Prison Phone Justice

COMMONWEALTH OF MASSACHUSETTS
DEPARTMENT OF TELECOMMUNICATIONS AND CABLE
No. D.T.C. 11-16
PETITION OF RECIPIENTS OF COLLECT CALLS FROM
PRISONERS AT CORRECTIONAL INSTITUTIONS IN MASSACHUSETTS
SEEKING RELIEF FROM
THE UNJUST AND UNREASONABLE COST OF SUCH CALLS

MEMORANDUM OF PETITIONERS OPPOSING DISMISSAL

INTRODUCTION
The Petitioners, in accordance with Massachusetts law!, have tiled a Petition and
two Amendments which request that the Department of Telecommunications and Cable
(DTC) (1) hold a public hearing regarding rates charged by Inmate Service Providers
(ISPs) and set just and reasonable rates, and (2) investigate numerous complaints
regarding the quality of service provided by ISPs. Respondents Securus and OTL have
filed responses which argue that the case should be dismissed. DTC accordingly has
directed the Petitioners to respond with briefing as to why this case should not be closed.
The Respondents' arguments that the DTC lacks jurisdiction to hear the
Petitioners' complaint are entirely unfounded. As discussed below, this type of
adjudicatory proceeding is an appropriate vehicle for rate-setting; despite the
Respondents suggestion, formal rulemaking is not required and indeed would be
inappropriate under the DTC's own procedures. The DTC's 1998 Order regulating

I

M.G.L. 159 §§ 14 and 24

1

prison telephone rates, and the approval of tariffed rates filed pursuant to that Order, do
not preclude the Department from re-assessing the reasonableness of rates in light of
present-day circumstances. The Petitioners have given the DTC ample cause to exercise
its jurisdiction, providing a wealth of evidence that new technologies and reductions in
cost have eroded the basis for the current rate cap, as reflected in decreasing rates
elsewhere.
The Respondents' practice of passing on to customers the cost of commissions
paid to cOlTcctional facilities is a key aspect of the Petitioners' claim that current rates are
unjust and unreasonable. As the Federal Communications Commission and utility
regulators in Alaska and Georgia have ruled, these commissions are not a cost of
providing telephone service and should be paid from telephone company profits rather
than by customers. The Petitioners do not seek to outlaw the payment of commissions.
They do not seek to interfere with the ability of the Department of Correction (DOC) or
any county to require commissions or the Respondents' ability to offer commissions.
They merely ask that the Respondents and all telephone companies be required to pay
commissions from profits. This will bring an end to the perverse bidding war in which
companies vie for facility contracts by siphoning off ever-more cash from customers.
This is squarely within the DTC's mandate to set just and reasonable telephone rates.
Finally, the Petitioners have submitted more than sufficient information on quality
of service problems to justify an investigation. There is absolutely no requirement in any
law or regulation that the Petitioners first exhaust another remedy before seeking a DTC
investigation. Indeed, the use of a Petition such as the instant one is an established
vehicle for requesting such an investigation.

2

ARGUMENT
I.

Standard of Review
The DTe has construed the Respondents' arguments as seeking dismissal of the

Petitioners' claims. Accordingly, the appropriate standard is that governing dismissal
pursuant to 220 C.M.R. 106 (6) (e). The Department must take the Petitioners'
assertions of fact as true and construe them in favor of the Petitioners 2

Dismissal may

not be granted unless it appears that the Plaintiffs would be entitled to no relief under any
statement of facts that could be proven in support of their claim. 3 While GTL explicitly
seeks dismissal 4 and portions of Securus' response may be construed as seeking
dismissal, neither of the Respondents has sought summary judgment. which would be
premature at this juncture as the Petitioners have not been able to conduct discovery as
provided in 220 C.M.R. 106 (6) (c).
II.

The DTC has Jurisdiction to Review the Respondents' Rates.
The DTe has explicit jurisdiction to hear Petitioners' complaint and the authority

to set rates through an adjudicatory proceeding. Neither the existing rate cap order
issued in 1998 5 nor the Respondents' tariffed rates on file with the DTe provide any
basis for dismissing the complaint. The DTe has the statutory authority to review the
Respondents' rates at any time. The fact that the DTe has, in the past, sanctioned the

See Petition afthe Attorney General of the Commonwealth of Massachusetts, pursuant to G.L. c. J64, §
93,/or an Investigation of the Electric Distribution Rates ojFitchburg Gas and Electric Light Co., DTE
99-18, Order of Oct. 18,2001 at 4 (2001) (citing Riverside Steam & Electric Co., DPU 88-123, at 26-27
(1988)).
3 See id.
4 See Response of GTL at 2.
5 investigation by the Dept. a/Telecommunications And Energy on its Ol-VI1 motion regarding (1)
implementation a/Section 276 of the Telecommunications Act of 1996 relat;ve to Public Interest
Payphones, (2) Entry and Exit Barriersfor the Payphone Marketplace, (3) New England Telephone and
Telegraph Company d/b/a NYNEX's Public Access Smart-pay Une Service, and (4) the rate policy jor
operator services providers, ORDER ON PAYPJ-/ONE BARIERS TO ENTRY AND EXIT, AND OSP RATE
CAP, D.P.U'/D.T.E. 97-88/97-18 (Phase U) (April 17, 1988) (hereinafter "1998 order").
2

3

current rates, does not now shield the rates from regulatory scrutiny. Furthermore,
Petitioners, through their complaint, six appendices, five exhibits and two separate
amendments, have clearly pled sufficient facts to support their claim that inmate calling
rates and surcharges in Massachusetts are unjust and unreasonable.

