The Phone Corporations That Ruined Fathers Day

On Sunday, some families had to choose between wishing dad a Happy Father’s Day on the telephone and putting food on the table.

by Peter Wagner, June 18, 2013

On Sunday, some families had to choose between wishing dad a Happy Father’s Day on the telephone and putting food on the table. These days, most telephone calls are practically free, but for the 2.7 million kids in the United States who have an incarcerated parent, a call home can break the bank.

Most prisons and jails give their telephone contract to a single company that charges up to $17 for a 15 minute call. Phone bills are high in part because the prisons and jails demand that the phone companies kick back up to 84% of the revenue to the facility, and in part because the Federal Communications Commission has stalled on regulating the industry for more than a decade.

In a normal market, the vendors who offer the lowest price and best service win the contracts; but in the prison phone market jails choose the vendor that promises to charge the highest rates and offer the highest kickback, or “commission.” The jails make the final decision on awarding the contracts, and the poor families who end up paying the bills are left entirely out of the decision.

Charging almost $1/minute may raise short-term revenue for a prison or jail, but it has long-term costs for society. All of the social science research shows that strong community ties are one of the best predictors of success after a person is released from prison or jail, but the prison telephone market threatens those ties. The families of incarcerated people end up paying $1 billion a year for overpriced telephone service, and we all pay for high recidivism rates and less safe communities.

A recent report Prison Policy Initiative report I co-authored, “Please Deposit All of Your Money: Kickbacks, Rates, and Hidden Fees in the Jail Phone Industry,” found that charging $1 per minute for a phone call is just the tip of the iceberg: a network of fees, hidden from the commission system, can double the price of a call. The phone companies rake in additional profit by taking every opportunity to charge customers for “services” such as:

• accepting customers’ money (deposit fees of up to $10/deposit)
• holding on to customers’ money (monthly account fees as high as $12)
• closing customers’ accounts (refund fees of up to $10)

To top it all off, the monopoly contracts allow the prison phone companies to turn bad customer service into a revenue source. In the normal phone market, companies like Verizon and AT&T battle it out over who can lay claim to the largest, fastest and highest quality networks. But here, companies like Global Tel*Link, Securus, and ICSolutions find revenue in *dropping* calls because each call has both a per-minute fee and a per-call fee of up to $4.95. Every single dropped call requires the caller to redial and pay the phone company a new connection fee. These companies have no financial incentive to ensure that calls are not dropped inappropriately and every incentive to drop as many calls as possible. It therefore shouldn’t be a surprise that the dropping of calls is one of the leading complaints from the family members of incarcerated people.

Fortunately, there is a clear solution to fix this broken and exploitative market: the Federal Communications Commission can step in to cap the rates and fees phone companies are allowed to charge in prisons and jails. Low rates in New York and in the federal prison system demonstrate that it is possible for phone companies to offer affordable rates that allow families to stay in touch while also making a profit. The FCC issued a Notice of Proposed Rulemaking in December to ask the companies and advocates a series of questions about the true costs of this industry. The companies largely ignored the FCC’s questions, but a diverse coalition of advocates presented clear evidence that the cost to call home could be quickly made affordable.

Last Friday, the FCC announced that it has scheduled a workshop on July 10 to review, among other things, state reforms of prison calling rates, and to discuss the cost of providing telephone service to the families of incarcerated people. We note that since we released our report last month, two companies have already improved their refund policies, and the second largest company, Securus, has agreed that calling rates are too high and that refund fees are “unwarranted.” We’ll have to see if the industry leader, Global Tel*Link — which was recently purchased for $1 billion from Goldman Sachs — is finally willing to provide useful answers to the FCC’s questions. Regardless, the FCC should act quickly to step in and protect the poorest families in the country from the exploitative prison phone industry.

The prison phone companies have shown that they have no incentive to treat the people paying their bills like customers. Until the FCC acts, we can be sure that the industry will ignore their customers and continue to look solely to their partners in contract and in profit — the jails and state prison systems — for approval.

Update June 19, 2013: Don’t miss the great International Business Times story that links back to this blog post! -Peter