Prison Phone Justice

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of
Rates for Interstate Inmate Calling Services

)
)
)
)
)
)
)

WC Docket No. 12-375

COMMENTS OF VERIZON AND VERIZON WIRELESS1
The record in this proceeding makes clear that high rates for inmate calling services (ICS)
are a significant problem on which the Commission should focus. The record contains
undisputed evidence that an inmate’s regular telephone and other communication with family
aids in the inmate’s transition back into the community post-incarceration and thus lowers
recidivism.2 As a result, there is a compelling public interest in ensuring that call rates are
reasonable in the unique ICS market. Because Verizon provided ICS until 2007 when it sold this
business,3 Verizon has a historical perspective on how this one-of-a-kind market functions and
where there may be opportunities for meaningful Commission action. The Commission should
concentrate on two issues identified in the Notice – i.e., site commissions and exclusive contracts
– and take action consistent with its jurisdiction that will result in lower rates for ICS and thus
facilitate more inmate-to-family communications.

1

In addition to Verizon Wireless, the Verizon companies participating in this filing are the
regulated, wholly owned subsidiaries of Verizon Communications Inc. (collectively, “Verizon”).
2
See Rates for Interstate Inmate Calling Services, Notice of Proposed Rulemaking, 27
FCC Rcd 16629, ¶ 4 (2012) (“Notice”).
3
Verizon does not profit from high inmate call rates. For the convenience of our
customers, Verizon will put charges on those customers’ bills for collect calls placed by
inmates. This is a billing service – with the same fees – that Verizon provides to other
telecommunications service providers, such as unaffiliated long distance companies.
1

DISCUSSION
1.

In almost every state, site commissions are a significant cause of the high calling

rates that inmates and their families face. As the Commission has observed, ICS contracts
between providers and public departments of corrections (DOCs) frequently require that ICS
providers pay a commission to the DOC.4 When Verizon provided ICS, site commissions paid
to DOCs tended to range from 40-50% of amounts billed. Site commissions are therefore
substantial costs imposed on ICS providers who then must recoup the costs through their calling
rates. As a result, Commission action that addresses these site commissions could directly affect
the rates for inmate calls.
Commission action may be appropriate here because the market for ICS does not
function like most markets. Specifically, in Verizon’s experience, when a DOC is seeking a
provider of ICS services (typically through an RFP), there are multiple bidders, and nearly all of
them can meet the service requirements articulated by the DOC. Accordingly, the competition
for the contract tends to revolve around the commission percentage that the bidder is willing to
pay the DOC. In other words, the calling rates that the bidders will charge the collect call
recipients of the inmates5 appear to be irrelevant to the process of selecting a provider; the bidder
with the lowest calling rates is simply not more likely to win the contract. And since the
contracts are exclusive contracts, the inmates’ call recipients – usually the inmates’ families who
often are economically disadvantaged – have no choice but to fund the large commissions. This
mismatch between the entity that selects the ICS provider and those who use and pay for the
provider’s calling services can result in distortions.

4
5

See Notice ¶ 37.
Nearly all calls from inmates are “collect” calls paid for by the called party.
2

To be clear, Verizon is not suggesting that there is anything inherently wrong with
commissions or that all commissions, regardless of size, should be eliminated. Verizon
understands that DOCs may use commissions to fund beneficial inmate services that may not
otherwise receive funding. But forcing inmates’ families to fund these programs through their
calling rates is not the answer. Because higher rates necessarily reduce inmates’ telephone
communications with their families and thus impede the well-recognized societal benefits
resulting from such communications, other funding sources should be pursued.
The Commission should consider the most effective way, consistent with its jurisdiction,6
to reduce commissions and ensure that any reductions do in fact lead to lower calling rates. One
option could be for the Commission to take steps similar to those measures it recently adopted to
combat access stimulation. In its USF-ICC Transformation Order, the Commission addressed
schemes in which competitive LECs with high switched access rates share the access charge
revenue they receive from IXCs or wireless carriers with another party, often a conference or
chat line partner.7 In these schemes, the LEC and the revenue-sharing party typically attempt to
stimulate high call volumes by offering services that are “free” to the end-user.8 Notably, the
Commission did not ban revenue sharing agreements in its USF-ICC Transformation Order.9
And the Commission acknowledged that in some instances “shared” access revenues were used
for a beneficial purpose, such as broadband deployment.10 Regardless, the Commission took
decisive action against these schemes by requiring the LEC to file a revised tariff with access