1. The DTC Has Jurisdiction to Set Rates Through a Petition Brought
Pursuant to G.L. c. 159, § 24.
The DTC'sjurisdiction and authority to address this complaint through an
adjudicatory-style proceeding is explicitly sanctioned by statute. The ability of twenty
ratcpayers to petition the Department, as they have here, is expressed in M.G.L. c. 159, §
24, which states, in relevant part: "Upon written complaint, relative to the service or
charges for service ... by twenty customers of the company, the department shall grant a
public hearing.,,6 State statute then mandates that the Department, after a hearing on such
a complaint, set just and reasonable rates. M.G.L. c. 159, § 14 ("Whenever the
department shall be of opinion, after a hearing had upon its own motion or upon
complaint, that any ofthe rates ... of any common carrier for any services to be performed
within the commonwealth ... are unjust ... the department shall determine the just and
reasonable rates."). Indeed, this appears to be exactly the procedure the Department
followed in 1998 when it issued the initial rate cap order after opening an investigation
on its own motion 7 A "complaint" tiled under § 24, is similarly sufficient to trigger the
hearing contemplated by §§ 14 and 24.
In light of these statutes, there is no credence to Respondent GTL's argument that
this proceeding is a request for rulemaking and therefore not an "appropriate vehicle" for

6

7

M.G.L. c. 159 § 24.
See, 1998 Order at 1.

4

determining the reasonableness of Respondents' rates. 8 Respondent's argument is at
odds with the Department's clear policy that ratemaking will be done through
adjudication9 and that rulemakings are used only "to adopted, amend or appeal
regulations ... " 10
But even if rulemaking were an available option to resolve the issues raised in
Petitioners' complaint, agencies have discretion, as Respondents concede,l1 to choose
between adjudication and rulemaking when the use of either procedure would be proper.
See Arthurs v. Bd. of Registration in Medicine, 418 N.E.2d 1236, 1246 (Mass. 1981)("It

is a recognized principle of administrative law that an agency may adopt policies through
adjudication as well as through rule-making."); West Bridgewater Police Ass 'n v. Labor
Relations Com 'n, 468 N.E.2d 659, 662 (Mass.App.Ct. 1984) CAn administrative

agency, in proceeding on a case-by-case basis, should be permitted to make refinements
and even new rules in light of past experience.").
Furthermore. the setting or revision of tariffed rates has never been an
impediment to agency use of adjudicatory proceedings. In Re Colonial Gas Company,
the Department of Public Utilities ruled on proposed rate changes after engaging in a
hearing process, in the form prescribed by 200 CMR 1.06, and it explicitly termed its
treatment ofthe case as "adjudication.,,12 In Re Cambridge Elec. Light Co., the
Department of Public Utilities ruled on a challenge by petition to a specialized taritled
rate, in this case a customer transition charge ("CTC") for the recovery of stranded costs.
In doing so, D.P.U. clarified the scope of adjudication: "The fact that the Depmiment has
Response of GTL at 24-26
Massachusetts Department of Telecommunications and Cable 20 I 0 Annual RepOIt at 15-16.
10ld. at 17. See also 220 CMR 2.01.
"Response ofGTL at 25.
12 Re Colonial Gas, D.P.U. 93-78, 1993 WL 449445 (1993).

8

9

5

not adopted regulations under G.L. c. 30A. § 2, for recovery of stranded costs yet does
not restrict the Department's broad statutory authority to promulgate such regulations in
the future or to approve charges such as the

erc on a case-by-case basis.

Regulatory

practice may as readily be shaped by adjudication under G.t. c. 30A. § 10 as by formal
rule under G.L. c. 30A, § 2, as the instant proceeding shows.,,13
Since the relief requested by Petitioners is explicitly authorized by statute and
well within the traditional bounds of adjudication, the Department has clear jurisdiction
to proceed with the complaint.

2. Neither the 1998 Rate Cap Order nor the Respondents' Tariffed Rates
l>reclude the DTC from Reviewing the Reasonableness or Justness of
Respondents' Rates.
Respondents erroneously argue that because their rates comply with the 1998
Order and because the rates they offer are pursuant to tarin's on file with the DTC, they
are reasonable and not subject to challenge. As stated above, the DTC is explicitly
authorized to review Respondents' rates at any time on their own motion or upon
complaint such as that of Petitioners to determine if new circumstances have made the
old rates unreasonable. 14 Respondents' argument that a presumption of reasonableness
somehow immunizes their tariffed rates from regulation is illogical and runs contrary to
the DTC's clear mandate to maintain just and reasonable rates in accordance with modern
day realities. IS
The rates set by the 1998 Order were based, in part, on additional costs to inmate
service providers (lSPs) that were not incurred by conventional operator service

13
14

15

Re Cambridge Elec. Ught Co., D.P.U. 94-101/95-36,164 P.U.RAth 69 (1995)
G.L. c. 159, § 24; G.L. c. 159, § 14.
G.L. c. 159, § 14; See also http://www.mass.gov/ocabr/docs/dtc/admin/dtc-20 lO-annual-report.pdf.

