FCC Second Further Notice of Proposed Rulemaking WC Docket No 12-375

• Oct. 22, 2014 • Locations: United States of America • Topics: Telephone Rates

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Federal Communications Commission

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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Rates for Interstate Inmate Calling Services

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WC Docket No. 12-375

SECOND FURTHER NOTICE OF PROPOSED RULEMAKING
Adopted: October 17, 2014

Released: October 22, 2014

Comment Date: [45 days after date of publication in the Federal Register]
Reply Comment Date: [60 days after date of publication in the Federal Register]
By the Commission: Chairman Wheeler and Commissioners Clyburn and Rosenworcel issuing separate
statements; Commissioners Pai and O’Rielly concurring in part, dissenting in part
and issuing separate statements.
TABLE OF CONTENTS
Heading

Paragraph #

I. INTRODUCTION.................................................................................................................................. 1
II. BACKGROUND.................................................................................................................................... 7
III. DISCUSSION ...................................................................................................................................... 19
A. Payments to Correctional Facilities ............................................................................................... 20
1. Restrictions on Payments to Correctional Facilities................................................................ 21
2. Legal Authority ....................................................................................................................... 29
3. Possible Reforms to Site Commissions................................................................................... 37
B. Interstate and Intrastate ICS Rate Reform ..................................................................................... 47
1. Proposals for a Unitary Rate ................................................................................................... 61
2. Tiered Rate Caps ..................................................................................................................... 67
3. Additional Considerations Related to ICS Rates..................................................................... 73
C. Reforms to Ancillary Charges ....................................................................................................... 80
1. Background ............................................................................................................................. 80
2. Legal Authority for Ancillary Charge Reform........................................................................ 85
3. Discussion ............................................................................................................................... 87
a. Prohibition of Certain Ancillary Charges ......................................................................... 87
b. Rate Caps for Ancillary Charges ...................................................................................... 94
c. Charges for Other Services ............................................................................................... 98
d. Consumer Disclosures .................................................................................................... 109
e. Other Issues..................................................................................................................... 111
D. Additional Ways to Promote Competition................................................................................... 113
E. Harmonization of State Regulations Under Section 276(c)......................................................... 116
F. Existing Contracts........................................................................................................................ 123
G. Transition Periods ........................................................................................................................ 128
H. Accessible Inmate Calling Services............................................................................................. 133
I. Advanced Inmate Communications Services .............................................................................. 145
J. Periodic Review........................................................................................................................... 152

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K. Enforcement................................................................................................................................. 155
L. Cost/Benefit Analysis of Proposals ............................................................................................. 159
IV. PROCEDURAL MATTERS.............................................................................................................. 160
A. Filing Instructions ........................................................................................................................ 160
B. Ex Parte Requirements................................................................................................................. 161
C. Paperwork Reduction Act Analysis ............................................................................................. 162
D. Initial Regulatory Flexibility Analysis......................................................................................... 163
V. ORDERING CLAUSES..................................................................................................................... 164
APPENDIX – Initial Regulatory Flexibility Analysis
I.

INTRODUCTION

1.
In 2013, nearly ten years after Martha Wright, a grandmother from Washington, D.C.,
petitioned the Federal Communications Commission (Commission or FCC) for relief from exorbitant
long-distance calling rates from correctional facilities,1 the Commission took long overdue steps to
provide relief to the millions of Americans paying unjust and unreasonable interstate inmate phone rates.
These exorbitantly high rates discouraged phone calls and, at times, made it nearly impossible for inmates
to maintain contact with their families, friends and communities, to society’s detriment.2
2.
Reforming inmate calling service (ICS) benefits society by making it easier for inmates
to stay connected to their families and friends. An April 2014 report from the Department of Justice
found that, of the 400,000 prisoners released over a five-year period, two-thirds were rearrested within
three years, and three-quarters were rearrested within five years.3 As a nation, we need to take all actions
possible to reduce these recidivism rates. Studies have shown that family contact during incarceration is
associated with lower recidivism rates.4 Lower recidivism means fewer crimes, decreases the need for
additional correctional facilities, and reduces the overall costs to society.5 Reform also helps families and
the estimated 2.7 million children of incarcerated parents in our nation, an especially vulnerable part of
1

See generally Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Petition for Rulemaking or, in the Alternative, Petition to Address Referral Issues
in Pending Rulemaking, CC Docket No. 96-128 at 3 (filed Nov. 3, 2003) (First Wright Petition) (“Accordingly,
Petitioners request that the Commission prohibit exclusive inmate calling service agreements and collect call-only
restrictions at privately-administered prisons and require such facilities to permit multiple long distance carriers to
interconnect with prison telephone systems. . . .”). The Wright Petitioners filed an alternative petition for
rulemaking in 2007. See Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Petitioners’ Alternative Rulemaking Proposal, CC Docket No. 96-128 (filed Mar.
1, 2007) (Alternative Wright Petition).

See, e.g., Wright Petitioners NPRM Comments at 37-38; Letter from Drew Kukorowski, Research Associate,
Prison Policy Initiative and Taren Stinebrickner-Kauffman, Founder and Executive Director, SumOfUs, to Julius
Genachowski, Chairman, FCC, CC Docket No. 96-128 (filed Nov. 15, 2012) (including 36,690 public comments
“supporting imposition of price caps on correctional facility telephone rates”).

See U.S. Department of Justice, Bureau of Justice Statistics, Recidivism of State Prisoners Released in 2005, April
2014, available at http://www.bjs.gov/index.cfm?ty=pbdetail&iid=4987 (last visited Sept. 14, 2014).

The Center on the Admin. of Criminal Law NPRM Comments at 10 (citing Nancy G. La Vigne, Examining the
Effect of Incarceration and In-Prison Family Contact on Prisoners’ Family Relationships, 21 J. OF CONTEMP. CRIM.
JUSTICE 314, 316 (2005)); accord Letter from Roy “Lynn” McCallum, Jail Commander, Elmore County Sheriff’s
Office, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 1 (filed April 22, 2013) (“We recognize
the value of retaining family contact during incarceration. The reduction in recidivism is well documented.”); see
also AMY L. SOLOMON, JENNY OSBORNE, LAURA WINTERFIELD ET AL., Putting Public Safety First: 13 Parole
Supervision Strategies to Enhance Reentry Outcomes at 29-31 (Washington, D.C.: The Urban Institute 2008),
available at http://www.urban.org/UploadedPDF/411791_public_safety_first.pdf (last visited Sept. 14, 2014).

See infra note 458.

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our society.6 In addition to coping with the anxiety associated with a parent who is not present on a daily
basis, these young people are often suffering severe economic and personal hardships and are often doing
poorly in school, all of which are exacerbated by the inability to maintain contact with their incarcerated
parent due to unaffordable inmate calling rates.7
3.
While the Commission prefers to promote competition to ensure rates are just and
reasonable, it remains clear that in the inmate calling service market, as currently structured, competition
is failing to do so.8 Evidence in the record indicates that, as of 2013, interstate ICS rates with comparable
security features and protections varied from as low as $0.046 per minute to as high as $0.89 per minute,
plus a per call charge as high as $3.95.9 Even worse, rates are as high as $2.26 per minute for a call
placed by a deaf or hard of hearing prisoner.10 Excessive rates are primarily caused by the widespread
use of site commission payments – fees paid by ICS providers to correctional facilities or departments of
corrections to win the exclusive right to provide inmate calling service at a facility.11 These site
commission payments, which have recently been as high as 96% of gross revenues,12 inflate rates and
fees, as ICS providers must increase rates in order to pay the site commissions. This forces inmates and
their friends and families, who use ICS and are forced to absorb the site commissions in the rates they
pay, to subsidize everything from inmate welfare programs, to salaries and benefits of correctional
facilities, states’ general revenue funds, and personnel training.13 The ICS market has been characterized
6

See BRUCE WESTERN AND BECKY PETTIT, THE ECONOMIC MOBILITY PROJECT, Collateral Costs: Incarceration’s
Effect on Economic Mobility at 18-19 (THE PEW CHARITABLE TRUSTS 2010), available at
http://www.pewtrusts.org/~/media/legacy/uploadedfiles/pcs_assets/2010/CollateralCosts1pdf.pdf (last visited Oct. 7,
2014). See also Letter from Barbara Graves-Poller, Supervising Attorney, MFY Legal Services, to FCC, Office of
Regulations, WC Docket No. 12-375 at 2-3 (filed July 7, 2014) (noting that under New York Domestic Relations
Law § 111(2), a parent who fails to visit or communicate with a child for six months is deemed to have forfeited
parental rights; thus inmates who cannot afford high ICS rates “risk losing their parental rights if they or their
children’s caregivers cannot afford to pay for telephone communications.”).

