CenturyLink and Pay-Tel offer a peek down the rabbit hole of the prison phone industry

Where 96% isn't 96% and clients aren't clients.

by Leah Sakala, September 2, 2014

For most companies, forking over 96% of revenue would be a disaster. But prison and jail telephone companies don’t operate in a normal market by any stretch of the imagination.

In a recent letter to the Federal Communications Commission (FCC), prison and jail phone company CenturyLink explained that it won its contract with the Escambia County, Florida, jail by promising to kick 96% of call revenue back to the jail. To make up for this loss, CenturyLink explains, the company relies on “ancillary fees to cover costs that otherwise could not be recovered in per-minute rates after deducting the County’s required commissions.” (For more on how commission payments and ancillary fees go hand in hand, check out our second report on the industry.)

Now, a 96% kickback/commission must sound very attractive from a sheriff’s point of view. But, as Pay-Tel founder Vince Townsend explained at last month’s FCC workshop, hidden fees can put sheriffs at a major disadvantage. Because the fee revenue is kept separate from the calling revenue, fee revenue lies entirely outside of the commission system. In other words, the only reason why CenturyLink can promise to kick back 96% of the calling revenue to Escambia County is because the company is collecting 100% of the fee revenue. And while CenturyLink claims to have disclosed all its ancillary fees as part of the contract negotiation process, corporate transparency is the exception in this market, not the norm.

Mr. Townsend pointed out that even a sky-high commission percentage turns out to bring in far less money to a correctional facility once the telephone company has kept the fee revenue for itself. Using $100 of gross revenue as an example, he explained:

I couldn’t do this to my clients*…. If I was scraping 60% of the money off the top [in fees] before I paid them commissions, I couldn’t do that. I respect them too much to do that because it is total deception to go in to somebody and say, “Oh, I’m going to give you 80%!” Well, what’s the 80% on? It’s really on $40. What’s 80% of $40? [The actual commission percentage is] 32%.

But one day they’ll wake up [about how hidden fees reduce commissions], and when they do I’m glad I’m on my side and not doing that.

Now, from the companies’ perspective charging high rates and hefty fees sounds like a profitable way to exploit a literally captive market. It turns out, however, that using some of the techniques found in normal markets can be good for business *and* good for families and communities. The experience of states like New York has found that making phone calls more economically accessible stimulates business. Other prison and jail communications companies are choosing strategies like offering discounts on high-volume holidays to introduce their services to new customers, and lowering fees to increase use of their services.

These normal-market-type tactics are unfortunate anomalies in the prison phone industry, but the movement for fair prison and jail communication policy is making steady progress. The FCC’s first order ruled that the prison and jail phone service fees must be based on the actual cost of doing business, which does not, the order emphasized, include handing over the majority of calling revenue to prison and jail systems. On the state level, places like Alabama are also taking statewide action to rein in the industry’s fees and kickbacks.

Be sure to stay tuned to see how the FCC and states’ next steps keep the ball rolling towards a fairer and more just prison and jail phone market.

*Just to clarify, Mr. Townsend refers to the correctional facilities as his “clients,” but of course who’s paying all the money that is turned into kickbacks and fee revenue? The families of incarcerated people.

PPI’s Aleks Kajstura presents at FCC workshop on further regulation of the prison phone industry

Aleks Kajstura gave an invited presentation of our research on two different workshop panels, highlighting the importance of fees and comprehensive reform.

by Leah Sakala, August 20, 2014

While the Federal Communications Commission’s historic ruling to rein in the prison telephone industry last summer was a huge step forward, there’s lots more to be done. That’s why last month the Commissioners held a Workshop on Further Reform of Inmate Calling Services to gather additional information from experts and industry participants (transcript).

Prison Policy Initiative Legal Director Aleks Kajstura gave an invited presentation of our research on two different workshop panels, highlighting the importance of addressing the wide spectrum of “ancillary fees” in regulation and explaining why fair phone charges must extend to both prisons and jails:

A particular highlight from the workshop was Darrell Baker, the Director of the Alabama Public Service Commission, who described his Commission’s strong new regulation to bring down prison and jail phone call rates and fees in his state.

We commend the FCC for continuing to work towards comprehensive regulation of this deeply broken industry. As we’ve recently blogged, even after the FCC’s initial order was issued last year industry players have wasted no time raising charges and devising new ways to put basic communication out of reach for the families of incarcerated people around the country. And, as Congresswoman Eleanor Holmes Norton pointed out in her remarks at the workshop, a lot is at stake in the struggle for fair communications policy:

We have documented that of all the approaches, the many approaches that are used to reduced recidivism, the one that we can document has the greatest effect is stimulating communication from behind those bars with people in the greater society who will support them and who love them.

