Breaking News! FCC Votes to Further Reform Prison Phone Industry

by Carrie Wilkinson

The cover story of the December 2013 issue of Prison Legal News was titled “FCC Order Heralds Hope for Reform of Prison Phone Industry.” It included a primer on prison and jail phone services, and detailed a landmark decision by the Federal Communications Commission (FCC) that capped the cost of interstate (long distance) rates for phone calls made by prisoners and enacted other reforms. The cover story concluded by saying, “Lady Justice may be blind, but judging from the FCC’s order she is not deaf – and the pleas of prisoners and their families for reform of the abusive prison phone industry are finally being heard loud and clear.”

Exactly two years later in this issue of PLN, after much work by the Human Rights Defense Center (HRDC), our partners in the Campaign for Prison Phone Justice and other advocates, we can report that not only are the voices of prisoners and their families still being heard at the national level, but long-awaited relief is coming as the result of yet another historic FCC rulemaking decision.

On October 22, 2015, the Commission voted 3-2 along party lines to comprehensively reform the Inmate Calling Services (ICS) industry. Democratic Chairman Tom Wheeler and Commissioners Mignon Clyburn and Jessica Rosenworcel voted in favor of reforms that will continue the process of curtailing the ICS business model of monetizing all forms of human contact, while Republican Commissioners Michael O’Rielly and Ajit Pai dissented. The FCC subsequently released its Second Report and Order and Third Further Notice of Proposed Rulemaking on November 5, 2015.

In written comments attached to the FCC’s most recent Order, Commissioner Clyburn referred to the sacrifices that prisoners’ families have been required to make in order to communicate during times of incarceration as “untenable, egregious, and unconscionable.” Not only was she right, but she had the fortitude to take on the issue and do something about it; without Commissioner Clyburn’s leadership, it is unlikely the FCC would have acted on comprehensive reform of the prison phone industry.

The Commission’s Order will cap all prepaid/debit calls (local, in-state and out-of-state) made from state and federal prisons at $0.11/min. A tiered rate structure will be implemented for all debit/prepaid calls (local, in-state and out-of-state) made from jails, based on facility size: $0.14/min. for jails with more than 1,000 prisoners, $0.16/min. for jails with 350-999 prisoners and $0.22/min. for jails housing 349 prisoners or less. Collect calls from prisons and jails initially will be capped at $0.14/min. and $0.49/min., respectively, when the Order goes into effect, then will phase down to the prepaid/debit caps over a two-year transition period.

The Order also eliminates most ancillary fees, which can add nearly 40% to the cost of a phone call. Only three fees will be allowed: automated payments by phone or online are capped at $3.00, payments through a live agent are capped at $5.95 and no more than $2.00 can be charged for paper billing. All other fees will be prohibited and no mark-up can be added to third-party financial transaction fees (such as MoneyGram or Western Union). The Order prohibits mandatory minimum payments for adding money to phone accounts, and places a floor of $50.00 on mandatory maximum payments.

While stopping short of banning site commission kickbacks, the FCC defined them broadly in its Order and reaffirmed that kickbacks are profits and not a cost of providing ICS, and thus cannot be included in ICS rates. Additionally, the FCC encouraged “states and other correctional facilities to curtail or prohibit such payments as part of an effort to further ensure that inmates and their families have access to ICS at affordable rates.” The Order also bans flat-rate calling and facilitates greater access to prison and jail phone calls for people with hearing disabilities.

The ICS reforms will go into effect 90 days after the Order is published in the Federal Register, which is expected to happen by the end of November or early December. The Third Further Notice of Proposed Rulemaking released with the Order seeks public comment on the following issues: promoting competition in ICS to reduce the need for regulation, video visitation and other advanced communications services for prisoners, recurring data collection from ICS providers, a contract filing requirement, international calling rates, third-party financial transaction fees and cost/benefit analyses of the FCC’s proposals.

The Commission’s most recent Order constitutes “a quantum leap in prison and jail phone industry reform,” said PLN managing editor Alex Friedmann, who attended the FCC’s October 22, 2015 hearing in Washington, D.C.

The Commission’s vote on ICS reforms occurred exactly one year after it released a Second Further Notice of Proposed Rulemaking, which was strongly opposed by the National Sheriffs’ Association and many sheriffs across the country as well as ICS providers. The sheriffs were solely focused on the kickback revenue they stood to lose, with no regard to the benefits of affordable communication for prisoners’ families, especially those with children. The FCC’s docket is replete with letters from sheriffs complaining about the tremendous costs incurred in providing ICS (with very little supporting financial data), and blatant threats to eliminate phone calls altogether if they don’t continue to receive kickbacks.

ICS providers mounted an even larger, unsuccessful campaign over the past year to get the FCC to ban commission kickbacks. With ICS rates capped, prison phone companies stand to lose millions of dollars collected primarily from prisoners’ families, some of our nation’s poorest citizens. The companies will receive less revenue and may still have to pay commissions; thus, they fought hard to convince the FCC to ban the kickbacks demanded by corrections officials so they could keep all the profit from the reduced revenue stream. They lost, as the Commission did not prohibit kickback payments in its Order, only discouraged them.

Regardless, to say the FCC’s Order will reduce ICS profits is an understatement. In a Research Update for Global Tel*Link Corp. (the largest ICS provider), financial research firm Standard and Poor’s, after noting that the FCC had voted to cap rates and ancillary fees “without reducing or eliminating facility commission payments,” affirmed a negative outlook, stating, “the new regulation could hurt Global Tel*Link Corp.’s (GTL) profitability and credit metrics, although the timeframe and magnitude of the potential impact remains uncertain.”

Approximately a week after the FCC issued a fact sheet on September 30, 2015 outlining the proposal for its upcoming vote, Standard & Poor’s released a Research Update for Securus – the nation’s second-largest ICS provider – also citing a negative outlook. Both GTL and Securus have vowed to take the FCC to court over its Order, as they did when the Commission released its initial reforms capping interstate ICS rates.

The FCC has done a great deal since HRDC co-founded the Campaign for Prison Phone Justice in 2011; its October 22, 2015 vote and subsequent Order, coupled with its landmark 2013 reforms, evidence the fact that prisoners and their families are becoming a recognized consumer group that requires protection from corporate predators and their government partners. In 2010, a 15-minute prepaid interstate call from the Washington State Department of Corrections cost $18.30 ($4.95 connection fee + $0.89/min.). The cost of that same prepaid call was reduced to a flat rate of $3.15 under the FCC’s initial Order regulating interstate prison phone rates, and will be further reduced to a maximum of $1.65 when the rate caps in the current Order go into effect. Equally as important is the FCC’s elimination of flat-rate phone calls; prisoners and their families will now only pay for the actual minutes they use during a call.

While we are grateful for Commissioner Clyburn’s leadership on this issue and the support of her democratic colleagues, and recognize the immediate positive impact the FCC’s Order will have on millions of prisoners’ families, there is still much more to do. Prison Legal News and HRDC have long advocated for a rate cap of $0.05/min. for all types of prison and jail calls, with no additional charges or ancillary fees and a ban on kickback payments. We have already started working on our response to the Commission’s Third Further Notice of Proposed Rulemaking, and will oppose the legal challenges that ICS providers are expected to file.

“Today’s vote will never make up for the inaction of the past, but it is my hope that this order will finally bring relief to those who have waited for so, so long,” Commissioner Clyburn said prior to the FCC’s most recent vote on ICS reforms. Our continued efforts must ensure that those reforms will go into effect, and that the work of obtaining further justice for prisoners and their families continues to move forward.

Source: FCC proceeding in re: Inmate Calling Services, WC Docket 12-375