See, e.g., Letter from Edyael Casaperalta, Rural Broadband Policy Group Coordinator, Center for Rural Strategies,
to Ms. Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at Attach. (filed Sept. 24, 2014) (Statement of
Morgan Tofani) (discussing how, when her stepfather was incarcerated, “phone conversations allow[ed] us to
continue our relationship during this difficult time,” and stating that her mother had spent “over $2,000 in phone
calls” for ICS).

See infra Section III.A.

The $0.046 rate was in New Mexico with no connection charges; the $0.89 rate was in Georgia and also included
an additional per-call charge of $3.95 – as much as a 23-fold difference. See Letter from Alex Friedmann, Assoc.
Dir., HRDC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Rev. Exh. B (filed June 8, 2013); see
also Securus NPRM Comments, App. 2 (showing the wide range of rates in the various states).

See HEARD FNPRM Comments at 3-4 (noting that one HEARD advocate paid $63.49 for a 33-minute TTY-tovoice call). See also Transcript of Reforming ICS Rates Workshop at 77-78, WC Docket 12-375 (filed July 30,
2014) (2014 ICS Workshop Transcript) (Talila Lewis, Founder, HEARD).

See infra Section III.A.

See Letter from Lee G. Petro, Counsel to Petitioners to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375 at Attach. (filed Aug. 16, 2014) (Petitioners Aug. 16, 2014 Ex Parte Letter at Attach.).

For example, Petitioners point out that in Orange County, California, the Inmate Welfare Fund had a budget of
$5,016,429 in 2010, and of that amount, 74% of the funds were used for staff salaries, 0.8% was used for the actual
services, supplies, and training for inmate educational programs, and 0.06% was used for services, supplies, and
training for inmate re-entry programs. See Petitioners NPRM Reply at 26-27 and Exh. H (providing a list of states
and counties that, pursuant to statute, extract revenues shared with ICS providers for non-inmate educational needs,
including employee salaries and equipment, building renewal funds, salaries and benefits, states’ general revenue
funds, and personnel training); PLS NPRM Comments at 7 (noting that commissions paid to county facilities in
Massachusetts are placed in a fund available for use by the Sheriff, while commissions paid to the Department of
Correction are transferred to the General Fund of the Commonwealth).

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by some as subject to “reverse competition,” forcing providers to compete not on price or service quality
but on the size of site commission payments – a dynamic that drives rates ever higher to cover greater and
greater site commission payments.14
4.
The 2013 Inmate Calling Report and Order and FNPRM tackled these issues for the first
time and took important initial steps for reform. The Order adopted a cost-based approach with interim
interstate rate caps and a Mandatory Data Collection to allow the Commission to evaluate ICS costs,
including ancillary charge costs,15 in order to develop reforms such as permanent rate caps and to address
the use of ancillary charges not reasonably related to the cost of providing service.16 With regard to site
commission payments, the Order reaffirmed the Commission’s previous holding that site commission
payments are an apportionment of profit.17 The Order also determined that site commission payments
and other provider expenditures not reasonably related to the provision of interstate ICS are not
recoverable through ICS rates.18
5.
Although the rate caps adopted in the Order were interim in nature pending results of the
Mandatory Data Collection,19 the reforms have already had a significant impact on contact between
inmates and their families.20 Evidence indicates that as interstate rates have declined, there has been a
corresponding increase in call volumes. For example, one provider indicates that, as a result of the
Commissions’ reforms, its interstate ICS rates declined 39 percent and interstate call volumes increased
20 to 30 percent.21 Praeses reports that it tracked interstate ICS call volume for its clients and that in
comparing a four-month period prior to the Inmate Calling Report and Order and FNPRM with another
14

See Letter from Jason Marks, Esq., to Mignon Clyburn, Acting Chair, FCC, WC Docket No. 12-375 at 1 (filed
July 12, 2013) (Marks July 12, 2013 Ex Parte Letter).

The Commission’s rules define ancillary charges as “any charges to Consumers not included in the charges
assessed for individual calls and that Consumers may be assessed for the use of Inmate Calling Services. Ancillary
Charges include, but are not limited to, fees to create, maintain, or close an account with a Provider; fees in
connection with account balances, including fees to add money to an account; and fees for obtaining refunds of
outstanding funds in an account.” 47 C.F.R. § 64.6000.

See generally Rates for Interstate Inmate Calling Services, Report and Order and Further Notice of Proposed
Rulemaking, WC Docket No. 12-375, 28 FCC Rcd 14107 at 14140, 14172, paras. 60, 124 (2013) (Inmate Calling
Report and Order and FNPRM or Order or FNPRM); pets. for stay granted in part sub nom. Securus Techs. v. FCC,
No. 13-1280 (D.C. Cir. Jan. 13, 2014) (Securus Techs. Partial Stay Order); pets. for review pending sub nom.
Securus Techs. v. FCC, No. 13-1280 (D.C. Cir. Nov. 14, 2013) (and consolidated cases). Commenter abbreviations
used in this item conform with those in Appendix B of the Order. See Inmate Calling Report and Order and
FNPRM, 28 FCC Rcd at 14198-200.
17

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, para. 54.

See id. Although the D.C. Circuit stayed three of the adopted rules, the interstate rate caps and the Mandatory
Data Collection remain in effect.

See generally Inmate Calling Report and Order and FNPRM.

See Letter from MiChelle Moore, to Lynne Engledow, FCC, WC Docket No. 12-375 (filed Sept. 17, 2014) (“As
you know, in August of 2013 – the FCC barred the high long distance rates for phone calls from prisons and jails . . .
this has made a truly positive impact on SO MANY PEOPLE! . . . myself included.”) (emphasis in original) (Moore
Sept. 17, 2014 Ex Parte Letter).

See Letter from Stephanie A. Joyce, Counsel to Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
12-375 at 2 (filed May 15, 2014) (interstate call volume in March 2014 was “20-30% higher than in March 2013,
and rates decreased 39% under the same comparison,” but such increase “is only approximate and might not be fully
attributable to the Order” but to a variety of other factors). See also 2014 ICS Workshop Transcript at 225 (Aleks
Kajstura, Legal Director, Prison Policy Initiative) (“And I think it’s important to look to places like New York that
have really cut their rates, what they’ve seen and which has been mentioned repeatedly through filings to the FCC
and in the earlier panels today is that as the prices drop, the call volumes increase making up significant portions of
the money and of the profits.”).

