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The FCC Looks into the Prison Telephone Racket

Phone home, go broke.

Update 1:39 p.m. 10.22.2015

The Federal Communications Commission on Thursday approved tight new caps on the cost of making phone calls from jails and prisons, after years of complaints from advocates and families about opaque and burdensome fees.

In a 3-2 vote, the FCC adopted new rules that cap calling rates at 11 cents per minute for prisons and 14 to 22 cents per minute for jails. Previously, with rates of 30 cents per minute or more and other fees, a 15-minute call could cost $17. The rules also limit additional service charges and require ongoing compliance oversight. The new regulations discourage, but do not prohibit, site commissions, in which telephone providers pay a portion of their profits to the prison or jail in order to operate there.

Two of the five commissioners voted against the new rules, saying they overreached the FCC’s legal authority. Prior to Thursday’s meeting, three of the top providers of prison phone services—Securus Technologies, Telmate and Global Tel Link—threatened to sue if the FCC tightened rates and fees without reining in site commissions. The rate caps would leave them unable to offset the payments they give to prisons, and their companies “would suffer irreparable, immediate harm,” industry executives wrote in a letter to the FCC.

At Thursday’s hearing, commissioner Mignon Clyburn lauded the new rules and characterized the prison phone industry as “the most egregious case of market failure I have seen in my 17 years as a state and federal regulator.”

After they are published in the Federal Register, the new rates will go into effect 90 days later in prisons and in six months for jails. The FCC also announced it is considering regulations on prison and jail video visitation, which has many of the same rate structures and fees.

Original Story

On Nov. 21, the Federal Communications Commission published 28 pages of fine print that could overhaul the way prisons operate their calling plans. Until last year, prison phone systems — known within the industry as “inmate calling services,” or ICS — were “a dark little backwater of telecommunication that the FCC was not paying attention to,” says Peter Wagner of Prison Policy Initiative, an advocacy group.

With no regulation, telecom contractors in prisons and jails could charge whatever they wanted for a phone call and tack on fees without limit. In some states, a 15-minute phone call costs as much as $17. Inmates and their families spend $1.2 billion a year on phone calls.

That began to change in 2003, when Martha Wright, a grandmother from Washington, D.C. filed a class action lawsuit alleging that the phone company at the private prison where her grandson was incarcerated charged “exorbitant and unconscionable long-distance rates, which severely burden communication between inmates and their family members and counsel.”

“It’s been times when she did have to choose over paying for her medication in order to talk to me,” said her grandson Ulandis Forte, who ultimately served 18 years for assault before his release in 2012.

The courts ruled that the proper jurisdiction for Wright’s suit was the FCC and transferred it there as a petition, where it languished for a decade. Then in 2013, the FCC, in its own words, “took long overdue steps to provide relief to the millions of Americans paying unjust and unreasonable interstate inmate phone rates.” The most important of the preliminary rule changes that went into effect earlier this year was a rate cap on interstate calls. The FCC said companies could not charge more than 21 or 25 cents a minute, depending on the type of call.

But this ruling did not affect calls placed within a state, which account for many of calls the placed from inside prisons. Now the FCC is considering rate caps on intra-state calls, as well as other regulations and restrictions that would “ensure that ICS rates are just, reasonable, fair, and accessible to all Americans,” according to their proposed rule change.

Calling services from inside a facility are usually provided by a single contractor selected by the corrections department through a competitive bid. In bidding for these contracts, companies typically promise to pay a certain percentage of their profits back to the department. The average “site commission” is 48 percent, but it can be much higher: in a new Arizona contract, the telecom company CenturyLink agreed to pay a 94 percent commission rate, according to a Prison Legal News analysis.

These payments create “reverse competition,” the FCC says, in which the financial interests of corrections departments are aligned with the seller (the companies) rather than the consumer (the inmates). FCC calls these kickbacks “the main cause of the dysfunction of the ICS marketplace” because they drive up per-minute rates and cause companies to look for other ways to make money, like fees. These can include costs to deposit money in an inmate’s account; monthly account maintenance fees; fees to connect each call; and fees to have a balance refunded when the inmate leaves prison or transfers between facilities.

According to an analysis by the Prison Policy Initiative, 39 cents of every dollar spent on inmate calls — $386 million a year — cover fees. An additional $460 million each year goes back to states or corrections departments.

Bethany Fraser is a mother of two whose husband has been in Maryland state prison since 2011; he’s about halfway through an 8-10 year sentence for killing a bicyclist while driving drunk. In Maryland, intrastate rates are 30 cents per minute, subject to between 65 percent and 87 percent in site commissions. The contractor, Global Tel*Link, also charges $4.75 to set up a prepaid account, and then $2 to add additional funds to the account. “I tried to research, and it would say, ‘press 9 for more information on this call and the cost,’” says Fraser. “I was trying to figure out, how much does this cost so I could create some sort of budget. I couldn’t even really get the information.” Fraser testified at the FCC in 2013 about the financial burden these calls — which can add up to hundreds of dollars a month — put on her family. Having lost half their income when her husband went to prison, Fraser and her kids have had to move four times, into increasingly smaller homes, to scrape by.

Calls and emails to request interviews with several of the ITC contractors, including Global Tel*Link, were either declined or not returned, but several of these companies submitted filings to the FCC in response to their request for comment. “Inmate calling services are not susceptible to one-size-fits-all federal regulation, nor are they required to be,” Global Tel*Link wrote. “Among the unique features that correctional facilities require are costly and increasingly sophisticated security elements — including automated call screening, biometric caller verification, real-time recording and monitoring, fraud control features, and more.”

Eight state departments of corrections have eliminated commission site fees on their own, and these states have some of the lowest calling rates in the country. (A 15 minute phone call from a prison in New Mexico, which eliminated site commissions, is 65 cents.) In its new proposed rule change, the FCC proposes to limit or prohibit these commissions. It also contemplates limiting or eliminating ancillary fees and charges unrelated to the cost of actually delivering phone service. The proposal is open for public comment until January 5.

More than 2.7 million children, like Fraser’s, have a parent in prison, and correctional officials increasingly believe that making it easier for inmates to stay in touch with their families decreases recidivism. “Ninety percent of our inmates are going home one day and they need to have that support mechanism,” says Sue McNaughton, spokesperson for the Pennsylvania Department of Corrections, which recently announced that the cost of inmate phone calls will be cut from 20 cents to 6 cents per minute. The state’s new contractor, Securus, still charges “payment processing fees” of up to $11.95 per deposit.

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