6

Verizon takes no position regarding the Commission’s authority in these Comments.
See Connect America Fund, Report and Order and Further Notice of Proposed
Rulemaking, 26 FCC Rcd 17663, ¶¶ 656-57 (2011) (“USF-ICC Transformation Order”).
8
Id. ¶ 656.
9
See id. ¶ 672.
10
Id. ¶ 666 (“[H]ow access revenues are used is not relevant . . . .”) (emphasis added).
7

3

rates benchmarked to the rates of the price-cap LEC with the lowest rates in the state if a revenue
sharing arrangement existed and certain traffic criteria were met.11
A similar approach may be appropriate here. Site commissions paid by ICS providers to
DOCs are one form of revenue sharing. Like the IXCs and wireless carriers that carry the traffic,
inmates and their families have no choice but to submit to the high rates offered by a single
provider.12 Accordingly, rather than attempting to prohibit or otherwise limit commissions –
some of which are mandated by state law13 – the Commission could determine an appropriate
benchmark or rate cap for interstate ICS rates in states where commissions (or commissions
above a certain percentage) are paid. The rates for interstate ICS in states where commissions
are prohibited, such as New York, may be instructive in setting such a benchmark. Such action
would drive down the commission percentage that ICS providers are willing to bid for contracts
or eliminate it altogether, thus substantially lowering the costs of providing service. The ICS
rates themselves could become a determinative factor in the contract bids, which would lower
the calling rates that inmates and their families face.
Additionally, the Commission could pursue a more flexible solution. For example, the
Commission could convene discussions between DOCs, ICS providers, inmate advocates, and
other stakeholders with the goal of agreeing on voluntary best practices or guidelines pertaining
to commission levels and other terms in DOC contracts. The policies and contract terms of
DOCs that have already eliminated or capped commissions could serve as a model for other
DOCs. A similar collaborative process has proven effective in the cybersercurity context and

11

Id.
Unlike other individuals outside of prison facilities, inmates do not typically have access
to other forms of communication, such as email, Internet messaging, social media, and video
calling.
13
See Notice ¶ 38.
12

4

has been recommended with respect to rights-of-way fees charged by states or localities – fees
that similarly include payments or commissions to the government based on a percentage of
providers’ revenues and that can likewise impair competition.14
2.

In addition to efforts to lower commission costs, the Commission should explore

the competitive effects of the exclusive contracts between the DOCs and ICS providers. The
Commission has long recognized that exclusive contracts can be pro-competitive and result in
efficiencies that ultimately benefit consumers.15 Providers compete for the contract and its
associated exclusivity. In some scenarios, however, exclusive contracts can foreclose
competitors and thus be anticompetitive.16 When the competitive benefits are outweighed by the
harms, the Commission has prohibited exclusivity clauses. The Commission should determine
whether such action would be appropriate here.
Six years ago, the Commission concluded that exclusivity clauses in contracts between
multiple dwelling unit (MDU) owners and video providers could not be enforced by video
providers because the clauses denied tenants/residents their choice of video (and broadband)
providers and foreclosed new entrants.17 The Commission found that “the person signing an

14

See FCC News Release, Advisory Committee Adopts Recommendations To Minimize
Three Major Cyber Threats, Including an Anti-Bot Code of Conduct, IP Route Hijacking
Industry Framework and Secure DNS Best Practices, at http://www.fcc.gov/document/csricadopts-recs-minimize-three-major-cyber-threats (Mar. 22, 2012); Connecting America: The
National Broadband Plan, Recommendation 6.6, at
http://download.broadband.gov/plan/national-broadband-plan.pdf (Mar. 17, 2010).
15
See, e.g., Exclusive Service Contracts for Provision of Video Services in Multiple
Dwelling Units and Other Real Estate Developments, Report and Order and Further Notice of
Proposed Rulemaking, ¶ 26 & n.76 (2007) (“MDU Order”).
16
Id.
17
Id.
5

