What would prison telephone justice look like?

What would effective state executive or legislative action for prison and jail telephone justice look like?

by Peter Wagner, September 29, 2015

Tomorrow, I’ll be speaking by telephone to the Iowa Governor’s Working Group on Justice Policy Reform about how the state can bring down the the cost of calling home from prisons and jails. The Working Group was announced at the Iowa Summit on Justice & Disparities, organized by the Iowa and Nebraska NAACP where I gave the keynote address.

I thought my notes about what the executive and legislative branches in state governments can do might be useful to advocates in other states, especially while we wait for the Federal Communications Commission to issue their next ruling.

Executive Branch:

1. Renegotiate the state’s contract with the phone vendor. At a minimum, you should be able to waive your commission and have the vendor reduce the prices proportionally. However, advances in technology (namely cheaper bandwidth) and the industry’s growing understanding that states are becoming more adept at recognizing how some vendors shortchange consumers (such as the costly ancillary fees) may give you even greater leverage. (Note: My understanding is that Iowa controls its phone system more than in most states. Iowa could abandon its goal of turning a profit on the phone system and instantly reduce the rates charged to families of people in state prison.)
2. Determine if inappropriate or excessive fees are being charged for telephone calls or related accounts. If so, seek redress from the state’s vendor. These can include excessive credit card fees, or fees for retrieving unspent account balances. For a roadmap to this investigation, see http://www.prisonpolicy.org/phones/pleasedeposit.html.
3. Order the State Treasurer to investigate whether phone companies active in the state are turning over unclaimed customer funds as required by state law. If no, seek redress. For a roadmap to this kind of investigation, see http://www.prisonpolicy.org/phones/letters_with_exhibits.html#unclaimed.

Legislative branch:

Require the state and its counties to negotiate for phone calls and video visitation services for people in their custody on the basis of the lowest cost to the consumer.

The strongest legislation:

• Applies to the state correctional system and any facilities operated by counties. (New York’s statute is extremely strong, but it does not apply to counties. The regulations in both Alabama and New Mexico are notable for applying to both the state prisons and the county jails. New Jersey‘s approach is interesting as the state negotiated to allow counties to opt-in to the state’s low-cost contract.)
• Prohibits commissions and other forms of profit sharing between vendors and the facilities including percentage payments, up-front signing bonuses, inflated “rent payments” or supplying technologies unrelated to the actual telephone service. For more examples of illicit profit sharing, see our August 1, 2013 letter to the FCC.
• Takes effect immediately and applies to existing contracts. (Bill drafters should be aware that vendors may rush to sign long-term contracts before the law’s effective date.)
• Requires the disclosure of all ancillary fees in the contracts and seeks to minimize these fees, which have historically doubled the price of a call but do not produce commissionable revenue.
• Prohibits the vendor from engaging in revenue sharing with third party payment processing and money transfer service providers.
• Ensures that customers’ leftover account balances be turned over to the state unclaimed funds program, as required by state law.
• Prohibits vendors from charging “single call fees” to people who do not have accounts with that vendor. These fees should be banned outright, but can also be replaced with a reasonable maximum credit card charge and a maximum call charge — as done by Alabama, where a non-account single call is now capped at $6; considerably less than the $14.99 that some of these vendors previously charged.
• Addresses video visitation services — the industry may use video visitation to circumvent regulation of phone services. Legislation should prohibit the state or any county from replacing traditional in-person visitation with video visitation. (Many jails nationwide are experimenting with video visitation. There is no charge to use the technology at the jail; but it is inferior to traditional contact or in-person visitation, and it is designed to drive consumers to use expensive video visitation from their homes. The typical rate is $20 for a 20-minute remote visit.)
• Ensures strong enforcement capability by clarifying the enforcing agency’s jurisdiction in the arena of inmate calling services. And explicitly confirms or strengthens the regulatory authority (perhaps the Iowa Utilities Board or other relevant agency) in this area to ensure that the legislation’s goal of reasonable phone costs remains intact as companies evolve their products to exploit any loopholes in the legislation.

Help us stay one step ahead of the exploitative prison phone industry

Prison phone companies are sneaky but we've learned how to uncover their tricks. Will you help us stay one step ahead?

by Peter Wagner, September 11, 2015

Three years ago today, the Prison Policy Initiative released our first report exposing the dirty prison and jail telephone industry that seeks to charge children of incarcerated parents $1 per minute for a simple phone call. Almost overnight, we caught the attention of the press and got more people talking.