6

providers (OSPS).16 Those costs, however, have changed significantly since 1998.
Respondents cite no evidence to support their contention that costs have remained the
same or increased, while Petitioners' complaint contains an abundance of evidence to the
contrary. 17 Petitioners cite extensively to the expert affidavit of Doug Dawson in the

Wright Petition before the Federal Communications Commission (FCC), which details
the various ways in which costs have plummeted since 1998, referencing economies of
scale, increased centralization, and technological improvements. 18 Regardless,
Petitioners' complaint must go forward because they are entitled to discovery concerning
Respondents' contentions that costs have increased.
The Department's 1998 Order also took into account the rates charged by
providers in other states in 1994 and 1995. 19 The order says, "The record shows that
AT&T, MCI and Sprint Communications Company impose $3.00 per call surcharges in
33 states to cover their additional costs, and that the costs of these providers do not diffcr
significantly from state to state.,,20 Petitioners' complaint demonstrates that this is no
longer the case and that rates and surcharges in the Commonwealth are unjustifiably

1998 Order at 9 ("These additional costs include (I) costs associated with call processing systems,
automated operators, call recording and monitorIng equipment, and fraud control programs, that are
required to ensure security and to deter abuses; (2) higher levels of un collectibles; and (3) higher personnel
costs").
17 See Petition at 15-22, Exhibits I and 5 and Appendix V.
18 See Petition at 16 and n. 25 and 26; See also. e.g.. Affidavit of Douglas A. Dawson ("Dawson Affidavit
2003") at 6, Appendix A to Martha Wright. et 01.; Petition for Rulemaking or. in the Alternative. Petition to
Address Referral Issues in Pending Rulemaking. CC Docket 96-128 (Nov. 3, 2003), available at
hlli?j/jjallJ'oss.fec.gov/l2IQ.d/ecfs/retrieve.cei?na.tive O1:_pdf'jldf&id dacument~6515782168 ; and see
Declaration of Douglas A. Dawson in Support of Petitioners' Altemative Proposal ("Dawson Declaration
2007-!") at 5-6, Appendix B to Petitioners' Alternative Proposal, Implementation of the Pay Telephone
Reclassjfication and Compensation Provisions afthe Telecommunications Act of 1996, CC Docket No. 96128 (March 1,2007), available at
b.l!]2;!jAallfoss.fcc.gav!prod!ecfs/retrieve.£,gi?nJltiv~_or pdf~pdf&id document~65189090 12.
19 See Exhibit I to InVisian Initial Comments cited in the 1998 Order at p. 9.
20 1998 Order at 9.
16

7

high21 Specifically, Petitioners provide a comparison chmi of the IS-minnte Intra-LATA
prisoner collect call rates in 2008 compared to 2004 for 47 states and correctional
facilities in Massachusetts, The chm shows that Massachusetts rates and surcharges run
counter to the national trend for most major jails m1d prisons in the county of
substantially reducing rates 22
Respondent Securus misleadingly claims that the Department reconfirmed the rate
regime in (he 1998 Order in 2004,23 However, prison telephone rates were not even
challenged in 2004 as they are now by Petitioners' complaint. The Department merely
established that V clizon Massachusetts could set a flat rate rather than the variable rate it
was charging for inmate collect calls, and that it could increase its surcharge because it
was still under the existing $3,00 cap,24 There was no assessment in 2004 of the
reasonableness of the rates,
Respondents wrongly argue that because they have tariffs on file and approved by
the Department, the rates set out in those tariffs are per se reasonable,25 Although state
statute provides that a filed tariff is deemed prima facie lawful, it is only deemed so until
it is changed by the Department, which the DTC has done on a number of occasions?6

See, e,g., Verizon New England, Inc, d/b/a Verizon Massachusetts, D.T.E. 98-57
(modifying tariff filed by Verizon); New England Telephone and Telegraph Co" D,P,\],
21 Id. al 11-29 and Appendix V,
22Id. at Appendix IV;
23 Response of Seeuru, at 8,
24

Response of Securus, Exhibit 1.

Respondent GTL also wrongly argues that because its inmate calling rates were examined and approved
by the Department, they are "ipso facto just and reasonable, Response of GTL at 17, Respondent GTL cites
Verizon New England, inc, dba Verizon Massachusetts, Arbitration Order, D,T,E 04-33 (July 14,2005) to
support its contention. The application of this case to the claims in Petitioners' complaint is inapt, however,
as the reasonableness of inmate calling rates was not assessed. See id. at 266. Furthermore, Petitioners do
not challenge the DTC's previous approval of Respondents' rates. Petitioners contend that those rates are
25

now unjust and unreasonable and that the Department has an obligation regulate and reset the rate regime
for inmate calling services ..

uG,L, e, 159, §17,

8

92-100, 1992 WL 421265 (modifying tariff filed by NET). The fact that the rates were
once approved by the DTC pursuant to statute does not mean that those rates remain
forever reasonable and cannot be changed.
Investigating the continued propriety of a tariffed rate upon the properly-filed
complaint of ratepayers is well within the scope of the agency, and indeed has been done
without controversy in a number of contexts 27 It is within the purview of the
Department to reinterpret the terms of the 1998 Order, if necessary, and to do so in an
adjudicatory proceeding. Indeed, in that order, it was the Department's stated decision to
"maintain its regulation of inmate calling services rates.,,28 The current complaint before
the DTC simply petitions the agency to ensure that those rates be updated so that they are
just and reasonable.

