FCC Proposes Cap on Prison Phone Rates, Explores Two Companies' Market Dominance

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By Paul Barbagallo  

The Federal Communications Commission proposed rules Dec. 28 [NPRM, FCC 12-167] that could result in lower phone rates for prisoners and their friends and family members and expanded regulation of a roughly $1.2 billion market dominated by just two companies.

Since 2003, civil rights groups, consumer advocates, and some members of Congress, including House Energy and Commerce Committee ranking member Henry Waxman (D-Calif.), have urged the FCC to act on two petitions by Washington, D.C., resident Martha Wright--one seeking an FCC ban on all “exclusive” inmate calling service agreements and collect call-only restrictions at privately administered prisons, and the other proposing rate caps and a prohibition on “per-call” charges.

In deciding to issue a notice of proposed rulemaking now, the FCC said the “wide disparity” in the rates charged across the country required further scrutiny.

Typical collect calls from prison require a $3.95 connection fee and can cost nearly 90 cents per minute, though there are wide disparities. The FCC found that the costs for a 15-minute interstate call were $6.65 in California, $6.45 in Texas, $2.04 in Montana, and $16.55 in Idaho.

“With seven hundred thousand individuals released every year from these institutions, it is crucial that we do whatever we can to strengthen family ties before these individuals return home,” FCC Commissioner Mignon Clyburn a member of the agency's Democratic majority, said in a statement posted on the FCC's website. “One sure way to realize this is through the provisioning of affordable phone service. The overall costs of not doing so are too great, for those who re-offend place a substantially higher economic burden on taxpayers than any lost proceeds that would result from lower prison phone rates.”

Perhaps most important for advocates of the Wright petition, the FCC's rulemaking notice seeks comment on whether the agency should now impose rate caps as a way to encourage more regular contact between inmates and their friends and family members.

The FCC, in the notice, suggested that the exclusive deals that prisons offer to phone service providers in exchange for commissions create monopolistic conditions.

“Although barriers to entry are low for payphone providers in most locations, a correctional facility typically grants an exclusive contract to a single ICS [inmate calling services] provider for a particular facility, essentially creating a monopoly at that facility,” the agency wrote. “As such, competition exists for ICS contracts but once an ICS provider wins a contract it becomes the sole ICS provider in that facility. Unlike non-incarcerated customers who have access to alternative calling platforms on public payphones, inmates only have access to payphones operated by a single provider for all available services at that payphone. These contracts additionally often include a site commission or location fee paid to the correctional facility.”

According to Standard & Poor's, Global Tel-Link Corp. and Securus Technologies Inc. maintain 70 percent of the correctional phone services market in the United States.

Ultimately, the commission's final rules will hinge on a determination of whether the current rates are “just and reasonable” under Section 201(b) of the Communications Act.

Vote Unanimous.

The decision by the FCC to open the rulemaking won unanimous support. Republican Commissioner Ajit Pai said he would be open to exploring possible solutions to the problem.

“As a general matter, I believe that prices should be set by the free market rather than by government fiat,” Pai said in a statement. “At the same time, however, we must recognize that choice and competition are not hallmarks of life behind bars. Inmates cannot choose among multiple carriers for lower rates. Instead, prison administrators select the service provider, and their incentives do not necessarily align with those who are incarcerated.”

Depending on the prison, inmates can make collect calls or set up prepaid accounts funded by relatives or by their earnings from prison jobs that pay cents per hour.

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