Stay tuned (and sign up for our newsletter for the latest updates!) as we continue to fight alongside our colleagues for fair prison and jail communications policy.

John Oliver takes on the U.S. prison system

Awesome piece with one small mistake on the difference between prisons and jails.

by Peter Wagner, August 4, 2014

In case you missed it, two weeks ago comedian John Oliver did an amazing 17 minute piece on the U.S. prison system on his Last Week Tonight program:

Now as Cari Gervin notes on the Metro Pulse blog, one thing that Oliver gets wrong is the difference between prisons and jails:

It’s a good piece, and it should make you infuriated—the state of mass incarceration in this country is atrocious. Privatizing—and profiting from—locking up people is really screwed up. But there’s one point Oliver misses. Right after showing a clip from Sesame Street, Oliver says, “At least Sesame Street is actually talking about prison. The rest of us are much happier completely ignoring it, perhaps because it’s so easy not to care about prisoners. They are by definition convicted criminals.”

Actually, 428,000 of the people locked up each day are presumed innocent. They have either just been arrested and are trying to make bail, or they are too poor to make bail and are being held until trial. Now this population is a portion — 18% — of the 2.4 million people who are locked up, but the speed at which people churn through jails adds up to big numbers: jails lock up 12 million people over the course of a year. That’s a lot of people, and as Cari Gervin notes: “conditions in local jails are often much worse—and more restrictive—than state or federal prisons”. She attributes the conditions to the fact that “municipal budgets are even more strapped than state budgets” although I’d make the point that because jails are all operated independently, there is less oversight and less attention paid to identifying and following best practices.

Now one of the worst practices is the idea of making families pay to visit their loved ones, and that’s something that to my knowledge exists only in jails, as I can’t imagine a state prison system banning in-person visitation and requiring people to use expensive paid video visitation instead. But sadly, a number of jails do this, and that’s the subject of Cari Gervin’s excellent cover story in Metro Pulse about the Knox County, Tennessee jail.

Toward the end of the Last Week Tonight video, Oliver sits on a stoop talking to puppets about their parents in jail. “That’s actually a zoo, that’s different,” Oliver says to an crocodile complaining that his “daddy’s in jail and people pay money to see him.”

The comedic effect gets lost when you consider just how much money people have to pay to see their incarcerated human relatives.

FCC hears how high cost of calls can end parental rights

David Carliner Award Finalist Barbara Graves-Poller tells the FCC that New York prison phonecall price gouging routinely causes people to lose their parental rights.

by Peter Wagner, July 24, 2014

One of the highlights of the American Constitution Society Conference in Washington DC was quite serendipitous. I was at the conference to accept the David Carliner Public Interest Award, and I had the opportunity to have an amazing dinner with David Carliner’s family and the finalist for the award, Barbara Graves-Poller. Barbara mentioned her travel plans for the next day, and I recognized that on my way to a family event I’d be driving directly past the same New York City airport she needed to get to. I offered her a ride, and we had a long conversation about the intersections between our work that led to three collaborations. First I’m excited to announce that Barbara joined the Prison Policy Initiative advisory board. Secondly I’d like to share how Barbara’s work in family law provided powerful support to our work on regulating the prison phone industry. (Stay tuned for collaboration #3.)

Barbara is a supervising attorney at MFY Legal Services in New York City, where she specializes in providing legal representation to “kinship caregivers”, i.e., “grandparents and other relatives caring for children whose biological parents are unavailable due to incarceration, illness, death or other causes.” In so many cases in our poorest communities, incarceration is what rips families apart.

Now, I’ve been working to bring fairness to the prison and jail telephone industry for a long time, but what Barbara said next still shocked me: In New York, high phone costs can cost incarcerated parents their parental rights.

Barbara sent a three page letter to the Federal Communications Commission, alerting them to this important additional reason why further reductions in the unnecessary cost of calling home from prison or jail is necessary. The whole letter is a must read, but check out this excerpt first:

I. Inmates’ Relatives Often Serve as Informal “Kinship Caregivers” for Children and Cannot Bear the Expense of Uncapped Collect Calls

…

Taken together, the poverty and lack of social supports that define the kinship caregiver community make unreasonably high telephone bills particularly burdensome. As a consequence, low-income family members may be discouraged from taking in children with incarcerated parents, thus resulting in an increase in the foster care population, or restrict communications between children and their parents in prison.