The Prison Policy Initiative operates on a shoestring budget, but, even for us, this first phones report was special. The author of The Price To Call Home: State-Sanctioned Monopolization In The Prison Phone Industry, Drew Kukorowski, volunteered his time to do the in-depth research that was required to uncover this previously hidden industry, and we managed to pull together the gifts of our individual donors to cover the rest.

The continued support of these donors then allowed us to dig deeper in a second report less than 8 months later, Please Deposit All of Your Money:
Kickbacks, Rates, and Hidden Fees in the Jail Phone Industry. We exposed:

• Industry contracts with local jails, which charge even more for calls than in prisons
• The hidden fees that can double the cost of each call

And because these companies have shown great skill at exploiting loopholes to retain their monopoly profits, our work continues. In January, we exposed that many of these phone companies have expanded their services to video visitation, in which they ban in-person visits to spur demand for expensive video chats.

I’m thrilled to say that our research and advocacy are making a difference, and the Federal Communications Commission is set to protect all families of incarcerated people. These wins are also having huge side effects: the debate over phones is helping this country finally realize how our criminal justice policies often reach outside the prison walls to punish entire families and communities.

I’m expecting the FCC to issue a robust ruling, but this billion dollar industry is going to fight back. These companies are sneaky, and they’ll surely go running to the courts again. But, over the last three years, with the support of our donors, we’ve learned how to follow the money and uncover their dirtiest tricks.

Neither we, nor the 2.7 million children with an incarcerated parent, would ever have gotten this far without a small group of individual donors. Now, we need to continue to stay one step ahead of this exploitative industry. Can you join our supporters and make a gift today?

Are campaign contributions the new “commission”? Analysis of Securus’s contributions in Sacramento

Why is Securus one of the largest campaign contributors to the Sacramento County Sheriff?

by Peter Wagner, August 12, 2015

Sacramento County, California’s jail confines 4,100 people on a typical day, so the selection of the sheriff should be a big deal for Sacramento residents, yet the leading campaign contributor is a company from Texas.

Dallas-based Securus apparently has a strong interest in who gets to be the Sacramento County Sheriff, so much so that the prison and jail telecommunications giant has been giving $10,000 a year to the Sheriff’s reelection fund for at least the last 3 years, as we describe in a letter sent this morning to the Federal Communications Commission.

Now what’s especially interesting about this is that Securus doesn’t currently have a relationship with Sacramento County; in fact, the county’s current phone contract is with competitor ICSolutions. We wouldn’t be surprised to see the contractor change soon, though, as new bids for the contract were due in July.

As the Federal Communications Commission prepares for a new ruling on regulating the industry, our letter addresses one of the more controversial issues: What should the FCC do about the commissions currently demanded by the facilities in exchange for awarding monopoly contracts to the prison and jail telephone companies? The demand for commissions is at the root of the dysfunction in the prison and jail telecommunications market, but we believe banning the commissions is not necessarily the solution.

We argue that the FCC can simply ensure that the rates and fees charged are reasonable and leave the companies and the facilities to fight over whether and how to share the reasonable profits that remain. (Relatedly, one also has to wonder if things like campaign contributions could possibly explain part of the discrepancy between the tiny profits that Securus tells the FCC it makes and the huge profits that Securus claims before its investors. )

In fact, ensuring that the rates are reasonable is the approach the FCC already took when they regulated inter-state calls, capping the charges for the calls and declaring that commissions were not a legitimate cost that could be used to justify higher rates.

Put simply, the FCC should ensure fair rates for families; that’s best achieved through direct regulation of rates and fees, not by trying to iron out every misaligned incentive in the market.

Alabama’s new phone rates go into effect

by Aleks Kajstura, June 30, 2015

Starting tomorrow Alabama begins implementing their prison and jail phone regulations which cap rates and fees for in-state calls.

The Alabama Public Service Commission promulgated the regulations in a Final Order last December, but had stayed implementation while two of the companies, Securus and Global Tel*Link, challenged the new rates in court. But as the companies pursued protracted litigation, the Commission reasoned that it could no longer hold off on ensuring reasonable phone rates for residents who needed to talk to their incarcerated loved ones:

“The Commission has a duty to ensure that rates and charges are reasonable and just to both the ICS providers and the customers. During the course of these proceedings, the Commission has found that customers are paying too much for ICS. A continued postponement in implementation of the Final Order’s prescribed rates and ancillary fees would further delay the rate relief to ICS customers in Alabama.”