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period one year later, post-adoption, “call volume increased nearly seventy percent.”22 But interstate rates
are only part of the ICS market.23 Although the Order set a framework for states to follow, few have done
so. Many intrastate rates remain high, with some having even increased following the Order.24 There are
indications that ancillary fees have also increased in number, price, or both, leading to further expense for
ICS consumers in a manner that is often unrelated to the cost of providing ICS.25 These developments
underscore the critical need for the Commission to move expeditiously to adopt comprehensive,
permanent reforms.
6.
The Commission was unable to adopt comprehensive reform in the Inmate Calling
Report and Order and FNPRM due to the limited data in the record and administrative notice limited only
to interstate ICS. Because we seek comment on a comprehensive solution – rather than just reforming
interstate rates – we seek comment on moving to a market-based approach to encourage competition in
order to reduce rates to just and reasonable levels and to ensure fair but not excessive ICS compensation.
This approach was not feasible when the Commission previously addressed interstate rates because new
intrastate rates and fees could circumvent such efforts. We therefore initiate this Second Further Notice
of Proposed Rulemaking (Second Further Notice) to develop a record to adopt comprehensive, permanent
ICS reforms as expeditiously as possible. In this item, we seek comment on adopting a simplified,
market-based approach focused on aligning the interests of ICS providers and facilities to deliver high
quality ICS with advanced security features at the lowest prices for end users. We seek comment on
whether such an approach will significantly limit competitive distortions in the ICS marketplace. We
seek comment on the Commission’s legal authority regarding site commissions and ask whether such
payments should be prohibited. We seek comment on whether facilities incur costs in the provision of
ICS and, if so, how facilities should recover these costs, as well as appropriate transition periods to enable
facilities time to adjust. We seek comment on proposals in the record to establish permanent rate caps for
all intrastate and interstate calls, limit ancillary charges, and adopt other measures to ensure that ICS rates
are just, reasonable, fair, and accessible to all Americans. We believe that this market-based approach is
only possible through a comprehensive reform effort dealing with all of the major portions of the ICS
market, unlike when the Commission addressed only interstate ICS in the Inmate Calling Report and
Order and FNPRM. We seek comment on alternative ways to promote competition in the ICS market.
We seek comment on whether eliminating site commissions and capping rates and fees, on both interstate
and intrastate ICS, better aligns the interests of both ICS providers and correctional institutions with the
interests of consumers, allowing market forces to drive rates to competitive levels.
II.

BACKGROUND

7.
In 2003, Mrs. Wright and her fellow petitioners (Wright Petitioners or Petitioners), who
included current and former inmates at Corrections Corporations of America-run confinement facilities,
filed a petition with the Commission seeking to initiate a rulemaking to address high long-distance ICS
22

See Letter from Phil Marchesiello, Counsel to Praeses LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket
No. 12-375 at 2 (filed Oct. 3, 2014) (Praeses Oct. 3, 2014 Ex Parte Letter) (Praeses, a private company that “assists
correctional facilities in evaluating and negotiating contracts with . . . ICS providers, monitoring the compliance of
such ICS providers with the contracts, and/or complying with local, state, and federal regulation of ICS,” compared
the period of April-July 2013 to April-July 2014. Id. at 2).
23

Moore Sept. 17, 2014 Ex Parte Letter (“The trouble now is . . . it’s cheaper for an incarcerated individual to call
outside the state (long distance) than it is for that individual to call inside the state -- to a local number.”).

2014 ICS Workshop Transcript at 169 (Lee G. Petro, Counsel to Petitioners) (“We’ve seen now with the reduction
in the interstate rates an increase in the intrastate rates and an increase in the ancillary fees.”).

2014 ICS Workshop Transcript at 137, 140 (Vincent Townsend, President, Pay Tel); see also Letter from Marcus
W. Trathen, Counsel to Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at Attach. “FCC
Workshop on Inmate Calling Services – Panel 2, Ancillary Charges” (filed July 10, 2014) (Pay Tel July 10, 2014 Ex
Parte Letter).

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rates.26 The petition sought to prohibit exclusive ICS contracts and collect-call-only restrictions in
correctional facilities.27 In 2007, the same petitioners filed an alternative rulemaking petition, asking the
Commission to address high ICS rates by requiring a debit-calling option in correctional facilities,
prohibiting per-call charges, and establishing rate caps for interstate, interexchange ICS.28 The
Commission sought and received comment on both petitions.29
8.
In December 2012, the Commission adopted a notice of proposed rulemaking seeking
comment on, among other things, the proposals in the Wright petitions.30 The 2012 ICS NPRM sought
comment on the two petitions and proposed ways to “balance the goal of ensuring reasonable ICS rates
for end users with the security concerns and expense inherent to ICS within the statutory guidelines of
sections 201(b) and 276 of the Act.”31 The 2012 ICS NPRM sought comment on other issues affecting the
ICS market, including possible rate caps for interstate ICS; ancillary charges; data in the record; collect,
debit, and prepaid ICS calling options; site commissions; issues regarding disability access; and the
Commission’s statutory authority to regulate ICS.32
9.
On August 9, 2013, the Commission adopted the Inmate Calling Report and Order and
FNPRM, finding that interstate ICS rates were not just and reasonable as required by section 201 of the
Act, and did not ensure fair, and not excessive, compensation for ICS providers as required by section 276
of the Act.33 In response, the Commission adopted reforms to ensure interstate rates were just,
reasonable, and fair as required by Sections 201 and 276 and focused on reforming interstate site
commission payments, rates, and ancillary charges. The Commission concluded that, in the absence of
competitive pressures, the default of cost-based regulation should apply to the ICS market.34 As
discussed in the Order, this approach is consistent with Commission practice that “typically focuses on
the costs of providing the underlying service when ensuring that rates for service are just and reasonable
under section 201(b).”35 In addition, the Commission noted that “the cost of providing payphone service
generally has been a key point of reference when [it] evaluates rules implementing the fair compensation
requirements of section 276(b)(1)(A).”36
26

See generally First Wright Petition.

Id.

See generally Alternative Wright Petition.

See Petition For Rulemaking Filed Regarding Issues Related to Inmate Calling Services Pleading Cycle
Established, CC Docket No. 96-128, Public Notice, DA 03-4027, 2003 WL 23095474 (Wireline Comp. Bur. 2003);
Comment Sought on Alternative Rulemaking Proposal Regarding Issues Related to Inmate Calling Services, CC
Docket No. 96-128, Public Notice, 22 FCC Rcd 4229 (Wireline Comp. Bur. 2007) (2007 Public Notice).

See generally Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed
Rulemaking, 27 FCC Rcd 16629 (2012) (2012 ICS NPRM). The 2012 ICS NPRM incorporated relevant comments,
reply comments and ex parte filings from the prior ICS docket, CC Docket No. 96-128, into WC Docket No. 12375. See 2012 ICS NPRM, 27 FCC Rcd at 16636, para. 15.
31

2012 ICS NPRM, 27 FCC Rcd at 16636, para. 16.

See generally 2012 ICS NPRM. While some commenters use the terms “debit” and “prepaid” interchangeably, in
the 2012 ICS NPRM, the Commission differentiated the two, noting that for debit calling, “money is deducted from
an account but the minutes are not purchased in advance,” id. at 16641, para. 33, whereas prepaid calls are always
funded in advance. Id. We continue that distinction in this Second Further Notice.

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14131-32, para. 46 (“fair” encompasses
compensation received by ICS providers, as well as rates paid by end users).

See id. at 14132, para. 47.

Id. at 14133, para. 50.

Id.