III.

The DTC Can and Should Require that Commissions be Considered
Shared Profits Rather than a Legitimate Business Cost.
A key aspect of the Petitioners' challenge to existing rates is their inclusion of the

cost of commissions paid by Inmate Service Providers (ISPs) to correctional facilities 29
The cost of commissions accounts for from 30 percent to over 52 percent of gross
telephone revenues across facilities 30 The Petitioners maintain that these commissions
are not a legitimate business expense, but rather represent shared profits, which may not
be included in cost calculations for purposes of determining "cost plus fair rate of return"

27 See, e.g. New England Telephone and Telegraph Company dba NYNEX, D.P.U. 94-35, 2000 WL 343074
(investigating the special conditions tariff paid by phone customers on Cuttyhunk Island);
Boston Edison Co., D.T.E. 98-14, 1998 WL 416877 (addressing the "substantive issue of whether the
Company's rates ought to be reduced").
28 1998 Order at 8.
29
30

See Petition at 9-11.

See Petition, Appendix II.

9

and setting just and reasonable rates 31 This question of law, if resolved in the
Petitioner's favor, further strengthens the charge that current rates are unjust and
unreasonable. 32
A. Commissions Are Not a Legitimate Cost of Service But Represent Shared
Profits.
Commissions do not reimburse correctional facilities for any actual cost of
providing telephone service. Commissions paid to county facilities in Massachusetts are
placed in a fund used for prisoner programs,33 while commissions paid to the Department
of Correction are transferred to the General Fund of the commonwealth. 34

Rather than

serve any purpose related to telephone service, commissions are a cash inducement to
select the bidder's proposal- paid for by telephone customers.
For this reason, the FCC has refused to allow companies to pass on the cost of
commissions to customers through preemption of state rate caps or a surcharge above
state rate caps for local collect ealls 35 The Regulatory Commission of Alaska (RCA)
and Georgia Public Service Commission (GPSC) have also determined that commissions

31 Traditional principles of utility regulation require that rates be set which allow the utility to meet its cost
of service and a "fair and reasonable return" on its investment See Hingham v. Dept of
Telecommunications and Energy, 433 Mass. 198, 203 (2000) (citing Lowell Gas. Co. v. Dept. of Public
Utils., 324 Mass. 80, 94-95 (1949».
32 Even If the Department were to rule that commissions are a legitimate cost of service, the petition would
still need to proceed in order to determine whether overall costs justify the rates charged, and whether the
level of commissions paid is a reasonable cost or is instead excessive.
JJ See "An Act transferring county sheriffs to the Commonwealth," Senate. No. 2119, Section 12.a
(enactment of the Senate and House of Representatives providing that inmate telephone funds shall remain
with the office of the sheriff in abolished counties) (2009) (attached as Exh. 1); see also Appendix C to
"Inmate Fees as a Source of Revenue: Review of Challenges," Report of the Special Commiss;on to Study
the Feasibility of Establishing Inmate Fees (Power Point) , Massachusetts Executive Office of Public
Safety and Security (July 1, 200 I) (listing use of fees collected by counties and DOC).
34 See G.L. c. 29 § 2 (April 1,2003).
35 In re imp/ementathm of Pay Telephone Reclassification and Compensat;on Provisions of
Telecommunications Act of 1996, ORDER ON REMAND & NOTICE OF PROPOSED RULEMAKING
("FCC Prison Payphone Order"), FCC No. 02-39, 2002 WL 252600, 17 F.C.C.R. 6347 (Feb. 21, 2002).
I

10

are not a cost of service and have refused to let telephone companies pass on the cost of
commissions to consumers 36 As the RCA held:
The inclusion of a commission requirement in a bid solicitation for regulated
utility service cont1icts with the regulatory objective of ensuring that utility costs
are necessarily incurred and rates are just and reasonable ... By allowing
commissions to be recovered through rates, the governing regulatory body
acquiesces in this commission-based bid process and promotes a system where
the service provider has an incentive to increase the price of service regardless of
the actual costs incurred 37
The respondents have cited no case in which a utility regulator has held that commissions
are a legitimate cost of service 38
Respondent Securus claims that the commission payments they provide to
correctional facilities are "no different than any other fees or payments Securus is
required to make to other government agencies.,,39 Commissions, however, are neither
user fees nor regulatory fees under Massachusetts law 40 A governmental fee is collected
"not to raise revenues but to compensate the governmental entity providing the services
for its expenses.,,41 Regulatory fees are ordinarily "imposed by an agency upon those
subject to its regulation" to "serve regulatory purposes," raising money "to help defray