Uncovering Securus’ profits

Securus exemplifies the industry's obscene penchant for squeezing profits by fleecing their customers and shorting their business partners.

by Peter Wagner, June 19, 2015

In general, Securus — a prison phone industry giant — is in a pretty profitable business. The company and its competitors vie for monopoly contracts to provide phone service in prisons and jails. Because the facilities demand a share of the proceeds, the incentive is to charge as much as the consumer — or regulators — can bear. But Securus exemplifies the industry’s obscene penchant for squeezing profits by fleecing their customers and shorting their business partners. As The Huffington Post wrote last week:

A presentation that the privately-held prison telecom company Securus made to investors that The Huffington Post obtained shows just how much money there is to be made as the state-sanctioned middleman between prisoners and the outside world: $404.6 million last year alone.

Securus, which provides phone services to 2,600 prisons and jails in 47 states, made $114.6 million in profit on that revenue in 2014. Securus’ gross profit margin — a measure of the difference between the cost to provide its services, and what it charges for them — was a whopping 51 percent.(*)

That’s not only unprecedented(**), it’s significantly higher than companies typically known for having high profit margins like Apple. And it’s certainly enough profit to buy up their rivals like JPay.

And these margins continue to grow. Our analysis of Securus’ profits from the investor slides reprinted by The Huffington Post shows the company’s profits took a huge leap upwards in 2014:

But what is driving these profits? Three shifts are likely behind Securus’ unprecedented profit growth:

1. Securus stopped paying commissions on interstate calls. The FCC issued an order capping the cost of these calls and prohibiting companies from treating the commissions as a legitimate cost of the call. Securus has, apparently, chosen not to share any portion of their profits with the facilities, keeping the profits all to themselves.
2. Securus is steering a greater portion of their call volume from regular calls to abusive “single call” programs that charge $9.99 via premium text message or $14.99 charged to a credit card for each call. As we explained in our January 2015 briefing, these calls are responsible for a disproportionate share of Securus’ profits:
   

   These charts show four views of three types of calls in Genesee County, Michigan: by volume, by the cost to families, by where Securus makes its money and where the County earned its commission. (And as we explain in a footnote to yesterday’s article, just the credit card calls earn Securus $24-76 million a year.)

3. Securus has increased their typical(***) credit card deposit fee from $7.95 at the time of our report in May 2013 to $9.95 shortly thereafter. Since Securus disclosed that they charged credit card fees 4.8 million times in 2013, at $9.95 each in 2014, Securus revenue could be as much as $47 million from just credit card fees in their record profitable year.

As we explain in an article released yesterday, Securus’ business model is less about providing phone service than it is about harvesting fees. What this data shows is just how profitable that fee harvesting can be.

Notes:

(*) Securus challenges some of the numbers in the quoted Huffington Post paragraphs but Securus does not challenge the legitimacy of the investor slides published by Huffington Post.

(**) Because Securus is privately owned even seeing this data is unprecedented. The data on these slides shared with investors is also quite different from the story that CEO Rick Smith told the FCC last July (video at 208:45 seconds or transcript):

Page 198:

1 At some point in the presentation and
2 these discussions, I always get around to
3 discussing where I think we stand in terms of a
4 competitive company with competitive returns. And
5 I've heard three words during the session so far.
6 One is that rates are egregious. One is that
7 rates are abusive, and the other one is that rates
8 are predatory. I can look at our bottom line and
9 compare that to other companies' bottom lines.
10 Most of these companies you've heard of. And so a
11 few statistics before we can use any of those
12 words.
13 I looked at net income, kind of what you
14 can get from public statements, as a percentage of
15 profit. And here's the listing. Verizon was at
16 14.3 percent; not bad. Time Warner was at 11.4
17 percent, and I'm going in descending order now.
18 AT&T, we've all heard of AT&T and what they do,
19 they're at 10 percent. Century Link, think of that
20 as U.S. West Embark, Century, pretty big company.
21 I think the fourth largest local exchange carrier
22 in the United States; they're at 5 percent. And


--- 
Page 199:

1 now Securus brings up the rear at 1.4 percent. So
2 Verizon makes roughly 10 times what I make on a
3 comparable basis. Time Warner makes eight times
4 what I make. AT&T makes seven times what I make.
5 Century Link makes four times what I make. I'm
6 not saying that any of those are bad. I'm just
7 putting these things in the proper perspective in
8 terms of what we make bottom line after all of our
9 costs, and commissions does represent a
10 significant portion of our costs is a relatively
11 small number.
12 So we don't earn excessive profits. We
13 don't earn excessive profits. We don't earn
14 excessive profits. I said that three times for
15 the egregious and abusive and predatory kinds of
16 comments that come at us most of the time. 