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10.
The Commission reaffirmed previous findings that site commission payments were not
costs but “profit.”37 As a result, the Commission determined that site commission payments “were not
part of the cost of providing ICS and therefore not compensable in interstate ICS rates”38 The
Commission’s previous request for “updated data from all interested parties and the public, but especially
from ICS providers . . . to aid . . . in developing a clearer understanding of the ICS market,”39 went largely
unheeded.40 Therefore, the Commission analyzed the limited data submitted by ICS providers, in addition
to publicly-available data, to establish interim per-minute interstate ICS safe harbor caps of $0.12 and
$0.14 and hard rate caps of $0.21 for debit and prepaid calls and $0.25 for collect calls41 to ensure that all
rates were reduced, and provided guidance about the waiver process for ICS providers that could show
good cause.42 The Commission also required that ancillary charges be cost based.43 Finally, the
Commission chose not to address intrastate ICS, noting instead that it had “structured [its reforms] in a
manner to encourage . . . states to undertake reform.”44 It noted, however, that in the absence of state
reform of intrastate ICS, unreasonably high rates would likely continue, which would require the
Commission to “take action to reform unfair intrastate ICS rates.”45
11.
The changes to interstate rates adopted by the Commission were significant but interim.
To enable the Commission to adopt permanent ICS reform, the Commission adopted a Mandatory Data
Collection for ICS providers to report costs and an Annual Reporting and Certification Requirement of
ICS rates.46 In the FNPRM the Commission sought specific comment on multiple aspects of permanent
ICS reform regardless of jurisdiction or call type.47
12.
Prior to the effective date of the Order, the D.C. Circuit stayed three rules adopted by the
Commission pending resolution of the appeal, including the rule requiring rates to be based on costs, the
rule adopting an interim safe harbor, and the rule requiring ICS providers to file annual reports and
37

Id. at 14135, para. 54.

See id.

See 2012 Inmate Calling NPRM, 27 FCC Rcd at 16645, para. 43.

See, e.g., GTL NPRM Comments at 26 (“Because GTL has more than 1,900 correctional facility customers, each
with unique procurement requirements and individualized contractual terms, it would be extraordinarily difficult and
time-consuming to extract the summary information the Commission has requested for each of those correctional
facility customers.”).

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14138-53, paras. 59-81. Rates within the safe
harbor levels of $0.12/minute and $0.14/minute benefit from a presumption of reasonableness and are insulated from
refund liability, while rates above the interim interstate rate caps of $0.21/minute and $0.25/minute are not permitted
without a waiver. Rates between the safe harbor and hard rate caps may be subject to scrutiny to determine whether
or not they are “cost-based” and “reasonable.”

Prior to the effective date of the Order, the Wireline Competition Bureau (Bureau) found good cause to grant a
waiver of the interim interstate rate caps to one ICS provider. See generally Rates for Interstate Inmate Calling
Services; Pay Tel Communications, Inc.’s Petition for Waiver of Interim Interstate ICS Rates, Order, WC Docket
No. 12-375, 29 FCC Rcd 1302 (2014) (Pay Tel Waiver Order). The Bureau found that, based on a combination of
existing below-average-cost state ICS rates and the Commission’s interim rate caps, “extraordinary circumstances”
existed, and that the public interest was served by granting Pay Tel a limited waiver to be allowed to charge $0.46
per minute for new and existing interstate long distance ICS contracts for a period of nine months. Id. at 1308-09,
1412-13, paras. 11, 20-21.
43
See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14157-58, para. 91.
44

Id. at 14173, para. 130.

Id. at 14173-74, para. 130.

See id. at 14172-73, 14169-70; paras. 124-26, 116-17.

See generally FNPRM.

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certifications.48 The court allowed other aspects of the Order to take effect, including the interim
interstate rate caps.49
13.
Since the adoption of the Order, the Commission has continued to monitor the effect of
its reforms on the ICS industry and pursue additional reform, including holding a workshop entitled
“Further Reform of Inmate Calling Services” on July 9, 2014. The workshop evaluated options for
additional ICS reforms, discussed the effects of the Order, the role ancillary charges play in the ICS
market, the provision of ICS at different types of facilities, and communications technologies beyond
traditional payphone calling being deployed in correctional facilities.50
14.
On June 11, 2014, the Commission received approval for its Mandatory Data Collection
from the Office of Management and Budget, and, after publication in the Federal Register, announced in a
Public Notice that data responses were due on July 12, 2014, a date which was subsequently extended
until August 18, 2014.51 In response, the Commission received significant cost and operational data,
including ancillary charge cost data, from the following ICS providers: ATN, CenturyLink, Combined
Public Communications, Correct Solutions, Custom Teleconnect, Encartele, GTL, Lattice, ICSolutions,
NCIC, Pay Tel Communications, Protocall, Securus, and Telmate. Collectively, these providers represent
the vast majority, well over 85 percent, of the ICS market.52 In this Second Further Notice, we seek
comment on these data, including some reporting and cost allocation inconsistencies among the
providers.53 We seek comment on these issues and generally on the data received as we propose to move
forward and adopt permanent interstate and intrastate ICS reform.54
15.
Proposals for Reform in the Record. Since the Order, we have received several
proposals in the record urging comprehensive ICS reform. On September 15, 2014, GTL, Securus, and
Telmate, who claim to be “the primary providers of inmate calling services . . . in the United States and
representing 85% of the industry revenue in 2013,” jointly filed a proposal to comprehensively reform all
aspects of ICS.55 First, the Joint Provider Reform Proposal urges the adoption of rate caps of $0.20 per
minute for debit and prepaid interstate and intrastate ICS, and $0.24 per minute for all interstate and
intrastate collect ICS, effective 90 days after adoption of a final order.56 The Joint Provider Reform
Proposal supports “reductions in site commission payments” but does not specify exactly what such
reductions would entail.57 The Proposal suggests the prohibition of “in-kind payments, exchanges,
48

See 47 C.F.R. §§ 64.6010 (Cost-Based Rates for Inmate Calling Services), 64.6020 (Interim Safe Harbor); and
64.6060 (Annual Reporting and Certification Requirement).

See Securus Techs. v. FCC, No. 13-1280 (supra note 16).

See FCC Announces Workshop on Further Reform of Inmate Calling Services, Public Notice, WC Docket No. 12375, 29 FCC Rcd 5367 (Wireline Comp. Bur. 2014).
51

See Commission Announces Inmate Calling Services Data Due Date, WC Docket No. 12-375, Public Notice, DA
14-829 (Wireline Comp. Bur. rel. June 17, 2014) (Data Collection Approval PN); see also Rates for Interstate
Calling Services, WC Docket No. 12-375, Order, DA 14-993 (Wireline Comp. Bur. rel. July 11, 2014) (Partial
Extension Order).
52

See Letter from Brian D. Oliver, Chief Executive Officer, GTL, Richard A. Smith, Chief Executive Officer,
Securus, and Kevin O’Neil, Telmate, to Chairman Tom Wheeler et al., WC Docket No. 12-375 at 5 (filed Sept. 15,
2014) (Joint Provider Reform Proposal or Proposal).

See infra Section III.A.3.

There is a Protective Order in place in this proceeding. See Rates for Interstate Inmate Calling Services,
Protective Order, WC Docket No. 12-375, 28 FCC Rcd 16954 (2013) (Protective Order). All data results provided
herein are aggregated to protect the confidential nature of the data filings.

Joint Provider Reform Proposal at 1-2.

Id. at 2.

Id. at 3-4.