II. Inmates Who Cannot Communicate with their Children or the Children’s Caregivers Routinely Lose their Parental Rights

Under New York Domestic Relations Law S 111(2), a parent who fails to visit or communicate with his or her child or designated caregiver for six months is deemed to have forfeited his or her parental rights. See In re Annette B., 828 N.E.2d 661 (N.Y. 2005). Incarcerated parents are not exempted from this rule and bear the burden of convincing a judge that they were unable to communicate with their children or provide financial assistance while in prison. Furthermore, nothing in the Domestic Relations Law requires foster care agencies to facilitate communications between incarcerated parents and their children. Indeed, many foster care agencies currently do not accept collect calls. Foster parents have discretion to accept collect calls but are not required to incur such expenses as a condition of caregiving.

Accordingly, inmates with children in the foster care system and kinship care arrangements risk losing their parental rights if they or their children’s caregivers cannot afford to pay for telephone communications. Time and again, New York courts terminate parental rights of currently and recently incarcerated parents because of the parent’s failure to communicate within the statutory period set forth in the Domestic Relations Law. In In re Yamilette MG., 986 N.Y.S.20 485, 487 (N.Y. App. Div. 2014), for example, the appellate court made clear that a father’s “incarceration did not absolve him of the responsibility to provide financial support for the child, according to his means, and to maintain regular contact with the child or the petitioner.” It made no inquiry into the father’s ability to afford calls while incarcerated, nor did it require proof that the foster care agency helped to facilitate communications between the father and child….

Thank you, Barbara, for sharing your experience with the FCC, and thank you Carliner Family and the American Constitution Society for making this connection.

And stay tuned for what the FCC does next.

Alabama to rein in third-party payment profit sharing in prison telephone industry

Alabama’s new rules will force prison phone industry to end kickbacks from Western Union/MoneyGram.

by Peter Wagner, July 21, 2014

On July 7, the Alabama Public Service Commission announced new rules to go into effect on October 1 to cap the rates and fees charged by the prison and jail telephone industry operating in that state.

The new rules are notable for addressing not just the high rates charged to families for each phone call, but also for the comprehensive way in which Alabama addresses the additional fees that families must pay to open accounts, deposit money, have accounts, and receive refunds. Fees are complicated and get less attention than the rates, but fees are important. As we explain in our Please Deposit All Your Money report, we found that fees account for 38% of the money spent on calls from correctional facilities.

The final rules largely resemble the proposed rules we analyzed and praised last year. And the new order confirms that the phone companies are not somehow exempt from unclaimed property laws, and must refund unused pre-paid funds to the customers or hand it over to the State as well as imposing new rules that discourage jails from banning in-person visitation to replace it with paid video visitation.

And most notably, the new rules significantly strengthen the Alabama Public Service Commission’s finding that many parts of the industry are receiving secret kickbacks from payment processors like Western Union and MoneyGram and creates a solution that should have an immediate nation-wide impact.

The final rules require all companies operating in Alabama to submit to the Commission by October 1 the fees charged by third party companies like Western Union and MoneyGram to send payments to that company. If the fee is more than the more typical charge of $5.95:

the provider shall submit a sworn affidavit signed by the provider’s Owner, President, or Chief Executive Officer and notarized, affirming that the ICS provider, its parent company, nor any subsidiary/affiliate of the provider or its parent company receives no portion of the revenue charged the provider’s customers by the listed third-party payment transfer services. For any payment transfer fee that exceeds $5.95, the ICS provider shall also provide to the Commission a copy of the provider’s contract with the third-party payment transfer service and shall justify to the Commission in writing, signed by the provider’s Owner, President, or Chief Executive Officer, why it is unable to arrange for payment transfer services at fees that do not exceed $5.95. (¶ 8.20)

Assuming that the companies aren’t willing to commit perjury, the companies will have three choices:

1. Renegotiate the contract like NCIC did to lower the price charged to families.
2. Renegotiate the contact just for payments in Alabama, thereby admitting to every other state that kickbacks are in place elsewhere.
3. Give up the Western Union and MoneyGram kickbacks nation-wide.

Given that poor people often don’t have access to banks and credit cards and must instead rely on services like Western Union and MoneyGram, this order will have a massive impact, leaving families with more money to spend on the actual phone calls or other family needs. Bravo Alabama!

Other states: What are you waiting for?