exclusivity clause for a MDU may be a builder or manager whose interests do not coincide with
those of the MDU’s residents.”18
The ICS context is similar. Here, the DOCs (the landlords in the MDU context) enter
into the exclusive contracts that govern which provider of voice services that inmates (the
tenants) must use. Neither landlords nor DOCs are the ultimate purchasers of service; thus, they
have little incentive to negotiate favorable terms of service for their tenants/inmates (or their
families) who will be responsible for paying the bills. Indeed, inmates are in an even worse
position than MDU tenants; inmates obviously are in no position to move to another residence if
they are unhappy with the selected service provider’s service or rates. And unlike others,
inmates typically do not have other communications options, such as email and social media.
Allowing multiple ICS providers to serve inmates at a DOC could promote competition
among ICS providers. While providers do compete for DOC contracts, as discussed above, that
competition is based on the site commission rates ICS providers are willing to pay. If the
benefits of competition were extended to the actual users of the service, inmates could select the
provider with the lowest rates and therefore engage in more frequent or lengthy communication
with their families.
At the same time, it is important to recognize the efficiencies from exclusive contracts.
For example, providers of ICS must provide substantial security measures to the DOCs relating
to the equipment to place the calls and the calls themselves (e.g., blocking, recording, etc.), given
the nature of inmate calling. Because these measures impose additional costs on providers and
competing providers would have to duplicate those efforts (or participate in some
administratively-complex and burdensome unbundling process), a single provider of ICS may be
18

Id. ¶ 28.
6

the most efficient outcome. Calling rates may not in fact decrease with multiple providers.
While the Commission has previously acknowledged that these considerations may justify
exclusive contracts for ICS services,19 that analysis may be outdated in light of technological
advances. As a result, the Commission should revisit its analysis. To the extent the Commission
concludes that exclusive contracts are problematic and ICS providers cannot enforce exclusivity
clauses, the Commission should then consider ways to encourage potentially reluctant DOCs to
explore the use of multiple ICS providers.
CONCLUSION
For the reasons discussed above, the Commission should address inmate call rates that
are too high by focusing on site commissions and exclusivity. The goal of these efforts should
be to reduce rates for inmates and their families, which serves the public interest.
Respectfully submitted,

By:
Michael E. Glover
Of Counsel

/s/ Mark J. Montano
Christopher M. Miller
Mark J. Montano
Verizon
1320 N. Courthouse Road
Ninth Floor
Arlington, VA 22201-2909
(703) 351-3058
Counsel for Verizon and Verizon Wireless

March 25, 2013
19

See Implementation of the Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996, Order on Remand and Notice of Proposed Rulemaking,
17 FCC Rcd 3248 (2002); Billed Party Preference for InterLATA 0+ Calls, Second Report and
Order and Order on Reconsideration, 13 FCC Rcd 6122 (1998).
7

Confirmation Page

Page 1 of 1

Your submission has been accepted
ECFS Filing Receipt - Confirmation number: 2013325678344
Proceeding
Name

Subject
Implementation of the Pay Telephone
Reclassification and Compensation
12-375
Provisions of the Telecommunications Act
of 1996 et al.

Contact Info
Name of Filer: Verizon and Verizon Wireless
Attorney/Author Name: Mark J. Montano

Address
Address For:
Address Line 1:
Address Line 2:
City:
State:
Zip:

Filer
1320 North Courthouse Road
Ninth Floor
Arlington
VIRGINIA
22201

Details
Small Business Impact: NO
Type of Filing: COMMENT

Document(s)
File Name
Custom DescriptionSize
03 25 13 VZ, VZW comments inmate calling
26
rates.pdf
KB

Disclaimer

This confirmation verifies that ECFS has received and
accepted your filing. However, your filing will be rejected
by ECFS if it contains macros, passwords, redlining, readonly formatting, a virus, or automated links to other
documents.
Filings are generally processed and made available for
online viewing within one business day of receipt. You may
use the link below to check on the status of your filing:
http://apps.fcc.gov/ecfs/comment/confirm?
confirmation=2013325678344
For any problems please contact the Help Desk at 202-418
-0193.

http://apps.fcc.gov/ecfs/upload/confirm?token=pui8anp7jjtt13b2zwpe2g75b

3/25/2013