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technology allowances, administrative, fees,” or anything “not directly related to, or integrated with, the
provision of ICS.”58 These three ICS providers contend that the Commission does not have authority over
“ancillary fees for transactions other than the provision of ICS” but propose to eliminate some ancillary
fees, limit allowable ancillary fees to those specified in the document, and cap other ancillary fees.59
Finally, these three ICS providers “commit to continue to comply with their existing obligations” under
the Americans with Disabilities Act and other statutes for inmates with disabilities, and suggest that the
Commission require officers of ICS providers to certify compliance with all adopted rules under penalty
of perjury.60 GTL, a signatory of the Proposal, later characterized the Proposal as “part of a new
framework that is designed to respond to market forces” and noted that “[t]he proposed rates and fees are
caps, which can vary by contract based on the correctional facility needs and the bidding process.”61
16.
In addition to the Joint Provider Reform Proposal, several individual ICS providers also
submitted proposals for reform. CenturyLink asserts that it could “support a unified cap approximately at
the current interstate cap levels,” which would apply “for both interstate and intrastate calls, with an
additional allowance for collect calling.”62 CenturyLink supports a prohibition on “all or all but a very
narrow class of ancillary fees.”63 CenturyLink also asserts that the Commission should “allow reasonable
commissions or administrative fees,” exempt from regulation high-cost facilities such as secure mental
health facilities, and grandfather existing contracts.64 Pay Tel also submitted a proposal for reform, which
it characterizes as a “comprehensive solution to ICS reform that attempts to be fair to all affected parties,
including inmates and their families, facilities, and vendors.”65 Pay Tel’s Proposal suggests “postalized”
per-minute rate caps, at a rate to be determined, for both intrastate and interstate calls, separated between
prisons and jails, with no per-call charges allowed.66 Specific ancillary fees would be allowed, with some
“premium calling options” for jails, and all other ancillary fees prohibited.67 Pay Tel proposes that all
facilities would be required to comply with existing obligations and laws regarding people with
disabilities.68
17.
The Wright Petitioners, along with several public interest groups, urge the Commission to
adopt a $0.07 per minute rate cap for all interstate debit, prepaid, and collect calls, with no per-minute
rate, and no other ancillary fees or taxes allowed.69 Prisoners’ Legal Service of MA (PLS) contends that
the interim safe harbors and caps that the Commission implemented in the Order are conservative and

Id. at 4.

Id. at 4-6.

Id. at 7.

Letter from Chérie R. Kiser, Counsel for GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at
1-2 (filed Oct. 2, 2014).

Letter from Thomas M. Dethlefs, Associate General Counsel – Regulatory, CenturyLink, to Ms. Marlene H.
Dortch, Secretary, FCC, WC Docket No. 12-375 at 1 (filed Aug. 14, 2014) (CenturyLink Aug. 14, 2014 Ex Parte
Letter).

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2.

Id.

See Letter from Marcus W. Trathen, Counsel to Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
12-375 at 1 (filed Oct. 3, 2014) (attaching Pay Tel Proposal and ICS Regulatory Reform Proposal Comparison).

See Pay Tel Proposal at 1-2.

Id. at 2-3.

Id. at 4.

Petitioners NPRM Reply at 1.

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“exceed cost data that any party submitted in the record.”70 PLS opposes extending the interim safe
harbor rates and caps, and instead proposes that the Commission adopt a flat all-distance rate of $0.07 per
minute, regardless of the size of the facility or the call volume generated from the facility.71 To justify
this rate, PLS points to the fact that ICS providers are charging as low as $0.04 and $0.05 per minute
absent commissions in some states.72
18.
A few states have undertaken ICS reform since the Commission’s Order. The Alabama
Public Service Commission (Alabama PSC) recently adopted comprehensive ICS reforms that include
intrastate rate caps as well as restrictions on the number and rates of ancillary charges it authorized.73 The
Minnesota Department of Corrections initiated a pilot program in a limited number of correctional
facilities in which a flat rate of $0.07 per minute is charged for all local and long-distance debit calls,
bringing the cost of a 15-minute call to $1.05, plus applicable tax.74 New Jersey recently lowered ICS
rates to $0.15 a minute for all interstate and intrastate calls from state prison facilities.75 We applaud
these efforts and seek comment below on what more the Commission and states can do to enact
comprehensive ICS reform.
III.

DISCUSSION

19.
In this Second Further Notice, we take the following steps to reform and modernize
interstate and intrastate ICS regulations while ensuring adequate security measures for correctional
facilities. First, we seek comment on eliminating all site commission payments on both interstate and
intrastate ICS to fulfill the Commission’s statutory obligations to promote competition and ensure just
and reasonable rates and fair compensation. We also seek comment on whether facilities incur costs in
the provision of ICS and, if so, how facilities should recover these costs, as well as appropriate transition
periods for reform to allow correctional facilities time to adjust. We seek comment on adopting intrastate
and interstate rate caps. We seek comment on reforming ancillary fees including adopting ancillary fee
rate caps, and prohibiting certain ancillary charges. We also seek comment on alternative ways to
promote competition in the ICS market. We seek comment on whether we should periodically review the
ongoing impact of ICS rate reforms. Finally, we seek further comment on issues related to enforcement,
disability access, advanced communications in the correctional setting, and the cost/benefit analysis of all
of the proposals herein.
A.

Payments to Correctional Facilities

20.
The record, including data from the 2014 ICS Workshop and the Mandatory Data
Collection, makes clear that the Order’s interim rate caps have significantly lowered the expense of
interstate ICS calls to end users. On the positive side, the interim interstate rate caps have resulted in
increased call volumes, evidence that unreasonable rates were discouraging communications and that
70

PLS FNPRM Comments at 6-7 (quoting Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14141,
para. 62).

See id. at 7.

See id.

Letter from Glenn S. Richards, Counsel for NCIC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375, Exh. B at 49-50, 70-88 (filed July 9, 2014) (attaching Final Order of Alabama Public Service Commission
Adopting Revised Inmate Phone Service Rules, Docket 15957 (rel. July 7, 2014) (Alabama PSC Further Order)).

See Central Office Memorandum Letter from John R. King, Assistant Commissioner-Facilities Division, to All
Offenders (dated April 15, 2014), available at https://www.prisonphonejustice.org/MN/mn-doc-rate-change-for2014/ (last visited Sept. 19, 2014) (announcing pilot program).

See State of New Jersey, Dept. of the Treasury, Contract # 61618, Amendment # 12 available at
http://www.njphonejustice.org/wp-content/uploads/2014/09/T1934ContractExtension12.pdf (last visited Sept. 12,
2014) (lowering the rate for interstate and intrastate calls from state prisons to $0.15 per minute).

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reasonable rates foster communications between inmates and their families and friends.76 Yet failures in
the ICS market continue. Interstate reform in some cases has been met by increased intrastate ICS rates
and has not discouraged other practices that also increase the costs of ICS to consumers, such as excessive
ancillary charges and an increase in the use of single call services.77 The pressure to pay site commissions
that exceed the direct and reasonable costs incurred by the correctional facility in connection with the
provision of ICS78 continues to disrupt and even invert the competitive dynamics of the industry.79 These
and other market failures demonstrate that the interstate-only reforms adopted in the Order, while an
important first step, did not completely address the problems in the ICS marketplace. This highlights the
need for more-comprehensive reform of the ICS industry to address both interstate and intrastate ICS.
1.

Restrictions on Payments to Correctional Facilities

21.
In this section, we seek comment on prohibiting site commissions as a category,
including all payments, whether in-kind payments, exchanges, allowances, or other fees. The record is
clear that site commissions are the primary reason ICS rates are unjust and unreasonable and ICS
compensation is unfair, and that such payments have continued to increase since our Order.80 Moreover,
where states have eliminated site commissions, rates have fallen dramatically.81 We therefore predict that
prohibiting such payments will enable the market to perform properly and encourage selection of ICS
providers based on price, technology and services rather than on the highest site commission payment.
Although we seek comment on prohibiting site commissions as a category, we seek comment on whether
correctional institutions incur any costs in the provision of ICS and, if so, how to enable the facilities to
recover such costs. We also seek comment on how best to proceed if a state has already prohibited site
commission payments.
22.
As part of its reform of unreasonable and unjust interstate ICS rates in the Inmate Calling
Report and Order and FNPRM, the Commission addressed site commissions and concluded that they
were an apportionment of profits between service providers and correctional facilities and were not, in
and of themselves, a cost of ICS.82 The payment of site commissions distorts the ICS marketplace by
creating “reverse competition” in which the financial interests of the entity making the buying decision

See supra note 21.