Re Evercom Systems Inc., ORDER GRANTING IN PART, AND DENYING IN PART, PETITION FOR
RECONSIDERATION, Regulatory Commission of Alaska No. U-00-143, 2001 WL 1246903 (April
24,2001); Re Investigate Long Distance Charges, CORRECTED ORDER, Georgia Public Service
Commission No. 14530-U, 2002 WL 31096880 (March 19,2002).
37 Re Evercom Systems, Inc., Regulatory Commission of Alaska, 2001 WL 1246903 at *4,
38 In its effort to tind any authority allowing commissions to be passed on to customers, Securus cites Sims
er 01, v, AT&T, 2001 Ind. PUC Lexis 502 (August 24, 2001), See Response of Securus at 16-17 and n. 37.
But Securus is wrong when it says that Sims "implicitly recognized that compensation to facilities is clearly
a cost associated with providing the services." ld. The Indiana Utility Regulatory Commission in S'ims
rejected the complaint of unreasonable and discriminatory rates not based on an analysis of costs but rather
because the rates charged were no higher than non-prison rates for similar services. ld. at *38. The
practice of paying commissions was not chalJenged or discussed in that case, and the only mention of
commissions is a reference to ATT testimony in defense of its rates. See Sims at *29.
36

39

Response, at 15.

Emerson College v. City of Boston, 391 Mass. 415 (J 984), at 424, See also Nextel Communications of
Mid-Atlanlic. Inc. v, Town of Randolph, 193 F.Supp.2d 311, 321 (D. Mass, 2002), Greater Franklin
Developers Ass 'n v, Town of Franklin, 49 Mass.App.Ct. 500 (2000).
41 Id, at 425.

40

11

the agency's regulation-related expenses.,,42

The Massachusetts Executive Office of

Administration and Finance, following these principles, provides in its fee-setting
procedures, "[f]ees may not be used purely as a tool to raise revenue, but should ref1ect
the government's expense in providing the service associated with the fee.,,43
Commission payments to the correctional facilities are used to raise general
revenue in precisely the way that a governmental fee may not, going to the state's general
fund in the case of DOC commissions and to counties' inmate benefit funds. Since
conectional facilities are not agencies in the position of regulating Respondents'
activities, the revenue from commissions does not defray the cost of regulation. In fact,
a payphone increases the value of the entity's premises,44 making it impossible to view
the commission payments as the kind of compensatory charge that defines a regulatory
fee. Commissions are not regulatory fees because they do not "bear at least a 'rough
correlation to the expense to which the State is put in administering its licensing
procedures or to the benefits those who make the payments receive. ",45
Neither do Commissions reimburse correctional facilities for the rental value of
the telephones' location. Indeed, the FCC has held that prison payphones actually add
value to the premises: "A payphone that 'earns just enough revenue to warrant its
42 Nuclear Metals. Inc. v. Low-Level Radioactive Waste Management Ed, 421 Mass. 196 (1995), citing
Justice Breyer's opinion in San Juan Cellular Tel. Co. v. Public Servo Comm 'n o/P.R., 967 F.2d 683, 685
(I st Cir. 1992).
43 Executive Office of Administration and Finance, "Procedures for Setting Fees" (ANF 6), June 25, 2008,
Appendix C, at p. 30, available at http://www.mass.gov/anUbudget-taxes-and-

procUJ'ementiadmin-bulletins/procedures-for-setting-fees-anf~6.html.

See FCC Prison Payphone Order at **4; see also, In the Matter of a Commission Inquily into the Rates
and Charges of Institutional Operator Service Providers, RECOMMNENDED DECISION OF THE
HEARING EXAMINER, New Mexico Public Regulation Commission No. 07-00316-UT, November 4,
20 I 0, at 67 ("New Mexico Ratc Inquiry"), adopted by the Commission in ORDER REMANDING CASE ON
THE ISSUE OF RATE-OF-RETURN, December 22, 2010, at 2, attached as Exhibit 2.
45 Walton V. N. Y State Dep't ofCorr. Svces., 921 N.E.2d 145, 151 (N.Y. Court of Appeals 2009) (citation
omitted) (holding, where state legislature had passed a law banning commissions ITom telephone charges,
that customers were not entitled to a refund of charges paid previously because the practice did not violate
the state constjtution~ and commissions did not constitute an unlawful tax or fee).
44

12

placement, but not enough to pay anything to the premises owner' is 'a viable
payphone ... because the payphone provides increased value to the premises.' Therefore,
location rents are not a cost ofpayphones but should be treated as projit.,,46 The New

Mexico Public Regulation Commission similarly determined that the space occupied by
prison payphones has no rental value, noting that prisons have a legal obligation to
provide access to telephone service, telephones do not occupy an additional room, and
prisons have no other potential paying temmt other than one commissary at each
C '1'
laCI lty. 47

Finally, while non-prison payphones may include in their rates a contribution to
common costs in order to "ensure the current number of payphones is maintained," 48 the
FCC has determined, "[tJhat policy has little or no application in the prison context"
because:
considering that rcs providers offer commissions, prison payphones are already
profitable. Any increase in inmate calling services' revenue to permit a larger
contribution to common costs will not encourage it to provide more payphones
but will only encourage higher location commissions. Further, the correctional
facility and its communications policy, not the market, often determine the
49
number ofpayphones.
The Department itself in its 1998 order discussed costs unique to prison telephone
service and -- although the payment of commissions was already widespread -- did not
include commissions as a business cost. While prison telephone rates were capped at the
level of operator service provider (OSP) rates charged by Bell Atlantic or AT&T,
FCC Prison Payphone Order at **4, quoting Implementation olthe Pay Telephone Reclassification and
Compensation Provisions of the Telecommunications Act of 1966, THIRD REPORT AND ORDER, AND
ORDER ON RECONSIDERATION OF THE SECOND REPORT AND ORDER, 14 FCC Rcd.2545, 2562
(J 999), pet. Den. Sub nom American Public Comm. Councilf FCC, 215 F.3d 51 (D.C. Cif. 2000) ("Third
Report and Order") (emphasis supplied).
47 New Mexico Rate Inquiry, Exh. 2, at 67.
48 FCC Prison Payphone Order at **6 ..
49 Id. The FCC also cited methodological problems in determining the distribution of common costs, calling
it an "intractable problem." ld.