(***) The redacted data does not disclose Securus’ costs to process credit card transactions, but they must be below $9.95, both for the common sense reason that their competitors are able to charge less, and because some states like Alabama require Securus to charge less with no apparent ill effects. Securus reported 4,059,157 credit card transactions ranging from $5.00 to $6.95 in 2012. We calculate the average fee collected to be $6.82 and the median to be $6.95. For 2013, Securus reported 4,769,570 credit card transactions ranging from $3.00 to $9.95. We calculate the average fee collected to be $7.20 and the median to be $6.95.

The prison phone industry’s new business model: Fee Harvesting

Some of these companies call themselves phone companies, but the phone service is little more than a gimmick to charge expensive fees.

by Peter Wagner, June 18, 2015

Our analysis of the FCC’s Second Further Notice of Proposed Rule Making is that the agency is clearly onto the industry’s dirtiest trick: charging consumers hidden fees. Some of these companies call themselves phone companies, but the phone service is little more than a gimmick to charge fees.

We’re thrilled at the FCC’s attention to fees, but we haven’t yet gotten the media and lay audiences to understand that the distinction between rates and fees is far more important and far less semantic than it appears at first blush. Let me explain:

If the FCC were to ignore the fees, that mistake would undermine any reforms that are made to the rates for the three reasons we discuss in our report Please Deposit All of Your Money: Kickbacks, Rates and Hidden Fees in the Jail Phone Industry:

1. The hidden fees can easily equal or surpass the base cost of a call. We estimate that families pay at least $386 million a year in charges like $9.50 for a credit card payment or $5 to receive a refund. On top of that, Securus and its competitors quietly pocket tens of millions of dollars tacking on an abusive $13.19 “single call” fee¹ to 20 cent calls.
2. The fees are the direct result of the commission system (explained below) because they are a hidden revenue source that enables the phone companies to promise the facilities an otherwise unsustainable percentage of the call income.
3. Fees have become the new business model that the companies use to circumvent the FCC’s caps on the rates charged.

In sum, the fees allow the companies to both circumvent the FCC’s rate caps and make possible the entire shell game of winning contracts by promising to pay what are actually impossible commissions.

It’s easy enough to understand why high fees are bad for the families paying for the calls, but they are bad for the facilities too. As one of the more ethical phone companies recently explained in a colorful video, the companies are asked to compete on the basis of who will promise the facilities the largest share of the rate pie; but they are never asked to disclose the existence of an entirely separate pie of income extracted from the fees charged to the families. The companies playing the fee game look generous because they are promising to share up to 99% of the rate revenue with facilities, but that “generosity” is only possible because the company is hiding the revenue it collects from fees.

Sadly, some facilities learn about this and then look away. They don’t see a reason to stick up for their taxpayers, nor do they see any self-interest in enforcing ethical behavior with their business partners. This story illustrates what the facilities are missing:

What the sheriffs are missing is that by allowing their partners to fleece families out of half a billion dollars a year in fees, they are ensuring that the poorest families in their counties won’t have very much money left to pay for the actual, commission-producing, calls.

And phones aren’t the only industry in which fee harvesting is the new business model. Take our work on release cards. Private companies reach out to jails with offers to take over all of their money management woes – at no cost to the county.. Previously, jails had to keep track of the money people were arrested with or were sent by family members and then, upon release, issue a check or give cash. Now, private companies take the cash and give people pre-paid Mastercards instead. The jails ask: What could be more convenient than that?

The better question is this: How is it even possible to provide a valuable service for free? It’s not. These companies exist by charging the people who are forced to use their cards exploitative fees like $3.50 a week for the account, $0.95 for purchases, $3.95 for checking their balance, and $30 for closing their account.

Most people who run correctional facilities see it as their job to make our communities safer and stronger. One of the simplest ways they can meet that goal would be to start working much harder to ensure that the facilities aren’t complicit in making the poorest among us any poorer.

Focusing on fees is one of the most important ways to ensure that both families and facilities are protected from the companies that have the interests of neither at heart.

Illustrations by Prison Policy Initiative Research Associate Elydah Joyce. To help other organizations explain fee harvesting in their own work, she has made these illustrations available under a Creative Commons license on Flickr.

Arkansas DOC to implement Securus video visits

Arkansas DOC will be first state prison system with Securus video visits

by Bernadette Rabuy, April 15, 2015

According to an article published yesterday in the Arkansas Democrat-Gazette, the Arkansas Department of Correction has approved a contract with Securus Technologies. You might remember Securus as it’s one of the private companies that dominates the prison phone industry and leads the for-profit video visitation industry.