Single call services are a way for call recipients to receive an ICS call without establishing an account with an ICS
provider. See infra Section III.C.3.c.

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, para. 54.

See, e.g., Letter from Stephanie A. Joyce, Counsel to Securus, to Julie Veach, Chief, Wireline Competition
Bureau, FCC, WC Docket No. 12-375 at 4 and Attach. B (filed July 30, 2014) (Securus July 30, 2014 Ex Parte
Letter).

See, e.g., Letter from Paul Wright, Executive Director, HRDC, to The Honorable Tom Wheeler, Chairman, FCC,
WC Docket No. 12-375 at Exh. 3 (filed Sept. 17, 2014) (HRDC Sept. 17, 2014 Ex Parte Letter) (citing Stephanie
Clifford and Jessica Silver-Greenberg, In Prisons, Sky-High Rates and Money Transfer Fees, N.Y. TIMES) (“But
even some industry executives see problems with the current setup, saying the commission system encourages
providers to charge inmates more, not less, for services. Companies often win contracts based on how much they
will offer states via commissions, rather than the rates they charge inmates.”); Letter from Stephanie A. Joyce,
Counsel to Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 2 (filed July 23, 2014)
(Securus July 23, 2014 Ex Parte Letter); infra para. 24.

See, e.g., Alex Friedmann, Associate Director, HRDC, to The Honorable Tom Wheeler, Chairman, FCC, WC
Docket No. 12-375 at 1-2 (filed July 17, 2014).

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, para. 54.

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(the correctional institution) are aligned with the seller (the ICS provider) and not the consumer (the
incarcerated person or a member of his or her family).83
23.
This “reverse competition” is reflected in data in the record. Aggregated data from the
Mandatory Data Collection from 14 ICS providers show that over $460 million in site commission
payments were paid to facilities in 2013.84 This means that ICS users and their families, friends and
lawyers spent over $460 million to pay for programs ranging from inmate welfare to roads to correctional
facilities’ staff salaries to the state or county’s general budget. These are pass-through payments from the
provider to the facility, absent which, rates would be lower. Moreover, the magnitude of payments is
significantly higher than previous estimates in the record. For example, using publicly available data in
2012, the Human Rights Defense Center (HRDC) estimated ICS providers paid over $123 million in site
commissions to correctional facilities.85 To put the number in context, however, the record and data from
the Mandatory Data Collection suggest that these payments represented just 0.3 percent of prison
facilities total budgets in 2012.86 Similarly, one ICS provider estimated that site commission payments
represented 0.4 percent of total prison/jail operating budgets in 2013.87 What appears to be of limited
relative importance to the combined budgets of correctional facilities has potentially life-altering impacts
on prisoners and their families.88

See id. at 14125, 14129-30, paras. 34, 41. While the Commission also concluded that as a category, site
commissions “are not costs that are reasonably and directly related to the provision of ICS,” id. at 14135, para. 54,
the Order acknowledges the possibility that some portion of payments to correctional facilities “may, in certain
circumstances, reimburse correctional facilities for . . . costs,” such as security costs, that the Commission would
likely consider reasonably and directly related to the provision of ICS. Id. at 14134-35, nn.196, 203. A partial stay
of certain rules adopted by the Order issued by the United States Court of Appeals for the District of Columbia
Circuit in January 2014 did not disturb the Commission’s determination on these points, as the Wireline
Competition Bureau recently emphasized in a public notice. See generally Securus Techs. Partial Stay Order;
Wireline Competition Bureau Addresses the Payment of Site Commissions for Interstate Inmate Calling Services,
WC Docket No. 12-375, Public Notice, DA 14-1206 (Wireline Comp. Bur. rel. Aug. 20, 2014) (Site Commission
PN).

Staff calculation using aggregated data from ICS provider data submissions. This estimate may be low. See Kery
Murakami, Inmate Calling Rate Cap to Be Considered in FNPRM, Communications Daily, Sept. 25, 2014 (“The
providers, though, have told the groups the $540 million paid in commissions nationally represent only about 0.5
percent of the cost of running the correctional institutions.”).

See HRDC FNPRM Comments at 4.

The 0.3 percent number is the result of aggregating the over $140,000,000 in site commission payments to prisons
in 2012 made by the reporting ICS providers and submitted in response to the Mandatory Data Collection and
dividing that by the $54.2 billion annual corrections spending estimate from the National Association of State
Budget Officers. See The National Assoc. of State Budget Officers; State Spending for Corrections: Long-Term
Trends and Recent Criminal Justice Policy Reforms at 1, available at
http://www.nasbo.org/sites/default/files/pdf/State%20Spending%20for%20Corrections.pdf (last visited Oct. 19,
2014) (“State spending for corrections reached $54.2 billion in fiscal 2012.”).

Letter from Stephanie A. Joyce, Counsel to Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375 at Attach. (filed Sept. 22, 2014) (Securus Sept. 22, 2014 Ex Parte Letter).

Even if site commission represent a larger share of the budget for any facility, the Commission has a longstanding precedent that the use of revenues from unreasonably high rates, even if used for a worthwhile purpose, is
not relevant to the Commission’s analysis of its statutory obligations. See Connect America Fund et al., WC Docket
No. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17876-77, para.
666 (2011) (USF/ICC Transformation Order), pets. for review denied sub nom. In re FCC 11-161, 753 F.3d 1015
(10th Cir. 2014).

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24.
Despite their limited overall budget impact, site commission payments are the chief
criterion many correctional institutions use to select the ICS provider for their facilities89 and are thus the
main cause of the dysfunction of the ICS marketplace.90 The demand for site commission payments
generates pressure on ICS providers to raise rates and assess additional ancillary charges, which are
typically not subject to site commissions.91 The existing contract proposal process (RFP, or request for
proposal) often focuses the competition between bidding ICS providers on who can pay higher site
commissions to correctional institutions instead of creating incentives for ICS providers to provide the
lowest rates to consumers.92
25.
The Alabama PSC articulated an alternative perspective on the cause of increased site
commissions, stating that “the proliferation of excessive ancillary fees, not call rates, is the most
significant contributor toward escalating site commission offerings.”93 It further asserted that “to
effectively constrain excessive site commissions, it is essential to first address the excessive revenue
sources [from ancillary fees].”94 In this Second Further Notice we seek comment on proposals to address
both site commissions and ancillary fees. We also seek comment on the Alabama PSC’s perspective on
the cause of increases in site commissions.
26.
At the time the Commission adopted the Inmate Calling Report and Order and FNPRM,
the highest commission amount in the record was 88 percent.95 Since the Order, despite the
Commission’s decision to not permit site commission payments to be included in interstate rates, the
record indicates that site commissions have continued to increase, with recent contracts including site
commission payments as high as 96 percent of gross revenues.96 Moreover, there is evidence that site
89

See Petitioners FNPRM Comments at 16 (“However, it would appear that, in the context of evaluating RFP
responses, the determining factor for the contracting party is not whether the ICS providers can meet the technical
requirements and security measures required by the correctional institutions. Instead, the selection of the winning
bidder is based on the extra “add-ons” that an ICS provider will provide, such as free calls, pilot programs, or
additional commissions paid to the correctional institution.”); see also Inmate Calling Report and Order and
FNPRM, 28 FCC Rcd at 14129, para. 41.

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14136, para. 54.

See Letter from Thomas M. Dethlefs, Assoc. General Counsel – Regulatory, CenturyLink, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 12-375 at 1 (filed Aug. 28, 2014) (CenturyLink Aug. 28, 2014 Ex Parte Letter)
(“bidders were obliged to utilize ancillary fees to cover costs that otherwise could not be recovered in per-minute
rates after deducting the County’s required commissions”).