46

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depending on whether the call was intraLA T A or intrastate, the Department permitted a
surcharge of up to $3.00 to account for additional costs unique to inmate calling
services 50 The Department listed the additional costs of prison phone service that had
been demonstrated on the record of the case, which were: "(1) costs associated with call
processing systems, automated operators, call recording and monitoring equipment, and
fraud control programs, that are required to ensure security and to deter abuses; (2) higher
levels of uncollectables; and (3) higher personnel costs."S! The Department did not
include commissions as a cost justifying for the surcharge.
Respondent Securus nevertheless now seeks to justify its rates in part by arguing
that commissions are a legitimate cost associated with inmate calling services 52 Securus
argues that the list of unique prison costs set forth in the 1998 Order was not exclusive,
yet it concedes that the Department was "well aware" of the practice of paying
commissions at the time. 53 GTL likewise acknowledges, "[t]he Massachusetts
commission system for inmate calling had been in place for at least four years when the
Department adopted its 1998 rate cap policy.,,54 The logical conclusion is that the
Department believed the surcharge to be justified (at the time) by the factors it cited, and
that it deliberately excluded commissions as a cost factor.

55

There remains absolutely no

justification to pass on commissions to customers as a business cost.

50

1998 Order at 9-10.

51

Jd. at 9, citing comments of intervenor Invision.

Response ofSecurus at 14-18.
Brief of Securus at 16 ("the Commission was well aware ofhtes additional compensation-related costs in
considering the rate structure for ICS").
54 Response of GTL at 13.
55 Whether the surcharge is still justitied by the factors cited in the 1998 Order is a matter of factual dispute
which should be left for fUliher discovery and analysis by the Petitioner's expert.
52
53

14

B. Considering Commissions to be Shared Profits Will Not Interfere with the

Respondents' Freedom of Contract.
The Respondents seek to justify their position by arguing that correctional
Requests for Proposals (RFPs) for telephone service require commissions, and"[ a]ny bid
response that indicated that no compensation would be paid would be non-responsive and
the bidder would be disqualified.,,56 However, the Petitioners do not seek to ban the
payment of commissions, nor do they argue that the DTC has authority to enforce such a
ban. They simply ask that the DTC use its authority to stop a perverse bidding war in
which telephone companies win contracts by padding their bids with ever-higher cash
inducements paid for by the customers 57
If commissions must come from company profits rather than be passed on to
customers, then all telephone companies equally will have to reassess the amount of cash
they can offer to facilities. As the RCA found, "Where prison phone service solicitations
require commissions, the exclusion of commissions from rates compels bidders to
consider the impact of a proposed commission on its profit margin.,,58

This would de-

escalate the amounts of commissions paid by all companies and ti'ee customers from the
burden of channeling cash to prisons. The notion that any telephone company would be
competitively disadvantaged by the end of this arms race is illogical.
Facilities and phone companies may agree to the payment of commissions, but
they do not have the authority to require ratepayers to pay for those commissions. Only

Response ofSecufus at 15.
Several state legislatures and the District of Columbia have chosen to end this arms race with statutes
forbidding the payment of commissions through phone rates. These include California, Cal. Gov'! Code §
15819.40 Amended by Stats. 2007, c. 175JS.B.811. § I, eff. Aug ...£4, 2007; New Mexico, N.M.SA 1978,
Section 33-14-1 (2001);New York, McKinney's Correctional Law § 623 (2008); Rhode Island, R.l. Gen.
Laws § 42-56-38.1(c) (2007); South Carolina, S.C. St. § 10-1-210 (2008); and Washington D.C., D.C.
Code § 24-263.01 (2001).
58 Re Evercom Systems. Inc., 2001 WL 1246903 at*5.

56
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the DTC may set rates. As the Georgia PSC observed, "The RFP process is not deigned
to ensure just and reasonable rates for the parties that are being billed for the service."

59

The New Mexico Public Regulation Commission has similarly rejected the notion that its
ability to regulate is circumscribed by the terms of prison telephone contracts:
The Commission has no jurisdiction over the contracts entered into between
[telephone company] E & T and correctional facilities or jails and has no power to
enforce those contracts in any way. The contracts involve services E & Twill
provide the facilities and the amount E & T will pay the facilities in order to
provide those services. Rates are paid by the inmates to the facility and are not
essential to the contracts. 60
The FCC has noted that the companies themselves do not even benefit from the
inclusion of commissions in prison customer rates. Rather, the winners in this arms race
are the correctional facilities:
[M]uch of any additional revenue ICS providers receive would likely be retained
by the location monopolist, the confinement facilities, in the form of higher
commissions ... The additional revenue stream likely would drive up the
commissions offered by competing ICS providers to the confinement facilities,
thereby keeping the ICS providers' net revenue flat 61
The FCC thus urged states "to examine the issue of the significant commissions paid by
ICS providers to confinement facilities and the downward pressure that these
commissions have on ICS providers' net compensation and, more importantly, the
upward pressure the impose on inmate calling rates.,,62
Any rate cap set by the DTC "interferes" with prison telephone contracts to the
extent that it limits what companies may charge customers. The DTC is mandated to set
just and reasonable rates based on the cost of service plus a reasonable rate of return. 63

