Alabama seeks to curb high cost of prison and jail phone calls

Alabama Public Service Commission caps phone rates and limits fees charged for phone calls from correctional facilities.

by Aleks Kajstura, October 9, 2013

In a sweeping proposal to rein in the exorbitant costs of calls to people in jails and prisons, the Alabama Public Service Commission seeks to cap all call rates and place strict limits on fees and other charges. We are particularly happy to see this comprehensive proposal addresses fees because, as we explain in our recent report, we found that fees account for 38% of the money spent on calls from correctional facilities.

The proposed rules seek to cap calls at $0.25 per minute, and video visitation at $0.50 per minute, noting that “[a]ffordable VVS [Video Visitation Service] rates are in the best interests of Alabama inmates, their families, and the confinement facilities.” (Video visitation still accounts for only a small part of communication with family members in jail and prison, but this cap is an important component of regulation because video visitation is a quickly growing service.)

We have previously identified commissions paid to correctional facilities as a major factor in the exorbitant rates charged for phone calls in jails and prisons, and the proposed rules similarly blame commissions for the high rates and fees charged by ICS (Inmate Calling Services) companies. The Commission found that “[e]ither ICS providers are operating at a loss, or are generating revenue by means other than inmate calls, or are shielding some portion of ICS revenue from commissions.” Furthermore, the commission found that “unnecessary or excessive ICS provider fees decreases the amount [of funds] devoted for inmate calls and reduces commissionable revenue.” To put it simply, high fees hurt incarcerated people as well as jails.

First, the Commission proposes to lower the rates charged for making or accepting a call, proposing a cap of $0.25 per minute. The Commission concluded that decreasing the rates charged for phone calls doesn’t hurt the companies’ revenue because call volume increases to make up for the lower per-minute revenue. The Commission’s research supports their analysis—for example the commission found that a 46% decrease in the per-minute rate for calls charged by one Alabama ICS provider resulted in no change in revenue.

To address their concerns about the high cost of calls padded by fees, the Commission proposes to limit fees to the actual costs incurred by the ICS companies, and the proposed rules would require all fees to be pre-approved by the Commission. The Commission takes a strong stand against inflated fees, stating “fees for ICS service are intended only to recover actual costs incurred by the ICS provider. They are not a profit center for the service provider nor are they to be a source of commissionable revenue for the inmate facility. Any evidence to the contrary constitutes tacit admission that the approved fees are above provider cost.” In our report, we analyze how ICS companies profit through high fees negotiated with money transfer companies such as Western Union. The Commission addresses the practice of fee sharing between the phone and money transfer companies by proposing to collect information on fees charged by money transfer services, and require justification for any “anomalies”.

The Commission proposes to cap fees charged for various payment methods, and would require payment by check or money order to be accepted free of charge. The commission also blasts the ICS providers for charging extra fees for using prepaid services: “The inherent cost savings associated with debit and prepaid service was cited by ICS providers as justification for seeking Commission approval to introduce debit and prepaid service. It is, therefore, incomprehensible that providers should now insist on charging these customers for the ‘privilege’ of using a service established for the provider’s benefit.” In addition to proposing caps for payment processing fees, the commission wants to eliminate any limit on the amount of money that can be deposited at a time, observing that “[s]uch artificial barriers deprive the customer of available ‘economies of scale’ with little increase in the provider’s actual costs. The staff believes such ceilings can be used to force customers into paying the provider’s processing fees more frequently.”

While acknowledging the need for various forms of payment for ICS services, the Commission proposes banning “text to collect” while reducing the cost of “pay now” calls. As we explain in our report, the companies use these unregulated “single call programs” to charge up to $15 for a minute-long call, taking advantage of vulnerable consumers in difficult situations.

The Commission also seeks a $2 cap on fees for sending customers a paper bill; this would prevent companies like Securus from charging $3.49 for a monthly statement. Many phone companies also charge fees for compliance with the law. Such “regulatory cost recovery fees” would be barred under the proposed rules: “Should the FCC specifically authorize a regulatory cost recover fee for ICS providers, the Commission will consider its applicability. In the interim, the Commission does not authorize such a fee for intrastate service.”

The proposed rules would also require greater transparency for customers through mandatory disclosure of rate and fee information through companies’ websites. Among other things, the companies will have to disclose available services, rates, fees, tax information, refund procedures, and customer service contact information. Additionally, “ICS providers shall fully inform customers on their websites of all the payment methods available, the payment processing charges associated therewith, including the money order and check payment options available at no charge, and the estimates time required to establish ICS service applicable to each payment option.” Gathering this basic information for our reports took us months, even with our research experience, so this requirement would be a great step toward making this very basic information easily accessible to family and friends who pay the bills.

In addition to charging customers to deposit their money, the phone companies also charge refund fees when someone wants to collect their unused balance. The Commission proposes to put an end to that practice, noting that its unfair when “providers not only avoid uncollectable expenses, they benefit from the interest-free utilization of customer owned funds.” The commission proposes to require that “ICS providers will be proactive in informing customers of procedures for refunding unused debit and prepaid balances. ICS customers will be refunded their unused balances in full.” That includes a ban on inactivity fees. The only company we know of that already follows these practices is Pay Tel, who provides an automatic refund after 6 months of inactivity.

In another proposed regulation that falls in the category of “this shouldn’t need saying,” the Commission would ban phone companies from charging taxes on phone calls up front when the money is first deposited, before any calls are actually made. As we explain in our report, Telmate (an ICS provider) has particularly egregious practices in this area—Telmate lumps fees and taxes together, and charges them in a non-refundable prepayment process.

The Commission is seeking comments on these new proposed rules through November 8, so we’ll submit our research and keep you updated.