See, e.g., Letter from Stephanie A. Joyce, Counsel to Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket
No. 12-375 at 1 (filed Sept. 26, 2014) (Securus Sept. 26, 2014 Ex Parte Letter) (“The provisional award has been
announced, and the scoring methodology was provided to each bidder. The methodology involved granting 83.33%
of the points to the bidder with the highest site commission pledge. All other criteria, which include the bidder’s
security offerings and customer service commitment, were collectively weighted at only 16.66%. What is most
telling is that call technology was only weighted at 8.33%, and there were no points for having the lowest calling
rate.”) (emphasis in original); see also CenturyLink Aug. 28, 2014 Ex Parte Letter at 1 (“First, Escambia County’s
Invitation to Bid was structured so that the bidder with the highest offered commission rate would be selected.”); see
also Petitioners Aug. 16, 2014 Ex Parte Letter at 1 (“recent bidding by ICS providers reflects that they are still
willing to pay commissions/kickbacks, with CenturyLink agreeing to pay 96% commission in Escambia County,
Florida and other ICS providers willing to pay between 83% and 95% of their gross revenues.”).

Letter from Darrell A. Baker, Director, Utility Services Division, Alabama Public Service Commission to
Chairman Tom Wheeler, FCC, WC Docket No. 12-375 at 7 (filed Sept. 30, 2014) (Alabama PSC Sept. 30, 2014 Ex
Parte Letter).

Id. at 4.

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14125, para. 34.

See Petitioners Aug. 16, 2014 Ex Parte Letter at Attach. The record also indicates that when a state acts to
prohibit or reduce monetary site commission payments, the ICS contract may instead require other valuable
(continued…)

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commission payments on intrastate ICS revenue, which were not addressed by the Order, have
increased.97 Absent further action, we are concerned that the market will continue to fail to promote
competition and ensure rates are just, reasonable and ensure fair compensation consistent with the dictates
of the Communications Act.98 Indeed, several commenters urge the Commission to adopt an approach
that “will lead to lower, market-based rates.”99 Securus has suggested that if the Commission does
anything short of completely banning site commission payments, it will allow gaming.100
27.
We seek comment on prohibiting all site commission payments for interstate and
intrastate ICS to enable market-based dynamics to ensure just and reasonable ICS rates and fair ICS
compensation.101 Eliminating the competition-distorting role site commissions play in the marketplace
should enable correctional institutions to prioritize lower rates and higher service quality as decisional
criteria in their RFPs, thereby giving ICS providers an incentive to offer the lowest end-user rates.102
Indeed, when states such as Missouri, New York and New Mexico eliminated site commission payments,
ICS rates decreased significantly.103 We therefore seek comment on such an approach and on whether it
will foster a competitive market that will ensure just and reasonable rates and fair compensation for ICS
(Continued from previous page)
inducements such as wireless telephone blocking systems. The Commission defined site commissions broadly to
include “payments in money or services from ICS providers to correctional facilities or associated government
agencies, regardless of the terminology the parties to the agreement use to describe them.” Inmate Calling Report
and Order and FNPRM, 28 FCC Rcd at 14135, n.199. The Commission also noted that it would treat “in-kind”
payments similar to site commission payments. Id. at 14137, para. 56. For example, California’s publicly available
contract shows that required contributions include the provision of a systems to ensure “continuous blocking of all
unauthorized cellular wireless communications.” State of California, California Technology Agency, IWTS/MASS
Agreement No. OTP 11-126805, available at https://www.prisonphonejustice.org/CA/ca-contract-with-gtl-20122018-part-1/ (last visited Sept. 15, 2014) (California GTL Contract) (cited in Inmate Calling Report and Order and
FNPRM, 28 FCC Rcd at 14148-49, para. 76, n.280).
97

See Petitioners Aug. 16, 2014 Ex Parte Letter at Attach.

See Securus Sept. 26, 2014 Ex Parte Letter at 1 (“As such, the market is not operating freely and carriers are
impeded from driving calling rates lower.”).
99

See GTL Aug. 11, 2014 Ex Parte Letter at 2; see also Letter from Stephanie A. Joyce, Counsel to Securus, to
Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 2 (filed July 17, 2014) (Securus July 17, 2014 Ex
Parte Letter) (“If commissions are eliminated, however, competition will force rates down to levels below the rate
caps”). See also Raher 2013 Comments at 7 (“If the Commission is to have any impact on ICS rates, it must address
the critical issue of site commissions.”) (emphasis in original); Securus July 23, 2014 Ex Parte Letter at Attach
(“Conditions for Lower Inmate Rates: 1) Eliminate Commissions”); Letter from Chérie R. Kiser, Counsel for GTL,
to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 2 (filed Aug. 11, 2014) (GTL Aug. 11, 2014 Ex
Parte Letter) (explaining that comprehensive reform that includes “mandatory decreases in commissions paid to
facilities” will lead to “lower, market-based rates”).
100

See Securus Sept. 22, 2014 Ex Parte Letter at Attach.; but see Letter from Stephanie A. Joyce, Counsel to
Securus, to Chairman Tom Wheeler, et al., WC Docket No. 12-375 at 3 (filed Oct. 6, 2014) (Securus Oct. 6, 2014
Ex Parte Letter) (“Securus does not oppose the payment of limited site commissions.”); see also Please Deposit All
Your Money Study at 15 (“The Federal Communications Commission should . . . [b]an commission payments in all
prison and jail telephone contracts on the grounds that such payments necessarily lead to inflated calling rates and
incentivize pernicious fee-collecting practices”).
101

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14128, para. 39.

102

But cf., Letter from Marcus W. Trathen, Counsel for Pay Tel, to Marlene H. Dortch, Secretary, FCC, WC Docket
No. 12-375, Attach. at 2-3 (filed Oct. 2, 2014) (Pay Tel Oct. 2, 2014 Ex Parte Letter) (“The notion that ‘the market’
can be relied on to drive the retail rates down to cost-based levels in prisons is false given that the entities setting the
rates (prisons) are not the same entities paying the rates.”).
103

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14126, para. 37 & n.139; 14127, para. 38 &
nn.147, 149.

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while minimizing regulatory burdens on ICS providers and the Commission. We also seek comment
below on whether the Commission should undertake periodic review to verify this.104
28.
We seek comment on a two-year transition away from site commissions to avoid flash
cuts and permit correctional institutions time to adjust.105 In addition, we seek comment on whether
correctional facilities incur costs for provisioning ICS. We request data that demonstrate the costs that
facilities bear that are directly related to the provision of ICS. We seek comment on the magnitude of
these costs and how to enable facilities to recover such demonstrated costs in a manner that does not
disrupt a market-based approach to lowering rates for end users of ICS.
2.

Legal Authority

29.
We seek comment on the Commission’s legal authority to restrict the payment of site
commissions in the ICS context pursuant to sections 276 and 201(b) of the Act. We begin with a review
of the authority accorded the Commission under section 276. In relevant part, section 276(b)(1) states:
In order to promote competition among payphone service providers and
promote the widespread deployment of payphone services to the benefit
of the general public, within 9 months after the date of enactment of the
Telecommunications Act of 1996, the Commission shall take all actions
necessary (including any reconsideration) to prescribe regulations that –
(A) establish a per call compensation plan to ensure that all payphone
service providers are fairly compensated for each and every completed
intrastate and interstate call using their payphone. . . .106
30.
As discussed herein, the Commission has previously concluded that site commission
payments are a significant cause of ever increasing rates.107 This fact was recently underscored by the
Joint Provider Reform Proposal, which stated that the rate caps they propose “are feasible for the parties
only if implemented in conjunction with corresponding reductions in site commission payments.”108 We
seek comment on the assertion that absent reform, achieving the statutory mandate of just and reasonable
ICS rates and fair ICS compensation would be difficult, if not impossible, to achieve. At the same time,
we are mindful that ICS providers should receive “fair” but not excessive compensation, and seek
comment on implementation and transition below to ensure that this occurs. We therefore seek comment
on whether the payment of site commissions would be an appropriate object of regulation under this
104

See infra Section III.J.