Re Investigate Long Distance Charges, 2002 WL 31096770 at *5.
New Mexico Rate Inquiry, Order Remand;ng Case, at 4-5,
61 Id., 2002 WL 252600 at ***8.
62 ld.. 2002 WL 252600 at ***9.
63 See' Hingham v. Dept' a/Telecommunications and Energy, 433 Mass. at 203.
59

GO

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Nothing requires it to sanction bids that offer ever-higher payments to prisons at the cost
of ever-higher phone rates to prisoners and their families.
While Securus argues that the reduction of commissions would lead to reduced
prison programming, this consideration is outside the DTC's purview. The D.T.C.
cannot know how county facilities would choose to allocate funds if commissions were
reduced, nor is it charged with the oversight of correctional budgets. (In the case of the
DOC commissions go to the state's general fund.) The D.T.C. is charged with the
oversight of telephone rates. Requiring prison phone customers, many or most of them
impoverished, to foot the bill for prison expenses that should be paid by the public at
large is unjust and unreasonable.

C. DOC Regulations Do Not Require or Authorize The Respondents to Pass on
the Cost of Commissions to Customers.

GTL asserts that "[t]he commission system is specifically mandated by
Massachusetts DOC regulation, and has been upheld by Massachusetts courts,,,64 and
Seucrus similarly avers, "the Department of Corrections' authority to enter into
agreements providing for [commissions] has been affirmed by Massachusetts courtS.,,65
The implication that either regulation or case law permits the cost of commissions to be
passed on to customers ~ much less requires it -- is flatly false. The regulation cited
merely requires that any commissions which are received by the DOC must be returned
to the General Fund of the Commonwealth 66
The Brees! v. Dubois decision cited by both respondents merely held that the
Commissioner of Corrections has the power "to enter into contracts necessary or
Response ofGTL at 12, citing 103 C.M.R. 482.06(6) and Breest v. Dubois, No. 94-1665H, 1997 WL
449898 (Mass. Super. July 28,1997).
65 Response of SeeUJ-us at 15, citing Brees! at *8.
66 See 103 C.M.R. 482.06(6).
64

17

incidental to the exercise of his authority to regulate telephones," including "those in
which it receives a commission.,,67 Breest did not consider whether telephone
companies could include the cost of commissions in their rates. No telephone company
was a party to Breest, which noted that "any challenge to the validity of a rate approved
by the DPU must be brought before the agency, not the superior court.,,68 In fact, while
the Commissioner of Correction is explicitly authorized to contract with telephone
companies, he does not have authority to approve of prisoner fees that are not explicitly
authorized by statute. See Souza v. Sherif! of Bristol County, 455 Mass. 573, 582 (Mass.
2010) (rejecting argument that Commissioner's statutory authority to audit and inspect

county facilities, and regulations implementing that authority, enabled Commissioner to
authorize County to charge prisoner fees; "Neither the regulations nor the statutory
provisions authorizing inspections provide an authorization to impose the challenged
fces").

IV.

The Petitioners' Complaints Regarding Quality of Service Should Be
Investigated
Respondents argue that Petitioners' quality of service complaints are not properly

before the Department 69 and that Petitioners should have first raised those complaints
with Respondents' through other means 70 This argument misstates Petitioners' burden in
bringing their quality of service complaints before the Department. There is no statutory
requirement that a complainant exhaust other remedies, whether inside the customer
service departments of the providers or through other administrative bodies.
See Breest at. *839.
Jd. at *8. Cacido v, Secretary of Public Safety, 422 Mass. 764 (1996), also cited by respondents,
similarly upheld the validity of the prison telephone regulations. The only challenge was to portions of the
regulations that provide for the monitoring and recording of prison phone calls; the payment of
commissions was not raised in that case.
69 Response of GTL at 18
70 Response ofGTL at 18-20, Response ofSecurus at 34-37

67
68

18

The Department has never before required exhaustion when taking up quality of
service complaints made by a group of customers or a municipality. Instead. it has
addressed the complaints on their merits, whether granting or denying the relief
requested. For instance, in Re New England Telephone and Telegraph Company, D.P.U.
20197 (75 P.U.R.4th 405), the Department of Public Utilities heard a request from one
hundred subscribers for relief in a complaint about calling area and quality of service.
The quality of service complaints were "incorporated into the proceeding,,71 without any
mention of an exhaustion requirement or mandatory procedure. 72
[n Re Verizon-Massachusetts in the Towns of Athol et aI., DTE 99-77 (2001 WL
427319), the Department of Telecommunications and Energy received a quality of
service complaint from a town's Board of Selectmen. In its Order, the DTE notes that it
promptly docketed the matter after receipt of the Petition and scheduled a public hearing,
again without reference to any pre-Petition complaint requirement.
In fact, DTE has explicitly stated that the ability of customers to petition the
Department provides a major safeguard against problems with quality of service. The
Department's "authority to investigate service quality problems pursuant to a petition
from elected officials or groups of twenty or more affected customers provides adequate
protection from degradation in the quality of service ... ,,73 The Department's ability to
hear quality of service complaints in the form of a petition is crucial to its regnlation of
ntilities. The procedural and administrative reqnirements that Respondents seek to place

