.”

Regulation of Commissions Urged

For one, Petro explained, “practices” could easily be interpreted to cover “commissions,” even though the agency might not have to go that far.

“The FCC should not get tied up and distracted with the commissions issue,” he said. “Companies and counties will still get their money with a new lower capped rate.”

To explain, he cited a recent contract inked between Telmate LLC and the Alabama Department of Corrections, in which Telmate has agreed to offer a flat rate for interstate and intrastate calls and still pay an 82 percent commission.

“If that is a good deal for them, why are we even talking about commissions?” Petro said. “The rates are simply too high.”

According to the FCC, typical collect calls from prisons require on average a $4 connection fee and can cost nearly 90 cents per minute, with wide disparities across states. For example, the costs for a 15-minute interstate call are $6.65 in California, $6.45 in Texas, $2.04 in Montana, and $16.55 in Idaho.

Two companies--Global Tel-Link Corp. and Securus Technologies Inc.--make up 70 percent of the correctional phone services market in the United States.

“In order for companies to enter this market, they must absorb what they pay into commissions,” said Clarissa Ramon, government affairs and outreach associate at the public interest group Public Knowledge, in an interview with BNA. “It's not a market you can easily enter, and it gives the FCC more reason to step in and provide more regulation.”

Concerns Raised About Security

During the FCC-hosted workshop last week, the agency heard plenty of opposition from Richard Torgersrud, CEO of Telmate, who suggested that companies like his may go out of business if the FCC mandates a uniform low rate. He argued that the extra charges are necessary to, among other things, pay for security screening of inmate calls.

Costs “vary dramatically” from facility to facility based on size and geographical location, Torgersrud also stressed during the workshop.

Such differences make the FCC's reform effort all the more difficult.

“Doesn't it lead potentially to some strange dichotomies if in fact the FCC moves on interstate rates and you have a state that's resistant and won't move on intrastate rates?” said Vermont Public Service Board Commissioner John Burke at the FCC workshop.

Since being sworn in as acting chairwoman in May, Clyburn has made prison phone rate reform a high priority. At this point, however, it appears that rules may not be finalized until late summer at the earliest.