Huffington Post: The Father’s Day Profiteers That Put Hallmark to Shame

by Leah Sakala, June 13, 2014

The Huffington Post just published my new article, The Father’s Day Profiteers That Put Hallmark to Shame. Here’s how it starts:

This Sunday, more than a million families will face a huge Father’s Day problem, and it’s not figuring out which tie pattern dad would like best. It’s the astronomical cost of wishing him a Happy Father’s Day over the phone if he happens to be one of the 1.2 million parents in prison or jail. That’s because the prison telephone industry wants to charge families as much as $1/minute just to tell incarcerated loved ones that they are loved and missed.

The article includes some heart-breaking first-hand testimonies from the tens of thousands of petition messages that we collected with SumOfUs calling for Federal Communication Commission (FCC) regulation:

• “…because I’m a single mom now, I can’t afford to indulge [my daughter] so she can talk to the only man she’s ever called Daddy. That is wrong.”
• “My little boy turned one today and it cost $12 for his dad to be able to sing him happy birthday. It’s not right that prison phone calls are so overpriced.”
• “While [my son’s] dad tries to write letters & cards, talking on the phone is a much more accessible way to connect with and develop a semblance of a relationship with a small child. My son rarely gets to talk to his dad anymore…”
• “My son’s father has been in prison for most of my son’s life. My son has only spoken to his father once in the last 10 years. My son is 14 now. If it were more affordable to speak to his father, perhaps my son would feel like he has some sort of connection with his father.”
• “My dad was in jail when I was a child and at this price there is no way my mom would have been able to afford to let me talk to him. Without my dad I would not be who I am today.”

Alongside these families that have been calling for prison phone justice for more than a decade, here at Prison Policy Initiative we’ll keep fighting to ensure that families can afford to stay connected on Father’s Day and every day.

The Mothers Day Phone Rip-Off

This Mother's day, hundreds of thousands of kids won't be able to call their mothers, and if Mom calls them, those kids are going to have a hard time paying for the call if she calls them.

by Peter Wagner, May 9, 2014

This Mother’s day, hundreds of thousands of kids won’t be able to call their mothers, and if Mom calls them, those kids are going to have a hard time paying for the call if she calls them. Incarcerated mothers — and most incarcerated women are parents of children — can’t receive phone calls but instead need to do the calling.

Who calls who wouldn’t be important if incarcerated moms could choose between an unlimited long distance plan and free Skype like most people do. Instead, incarcerated mothers have to use the monopoly vendor selected by their prison or jail; and the prison or jail generally selects the company that offers the highest kickback commission from the call.

You can see where this is going. The calls are expensive. The “good” news is that the Federal Communications Commission recently capped the maximum rate that can be charged for an interstate call at 21 or 25cents a minute. (Yes, people in prison live in a world where they might be lucky to make 25cents an hour from their job in the prison and where they celebrate the federal government lowering the cost of a call from $1/minute to 25cents.) But about 80% of kids with incarcerated parents won’t benefit from those new price caps because most calls home from prison are in-state calls not subject to the new price caps.

We need to work together to ensure that this is the last Mothers Day where families need to choose between putting food on the table and telling Mom how much she is missed and loved.

Sourcing: The Bureau of Justice Statistics report Parents in Prison and Their Minor Children is a goldmine of information about incarcerated parents and their minor children in state and federal prison, including detail about frequency of visits and other contact, that most they lived together with their kids when they were arrested, etc. Regarding the use of “hundreds of thousands” in this post, the BJS report says that in 2007, there were 131,000 minor children who had a mother in state prison, 16,400 who had a mother in state prison. Not included in that study were jails, which are an important but often overlooked 30% of the mass incarceration pie.

PPI weighs in on New York Times Room for Debate on video visitation

"[I]f left unregulated, the video communication market could follow the trajectory of the infamously broken prison telephone industry."

by Leah Sakala, February 28, 2014

Prison Policy Initiative Executive Director Peter Wagner weighed in this week on a New York Times Room For Debate discussion about video visitation in prisons and jails. As Peter explained,

With proper regulation and oversight, prison and jail video communication has the potential to offer additional avenues for critical family communication. But if left unregulated, this market could follow the trajectory of the infamously broken prison telephone industry, dominated by the same corporations.

For more of our work on the prison and jail video visitation industry, check out our FCC filing on the subject and the New York Times editorial that it inspired.