Re New England Telephone and Telegraph Company, D.P.U. 20197 (75 P.U.RAth 405) at 406
n See also Re Plymouth Water Company, D.P.U. 91-254 (1992 WL 506135) (approving a settlement after
twenty customers petitioned the Depm1ment over billing practices); Re Boston Edison Company, D.P.U.
87-136 (1995 WL 627748) (addressing a quality of service complaint brought by twenty ratepayers).
73 Re The Berkshire Gas Company, DTE 98-61/98-87 (1998 WL 996028).
71

19

on this Petition have no basis in legal authority and are entirely antithetical to the
Department's purview,
The long list of "formal complaint channels" provided by Securus illustrates the
absence of any legally mandated complaint procedure prior to bringing this matter before
the Department,14 The list shows that there are a variety of state institutions
(administrative and otherwise) with different mandates that exist, at least in part, to hear
quality of service complaints, In its variety, the list shows that there is definitively not
any specific requirement to be fulfilled or specific path mandated before a complaint can
be brought to the Department in this form,
In support of the idea that there is a "well-defined process" for dealing with all
quality of service complaints, Respondent GTL cites the Otnce of Consumer Affairs and
Business Regulation website for tiling a complaint with the Consumer Division of the
DTC 75 From the website's recommendation that customers "[flirst, try to contact your
telecommunications or cable company," GTL extrapolates the existence of a "preferred
complaint policy" that would render the Petition improper. This single recommendation
to try resolving problems with the company first cannot possibly be seen to constitute any
kind of binding exhaustion requirement and does not preclude the proper filing of a
complaint with the Department in this case,
GTL also cites D,P,U, 18448 (1977), which established a procedure that pertains
exclusively to residential customers and exclusively to billing complaints 76 Furthermore,
this document gives both customers and compmlies the unqualified right to bring mly new

Response of Securus at 34, listing "the DTC, the FCC, the state AGO, the state OCABR, or the BBB"
http://www.mass.gov/ocabrlgovernmentloca-ageneies/dtc-Ip/consumer-dtclfile-a-complaint.html
76 D,P,U, 18448, Rule 6, I ("If any matter relating to a bill is disputed by the customer, the following
procedure shall apply")
74
75

20

complaint directly to the Department: "Any party aggrieved by any action in violation of
these Rules may at any time request a hearing before the Department by making a
complaint in writing to the Department, provided that such matter has not been
previously investigated by the Department."n This set of rules clearly forecloses any
argument that Petitioners have improperly brought this complaint before the Department
because they have not complained sufficiently to their individual providers.
Despite the absence of any requirement, the Petition and its amendments make
clear that Petitioners have, in fact, brought quality of service to Respondents' attention on
numerous occasions 78 Furthermore, several of the Petitioners comment on their bad
experiences with attempting to resolve quality of service issues with the providers'
customer service departments. 79 These family members and friends of prisoners report
difficulty in even being connected with a company agent able and willing to record their
quality of service complaint. The very nature of customer service problems makes it
increasingly difficult for these Petitioners to communicate their complaints and decreases
the likelihood that their initial complaints will be translated into a company record.
Petitioner Shirley Turner's experience illustrates the inherent difficulties that customer
service problems pose to customers. Respondent Securus' (previously Evercom)
customer service department told Ms. Turner that the only way to receive credit for
problem calls was to download a form off the Internet. After Ms. Turner informed the
company that she did not have internet access, it denied her request to have a copy of the
form mailed to her 80

Jd., Rule 6.3.
See First Amendment to Petition, Supplement on Quality of Service.
79 See First Amendment to Petition at 20-24
80 Affidavit of Shirley Turner at fi 7, attached as Exhibit A-lO to Petitioner's First Amendment.
77

78

21

Because many Petitioners face these difficulties in even reaching the point where
their complaints can be recorded, Respondents' analysis of the formally recorded
complaints in their system does not faithfully depict the nature of Petitioners' complaints.
Ultimately, Respondents' claims that Petitioners have not adequately complained to the
companies about quality of service are both factually inaccurate and unresponsive to the
underlying service problems that Petitioners have identified.
CONCLUSION
For the reasons stated above, the Petition should not be dismissed and the
Department should declare that commissions paid to correctional facilities are not a
legitimate business cost which may be included in telephone rates.

Date: March 23, 2012

Respectfully submitted:

f7

--------

ibj/j~-,
Bonita Tenneriello, Esq.
Elizabeth Matos, Esq.
James Pingeon, Esq.
10 Winthrop Square, 3'd Floor
Boston, Massachusetts 02110
(617) 482-2773 (telephone)
(617) 451-6383 (facsimile)
bten}lcriello@,plsma.org
ematos(a)plsma.QIg
jpingeon@plsma.org

i

that a tme copy of the above

documeni vvas ~erved upon the attorney of
,econ! ~ e~c7 0ther party by mail ~

on-JflZ. 7iI~_~

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