While Arkansas will not be the first state to adopt video visitation, it is the first state that we know of to contract with Securus for video visitation services. Our January 2015 report on the video visitation industry found that most states that have large video visitation programs contract with JPay.

In addition to leading the video visitation industry, Securus’s video visitation contracts are unique because they often explicitly require the elimination of in-person family visits. Thankfully, the Arkansas Department of Correction will be implementing Securus video visitation as a supplement and not a replacement. DOC spokesman Cathy Frye told the Arkansas Democrat-Gazette, “We do not, however, want it to become a replacement for face-to-face visits.”

But according to the DOC’s Frye, Securus does not market its video system as a supplement for families who have difficulty visiting in-person. While the video visitation industry often claims that correctional facilities alone decide to limit in-person visits, the language in Securus’s contracts suggested otherwise, and Frye has now confirmed our fears:

“We agreed to the cut in audio commissions and to forgo the video commissions because the other option would have been to strongly push inmates into using video visitation instead receiving in-person visits from their families,” Frye said.

“Because this is such new technology, many of the companies providing it are pressuring correctional facilities to strongly encourage video visitation. That’s what you’re seeing at some of the county jails around the state. Those facilities have either limited or cut off in-person visitation entirely to ensure that the video-visitation venture can support itself, bring in revenue, or both.

Frye’s comments are telling. They confirm that private companies are setting correctional visitation policies and that the motive for banning in-person visits is money, not safety.

In other breaking news: Securus is acquiring JPay, which leads the market for sending money into prisons and, as I mentioned earlier, provides video visitation in state prisons. We’re not sure how exactly this will change JPay, but we are concerned. Will JPay raise the prices of its video visits from its typical rate of $0.33/min to Securus’s typical rate of $1/min? Will getting refunds from unsuccessful JPay video visits still be possible or will it follow in Securus’s footsteps in providing a customer service experience so frustrating that families give up on refunds? We will be developing a response strategy so stay tuned!

And if you’re in Arkansas, Arkansas Voices for the Left Behind will be holding its 21st annual event at the State Capitol Rotunda on Friday, May 8 at 11am, in which it will launch a campaign: “Erase the Stigma. Stop the Hurting and Begin the Healing for Children of Prisoners.” The Arkansas DOC video contract will be one of the topics discussed at the event.

The demographics of computer ownership and high-speed internet access

The poor, the elderly, and African-Americans and Latinos are less likely to have computers or high-speed internet at home. Replacing regular jail visits with computer video chats is a bad idea.

by Peter Wagner, March 17, 2015

As we explained in our report about the video visitation industry that wants jails to replace free in-person jail visits with expensive computer video chats, not everyone has computers at home or high-speed internet. It’s clear — and should be no surprise to industry leaders — that access is the most restricted in poor households, in African-American and Latino households, and in the homes of older people.

We used the poverty data in our report, but we thought graphing all of this data might be useful for our colleagues fighting proposals to replace traditional government services with mandatory internet-based services. Without a doubt, the internet is a great tool, but we are not yet in a world where we can assume that everyone has access to this technology.

Click for larger versions:

New videos: Video visitation is not “just like Skype”

4 short comedy videos reject that video visits are "just like Skype"

by Bernadette Rabuy, February 18, 2015

Last month, we released a new report, Screening Out Family Time: The for-profit video visitation industry in prisons and jails. Despite exciting press coverage and a victory in Portland, Oregon, where that sheriff agreed to bring back in-person visits, county jails and private companies are still conspiring to ban traditional family visits.

In response, we collaborated with NYC comedians to challenge the industry’s offensive claim that video visitation is “just like Skype” with 4 short videos. The comedians take on banning in-person visits, the high cost, how hard the systems are to use, and that these services make eye contact difficult.

Watch all 4 videos:

Thank you Siobhan Beasley, Phebe Szatmari, Haldane McFall, Luke Delahanty, Ben Rosen, Ted Alexandro, and Dewey Caddell for showing us that it’s possible to make people laugh while raising awareness about one of the most upsetting “innovations” to hit criminal justice in years.

Exploiting Inmates

"Exploiting Inmates" by Sukey Lewis in today's East Bay Express presents a great comprehensive overview of the current problems with the prison and jail phone industry

by Aleks Kajstura, February 4, 2015

The simply-titled article Exploiting Inmates by Sukey Lewis in today’s East Bay Express presents a great comprehensive overview of the current problems with the prison and jail phone industry.

Well worth a read, whether you’re new to the issue or looking for a good narrative that ties it all together: Exploiting Inmates