HuffPo: FCC Bests Prison Telephone Industry Just in Time for Valentine’s Day

Peter and Leah wrote a new Huffington Post piece about the start of the FCC's inter-state prison phone rate regulation on Tuesday.

by Leah Sakala, February 13, 2014

To celebrate the FCC’s inter-state prison phone call charge regulation going into effect on Tuesday (just in time for Valentine’s Day!), Peter and I wrote a new piece for the Huffington Post.

The FCC’s regulation is a huge milestone in the decade-long fight for fair phone charges for the families of incarcerated people, and there’s lots more to be done. As we wrote:

…the fight for fair phone charges is one that the families of the 12 million people cycling through jails each year can’t afford to lose. Interstate rate regulation was a huge step forward that must now be defended in court, and the FCC and state and local governments need to keep going in order to protect all families, regardless of whether their loved ones are incarcerated in the same state or elsewhere. Our movement is strong, and we’re committed to ensuring that all parents, partners, and kids can afford to affirm their love for one another over the phone next Valentine’s Day.

We also spoke with American Public Media’s Marketplace yesterday for a story on the FCC’s prison phone regulation.

For more on what this regulation means for families and friends, check out the Campaign for Prison Phone Justice’s great new FAQ.

Today the FCC dragged the prison telephone industry kicking and screaming into the 21st century

The two largest prison phone companies, mislead correctional facilities and federal regulators by acting like communications technology is stuck in the 1950s.

by Peter Wagner, February 11, 2014

Today is a historic day: the Federal Communications Commission’s new rules take effect that cap the cost for inter-state calls home from prison and jail at a still-expensive but much-improved rate of 21 to 25 cents per minute. The FCC is exploring expanding its regulation to apply to the bulk of calls which are in-state in nature, and other important proposed restrictions have been stayed by the federal courts while prison telephone giants like Securus and its corporate allies sue the federal government for daring to end the industry’s monopolist price gouging.

As we’ve demonstrated in several lengthy reports and filings to the FCC, the high cost of phone calls from prison is driven by a kickback system in which private companies get monopoly contracts in exchange for sharing the majority of the revenue with the same correctional agency that awarded the contract.

So while Securus sues to protect its windfall profits off the backs of families, I’d like to point out just how far out of step rates like $1/minute are in a world of modern electronic communications.

Contrary to what the phone companies would have you believe, important security technology isn’t what’s driving the cost of these calls. In fact, a call home from New York State prisons costs 4.8 cents a minute because that state refuses kickbacks and negotiates the contract on the basis of the lowest cost to the consumer. But the very same company charges close to $1/minute in other states. As we’ve said again and again, it’s all about the profit.

But aside from the contemporary arbitrariness of the charges in this industry, taking a look at the historical perspective sheds some additional light on why the FCC has to drag this industry kicking and screaming into the 21st century. You see, Securus and Global Tel*Link, the two largest prison phone companies, mislead correctional facilities and federal regulators by acting like it’s still the 1950s, when transmitting a long-distance call was a deeply expensive and laborious manual process.

Why do most prison and jail phone contracts assume that a long distance call requires an army of telephone operators like the ones in this photo from 1919?

The phone companies profit by pretending it’s the 1950s. Download (1.5MB, 1:30)

Check out this radio dramatization from Dragnet of a long distance call in 1954. That tedious 1 minute 22 second process wasn’t much better than the very first inter-continental telephone call in 1919, which took 5 operators 23 minutes to connect Alexander Graham Bell with his former assistant Thomas Watson. Fortunately technology has vastly improved since then, and these days prison and jail telephone companies sell digital communications products for which distance is simply not a factor. These companies know, however, that it’s in their best interest to leave sheriffs in the dark about these 21st century technological advances. With the possible exception of some of the smaller companies that are pushing one-size-fits-all “postalized” rates, the phone corporations don’t appear to be lifting a finger to educate the sheriffs about the real cost of the telephone services being contracted.

The industry’s lack of transparency about the actual cost of providing telephone service is quite similar to its practice of hiding fees, which we discussed in detail in our second report. Essentially, the phone industry rakes in additional profit by tacking on extra fees and hiding them from the commission system. As a result, the sheriffs are led to believe that they have negotiated a good deal with the phone company, but the hidden fees preserve far more profit for the industry than it lets on. That’s why our report included an appendix with questions that the sheriffs should ask about fees when negotiating these contracts.

So, at the end of the day, how far out of whack is a $1 a minute phone call? We did some research to figure out the last time a regular U.S. long distance phone call cost $1 per minute. Adjusting for inflation, a call hasn’t cost that much since 1950: