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.

A prison phone industry giant said what??

The Huffington Post just published the first article we’ve seen on the prison phone regulation that includes a public interview with the CEO of Securus.

by Leah Sakala, September 10, 2013

The Huffington Post just published the first article we’ve seen on prison phone market regulation that includes a public interview with Richard Smith, the CEO of Securus, which is the second-largest corporation in the prison telephone industry.

In the year we’ve spent doing detailed analyses of this industry’s shenanigans, we can’t help having gotten a little jaded. But the industry keeps on shocking us with new lows. Here’s a teaser from the article.

First, Mr. Smith likens corporate phone companies to selfless public servants:

It’s almost like throwing firemen and policemen under the bus, it just isn’t fair.

He then turns right around and admits that the corporate bottom line is his top priority:

It isn’t an altruistic business. It’s a business for profit.

The article also cites our work, pointing out that in the few weeks since the FCC has voted to regulate the prison phone industry Securus has actually raised its deposit fees even higher. Now, instead of costing $7.95 to make a deposit over the phone, Securus charges $9.95.

Prison phone giant Securus cashes in, raises fees

While the FCC drags its feet on regulating the prison phone industry, the industry is wasting no time raking in the profits.

by Peter Wagner, September 5, 2013

While the Federal Communications Commission (FCC) drags its feet on regulating the prison phone industry, an industry leader is wasting no time raking in the profits. Just this week, Securus, the second largest company in the prison phone industry, has quietly raised some of its fees.

In our report, Please Deposit All of Your Money: Kickbacks, Rates, and Hidden Fees in the Jail Phone Industry, we wrote that the companies’ hidden fees can double the price of a call. Unlike the regular phone industry, these companies want their money upfront, and they charge additional fees to take, hold, and refund families’ money.

Securus, for example, didn’t think it was enough to charge a family $7.95 to accept a deposit via the web or over the telephone. Now, the company charges $9.95 to deposit money with a credit card over the phone. The company charges this same higher rate regardless of whether you speak to a customer service agent or use the automated system. (By contrast, I can’t think of a business that I use regularly that charges me a fee to take my money. Generally, companies absorb those costs because they want my business. Because this industry has its customers locked in (pun intended), they don’t have to worry as much about competition. But Securus is clearly out of line compared to its competitors. The prison phone company PayTel, which has none of Securus’ economies of scale, charges $3.00 for an automated payment and $5.95 for payments made via a live operator.)

Securus has another, hidden profit-boost as well. Buried in its long list of questionable monthly charges is an increase in one: Securus is keeping the bill processing charge ($1.49/month), Billing Statement Fee ($3.49/month), Federal Regulatory Recovery Fee ($3.49/month), USF Administrative Fee ($1.00/month) and increasing the “Wireless Administration Fee” from $2.99/month to $3.99 a month.

Food for thought: Is Securus raising its fees because it wants to raise every dollar it can now, before the FCC rules take effect, or does this have to do with the recent sale of the company from one investment bank (Castle Harlan) to another (ABRY Partners)? I note that competitor NCIC, which isn’t owned by an investment bank, lowered some fees after our report brought public attention to fees.

Bonus question: Are any sheriffs out there aware that these fees are not commissionable and that their partner Securus just increased its corporate profits at local taxpayers’ expense?

Extra bonus question: Is the FCC aware of what the industry is doing while we wait for the publication of the order to regulate the industry?

Sources:

• New fees
• Old fees

Prison Legal News covers historic FCC workshop on the prison phone industry

The article includes a nice summary of Peter's invited presentation on a panel about the true costs of providing prison phone service.

by Leah Sakala, August 29, 2013

David Ganim of Prison Legal News wrote a great piece about last month’s FCC workshop on prison phone call charges (beginning on page 26).

The article includes a nice summary of Peter’s invited presentation on a panel about the true costs of providing prison phone service:

Peter Wagner, an attorney and executive director of the Prison Policy Initiative, who was the last panel speaker at the FCC workshop, rebutted several of the arguments made by prison phone companies and their supporters. He further addressed the issue of extra fees charged by prison phone service providers – such as fees to fund pre-paid phone accounts as well as account closure, inactivity and refund fees.

Wagner noted that 12 million people pass through the U.S. jail system annually and that the extra fees associated with prisoner calls are a means for prison phone companies to generate revenue outside the commission system, since commissions aren’t paid on fees. He said that small prison phone providers have smaller fees but that the larger companies, including Global Tel*Link and Securus, have some of the highest fees in the industry. Wagner concluded by stating the extra fees demonstrated that the prison phone industry, which he termed a “dark, neglected corner of the telecommunications industry,” is unable to regulate itself – and that to be effective, reforms must address the problem of such fees.

For more great reporting from Prison Legal News, subscribe online, like them on Facebook, or follow them on Twitter.

When is a customer not a customer? (In prison.)

A New York Times Magazine article exposes how the broken prison commissary industry leaves the people footing the bill out of the equation.

by Leah Sakala, August 20, 2013

A fascinating “It’s the Economy” column by Adam Davidson in this week’s New York Times Magazine, ‘Orange’ Is the New Green, takes a good, hard look at some serious market failures in the U.S. prison system. Along the way, the article provides great first-hand reporting about how the prison commissary system works, and it explains the economic theory in a way that may be helpful to our allies working to bring justice to the prison and jail telephone industry.

(As a refresher on what’s wrong with the prison phone industry, state prison systems and local jails grant exclusive monopoly contracts to telephone corporations. In exchange, the corporations charge sky-high bills to the families of incarcerated people and kick back the lion’s share of the profit to the prisons and jails.)

In our reports, we explain that the prison and jail telephone industry is so broken because the customers, which is to say the people who are actually using the provided service and footing the bills, aren’t actually the customers in the eyes of the corporations.

The New York Times article makes it clear that the prison phone industry is unfortunately not unique in this regard. The prison commissary industry, too, operates in what Davidson calls a “third-party-decider economy.”

Davidson found that allowing prison systems to be the “third party” in these industry transactions actually means that the corporations that are less responsive to the needs of incarcerated people are more successful in the marketplace. As he explains:

How can that possibly be? Because the people choosing the company aren’t the ones using the products.

This immediately looked familiar to us. In our most recent report, we found that some companies in the prison phone industry actually profit by providing bad service, such as forcing customers through convoluted refund processes or dropping calls.

But to add to Davidson’s argument, it’s important to remember that the people choosing the companies are also not the ones paying for the products or service, which is how you end up with the families of incarcerated people paying an outrageous $17 for a single 15-minute phone call from a loved one. From a corporation’s perspective, the literally captive market in prisons and jails is a boon for the bottom line.

Fortunately it looks like some relief for families is in sight, at least in the prison phone industry. The FCC has voted to rein in charges for the most expensive interstate calls, and may take more action in the future. But there’s lots more work to be done. The uniquely American project of mass incarceration has created many markets rife with perverse economic incentives to line the pockets of prison systems and corporations by dunning poor families. And corporations are not about to pass that up.

FCC takes historic stand to control the predatory prison and jail phone industry

the FCC is finally stepping up to the plate to protect families from having to choose between staying in touch and paying the bills.

by Leah Sakala, August 9, 2013

This afternoon the Federal Communications Commission voted to approve a new set of regulations to control the exploitative prison and jail phone industry. Currently, prisons and jails grant exclusive contracts to telephone companies that charge families outrageous bills and kick back a hefty portion of the profit to the correctional facilities. But now, the FCC is finally stepping up to the plate to protect families from having to choose between staying in touch and paying the bills.

While the official text for the order and notice won’t be available until next week, today the FCC announced that the regulation will mandate:

1. That “all interstate inmate calling rates, including ancillary charges, be based on the cost of providing the inmate calling service.”
2. Interstate rate caps of $0.21/minute for debit and pre-paid calls and $0.25/minute for collect calls, and “safe-harbor” rates of $0.12/minute for debit and prepaid calls and $0.14 cents/minute for collect calls. The rates must also include the costs of security features and technology.
3. The expense of kickbacks back to prisons and jails must not be factored into interstate rates or charges
4. People who need assistive hearing or speech services not be charged higher rates
5. A call for “mandatory data collection, annual certification requirement, and enforcement provisions to ensure compliance with this Order”

The FCC also opened a new comment period to gather information on two topics:

1. Regulating in-state rates
2. Encouraging competition to bring down rates

Advocates for fair phone rates have been calling for regulation for more than a decade, beginning with a 2000 class action lawsuit brought against the Corrections Corporation of America and several prison phone companies. A federal judge decided that the case fell under the jurisdiction of the FCC, where it sat for years. Today’s ruling marks the first definitive action from the FCC to control the broken prison and jail telephone industry.

This victory was the result of a strong and sustained campaign, and we are proud to be celebrating with our movement partners. Stay tuned for a more in-depth analysis next week when the details are available!

The good old days of the exploitative prison phone industry?

2002 footage shows how much the industry has changed in 10 years.

by Leah Sakala, August 9, 2013

The campaign for phone justice just posted a 2002 video of prison phone providers talking about the industry:

Talk about a blast from the past. The video is a perfect example of how much the industry has changed in the last decade. Here’s why:

1. The video features representatives of Verizon and AT&T, public-facing companies you’ve actually heard of. Neither of these companies in the prison phone business anymore after investment banks took over the industry, and now Verizon publicly deplores the price-gouging in the current prison phone market.
2. The video features leading prison phone companies actually engaging with the media. By contrast, coverage of today’s upcoming FCC vote on prison phone regulation has been rife with sentences such as: “American Securities, which owns Global Tel*Link, declined to comment.”
3. The spokespeople in the video acknowledge that it’s not a fair industry to the families of incarcerated people: the corporate bottom line depends on prisons staying full and families footing the expensive phone bills. “Unfortunately, this is a growth industry,” says the Verizon representative at the start of the video, noting that prison expansion is expanding their customer base.

But now? The nation’s largest prison phone company, Global Tel*Link (which most people have probably never heard of), has been conspicuously silent. Not only are Global Tel*Link representatives not responsive to the public and to the media, but they’re also not talking to the Federal Communications Commission, refusing to participate in discussions about regulation or provide data the FCC is requesting.

Calls home from prisons and jails were outrageously expansive when the video was shot, and they’re outrageously expensive now. That alone is reason enough for the FCC to approve comprehensive regulation this morning. But the extreme price gouging combined with a shocking lack of transparency from prison phone corporations should leave no question in the Commissioners’ minds: It’s time to get this broken industry under control.

Tune in at 11AM EST to watch the historic vote and see what happens.

Hiding commission payments and bypassing regulation

Letter to FCC: crafting effective regulation for prison phone market requires taking a comprehensive view of the commission system, ending high rates.

by Aleks Kajstura, August 3, 2013

On Thursday we submitted a letter to the FCC urging it to craft effective regulation for the prison and jail phone market by taking a comprehensive view of the commission system that leads to high rates. We wrote:

[S]ome states and at least one county have already started banning commissions in an effort to stem the high rates. However, our review has found that an overly narrow concept of commissions leaves some glaring loopholes that make these efforts far less effective than originally expected. We would like to share the examples of Dane County, Wisconsin and the State of California to illustrate the possible result of a too-narrow view of commissions: Commissions can instantly be rebranded as “administrative fees” with no actual change.

In 2007, the County Commissioners of Dane County, Wisconsin voted to ban the commissions that brought in nearly $1 million per year. County Supervisor Dave de Felice explained the county was “addicted to this money.” Recognizing the inherent conflict of interest that commissions created, he stated, “We’ve lost our moral compass and direction for a million bucks a year.” The addiction metaphor turned out to be truer than Supervisor de Felice imagined, because when the contract was up in 2009, the County specified that it “shall receive no commission from phone service revenue” yet it required ICSolutions to pay an annual “administrative fee” of $476,000 in monthly increments.

The California Department of Corrections & Rehabilitation also banned commissions and now collects an “Administration Fee” of $66,666.66 per month.

What may have started as an exploitation of regulatory loopholes is now clearly a trend. As Telmate notes: “[C]ommissions are no longer confined merely to a portion of the carrier’s revenues…. These include free ‘booking’ calls, live deposit acceptance, automated inmate grievance and other IVR systems, voice biometrics, commissary ordering, managed cell phone access, storage of recorded inmate calls, and in some instances computing equipment for corrections staff as well as law libraries or religious services. The volume of such non-financial consideration has likewise been increasing….”

As we explained in our report, Please Deposit All of Your Money: Kickbacks, Rates, and Hidden Fees in the Jail Phone Industry, free booking calls ‘should be subsidized by state and local governments, not prison phone companies that must then compensate for the lost income by overcharging for all other calls.’ And,

As market-leader Global Tel*Link aptly stated: ‘Put simply, there is no free lunch.’ The kickbacks, via explicit commissions and payments-in-kind, are driving up the costs for the phone companies and, as a result, for consumers.

The FCC will vote on a proposal on August 9th, let’s see what happens!

New York prison system tells FCC meaningful prison phone regulation is possible

New York has found that "there are significant benefits that can be attributed to lower calling rates."

by Leah Sakala, July 10, 2013

The Federal Communications Commission is holding a workshop today to gather information on regulating the high cost of calls from prisons and jails, and the New York Department of Corrections and Community Supervision is weighed in by submitting a letter.

The letter explains that New York’s prison system knows about regulating prison calling charges from personal experience. In 2007, the system eliminated its 57.7% commission and lowered the rates from $4.48 to less than $1 for a 20-minute call.

And what was the result of lowering the price to call home in New York? More families are able to stay in touch, there are fewer contraband cellphones, and family relationships are stronger when incarcerated people return home. And it’s saving the state money in reentry programs, too: “…the Call Home Program is among the most cost-effective family reunification options” offered in the New York prison system.

The only drawbacks to lowering phone charges that the letter identifies is that making calls from prison more accessible requires vigilant prison security systems (which makes sense), and that the state has had to find alternate sources of revenue to make up for banning commissions.

In sum,

…the Department’s experience indicates that inmate calling rates can be reduced substantially if states eliminate their commission on the calls, and structure competitive bidding processes that ensure that the cost of the calls is among the primary attributes of their inmate calling contracts. Moreover, there are significant benefits that can be attributed to lower calling rates that seem to outweigh the operational challenges that also attach to the process.

The FCC should take heed from New York’s experience and act quickly to rein in the outrageous rates and high fees that families are forced to pay just to stay in touch.

PPI will expose hefty fees and commissions at FCC workshop on prison phone service

The workshop is from 9am-5pm EST Wednesday July 10th, and the FCC needs to hear from you. Find out how to participate.

by Leah Sakala, July 9, 2013

Tomorrow will be an important day in the fight to bring fairness to the prison and jail telephone industry.

Aleks Kajstura puts the finishing touches on 1,200 pages of evidence from our report “Please Deposit All of Your Money: Kickbacks, Rates, and Hidden Fees in the Jail Phone Industry” to bring to tomorrow’s workshop.

As I write, our Executive Director, Peter Wagner, is on his way down to D.C. for the Federal Communication Commission’s Workshop on Reforming Inmate Calling Services Rates tomorrow. Peter will present our research findings on fees and commissions on a panel about the true cost of providing phone service in prisons and jails.

The workshop is from 9am-5pm EST tomorrow, Wednesday July 10th, and the FCC needs to hear from you. There are lots of ways to participate:

1. The workshop is free and open to the public. If you are in the D.C. area, please consider attending in person at the FCC Commission Meeting Room, 445 12th Street, S.W., Washington, DC.
2. If you can’t make it in person, watch the live stream of the workshop online starting at 9AM EST tomorrow morning.
3. Spread the word and make your voice heard on social media. Join the discussion on Twitter using the hashtag #phonejustice (we’ll be Tweeting as usual under the handle @prisonpolicy).
4. Ask questions you’d like answered at the workshop by emailing livequestions@fcc.gov or tweeting them at @FCC with the FCC’s suggested hashtag #InmateCallingRates.

After more than a decade, it’s time for the FCC to finally provide relief to the families of incarcerated people by regulating the prison phone industry. Tomorrow’s workshop is a step in the right direction.

Update July 11, 2013: A video of the complete workshop is now available on YouTube.