105

See infra Section III.G.

106

As a general matter, we observe that “provision” applies, without jurisdictional limit, to both “intrastate and
interstate” payphone service calls, and similarly without regard to whether the payphone service is provided on a
common carrier or non-common carrier basis. Since “payphone service” is defined to include “the provision of
inmate telephone service in correctional institutions,” this section seeks comment regarding the regulation of site
commissions as to both interstate and intrastate ICS unless otherwise indicated, and without regard to the
classification of ICS as a common carrier or non-common carrier service. We seek comment on how the explicit
preemption in section 276 could be limited by section 2(b) of the Act, which states that “nothing in this Act shall be
construed to apply or to give the Commission jurisdiction with respect to . . . charges, classifications, practices,
services, facilities, or regulations for or in connection with intrastate communication service by wire or radio of any
carrier.” In the FNPRM, the Commission tentatively concluded that “section 276 affords the Commission broad
discretion to regulate intrastate ICS rates and practices that deny fair compensation, and to preempt inconsistent state
requirements.” Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14175-76, para. 135. Is the
relationship between section 276 and section 2(b) effectively addressed by the accompanying discussion in the
FNPRM? See id. at paras. 14176-77, 136-39 (discussing the language of section 276 and related court precedent). If
not, why not?
107

See Inmate Calling Report and Order and FNRPM, 28 FCC Rcd at 14127-28, para. 38.

108

Joint Provider Reform Proposal at 3.

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statutory provision. Would a prohibition on site commission payments ensure “fair compensation” as that
term is used in section 276? While the Commission has previously found the phrase “fairly
compensated” to be ambiguous, and acknowledged that a range of compensation rates could be
considered fair, it has treated the concept of fairness as encompassing both the compensation received by
ICS providers and the cost of the call paid by the end user.109 As the record continues to show that the
payment of site commissions causes ICS rates to be set at excessive levels, could the Commission under
section 276 find that site commissions result in unfair compensation and therefore should be prohibited or
otherwise restricted?
31.
We seek comment on our prediction that a prohibition on the payment of site
commissions would foster a more competitive marketplace for the provision of ICS. If site commissions
hinder and distort competition among ICS providers, hinder the widespread deployment of payphone
services, or both, would that support the Commission’s exercise of section 276 authority “to prescribe
regulations” to ensure that ICS providers are “fairly compensated”? If so, would the statutory duty to
ensure fair compensation encompass an outright ban on the payment of site commissions by ICS
providers? We note, for example, that if a correctional institution were to self-provision ICS and seek to
charge rates that include an amount that would be deemed a site commission as part of its profits, above
and beyond a normal return, such conduct could be directly addressed by Commission regulation of ICS
rates to limit rates to a level that ensures fair compensation, but no more. Does this approach support the
view that Commission regulation directly targeting site commissions likewise can be justified to the
extent providers ensure that ICS rates provide no more than fair compensation?
32.
If, as the record currently shows, the payment of site commissions leads to ICS rates that
are set at unreasonably high, even exorbitant, levels, then, as has occurred in states that have eliminated
site commissions, we predict that a prohibition on making these payments would lead to significantly
lower ICS rates. We seek comment on the reasonableness of this presumption and whether there are
criteria other than site commissions that might discourage correctional institutions from prioritizing lower
rates and better service quality in their RFPs. If the elimination of site commissions does lead to lower
rates, we seek comment on whether lower ICS rates would lead to greater ICS usage. How should we
interpret the word “deployment” in this context? For instance, is “deployment” limited to installation of
new physical infrastructure that would enable the provision of ICS, or can “deployment” reasonably be
construed to include new incentives or opportunities for end users to access existing payphone services?
Similarly, can “payphone service” – which section 276 defines to include “any ancillary services” –
reasonably be construed to include new features that might be offered to accommodate greater demand?110
We seek comment on this analysis.
33.
We seek comment on any other relevant language in section 276 that may bear upon our
authority to prohibit site commissions. For instance, what is the relevance of section 276(b)(1)(A)’s
requirement that regulations adopted by the Commission ensure that payphone service providers are
compensated “per call” and for “each and every completed intrastate and interstate call”? More generally,
are there alternative interpretations or theories for implementing section 276 that counsel for or against
particular approaches to addressing site commission payments?
34.
We seek comment on the proposal that site commission payments undermine the
achievement of section 276’s goals in the ICS context, even though the Commission previously has
permitted location rents in the context of public payphones.111 For example, as to public payphones, the
Commission found that “[p]ayphones in many locations are likely to face a sufficient level of competition
109

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14115, para. 14.

110

47 U.S.C. § 276(d).

111

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14107, para. 54, n.200 (stating that “the
Commission has used location rents and site commissions synonymously throughout its ICS proceedings”) (citations
omitted).

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from payphones at nearby locations to ensure that prices are at the competitive level,” and thus “[a]s a
result, we believe that payphones at such locations are unlikely to need additional scrutiny.”112 The
Commission recognized, by contrast, that there could be “locations where . . . no ‘off premises’ payphone
serves as an adequate substitute for an ‘on premises’ payphone.” As the Commission observed:
In such locations, the location provider can contract exclusively with
one PSP [payphone service provider] to establish that PSP as the
monopoly provider of payphone service. Absent any regulation, this
could allow the PSP to charge supra-competitive prices. The location
provider would share in the resulting “location rents” through
commissions paid by the PSPs. To the extent that market forces cannot
ensure competitive prices at such locations, continued regulation
may be necessary.113
35.
We seek comment on whether market conditions for ICS differ sufficiently from those
the Commission previously found in the case of public payphones as to warrant different treatment under
section 276. Are ICS providers inherently “monopoly providers of payphone service” and therefore able
“to charge supra-competitive prices?” Do inmates have access to competing alternatives? One way to
mitigate this problem would be to require correctional institutions to enter into service contracts with
multiple ICS providers instead of awarding a monopoly to a single provider, as the Wright Petitioners
initially suggested.114 However, the record suggests that requiring multiple providers at correctional
institutions, and thereby enabling competition, could present significant practical challenges and
potentially could increase costs and therefore drive up rates.115 Further, it is unclear whether allowing
multiple providers at correctional institutions would substantially lower ICS costs to consumers if
facilities were still able to receive site commission payments. We seek comment on these views, and
whether action on site commissions thus can be reconciled with Commission precedent under section 276
for public payphones, or if action to prohibit or restrict site commissions for ICS locations would require
the Commission to change course in any respect.
36.
We also seek comment on any other sources of Commission authority to regulate site
commissions. For example, section 201(b) of the Act requires all charges and practices “for and in
connection with” an interstate common carrier service to be “just and reasonable.”116 We seek comment
on whether section 201(b), independent of any authority under section 276, gives us jurisdiction to
prohibit the payment of site commissions for interstate ICS. Is the payment of site commissions a
“practice” under section 201(b)? Conversely, could it be viewed as a “rate,” or component of a “rate,”
under section 201(b)? Under either alternative, is the payment of site commissions “for and in connection
with” interstate ICS? To what extent would a prohibition of site commissions under section 201(b) differ
from a prohibition under section 276? Are there circumstances under which section 201(b) would support
the regulation of site commissions in connection with intrastate, as well as interstate, ICS? For example,
112

Implementation of the Pay Telephone Reclassification and Compensation Provisions of the Telecommunications
Act of 1996 et al., Report and Order, CC Docket No. 96-128 et al., 11 FCC Rcd 20541, 20549, para. 15 (1996).

113

Id.

114

See generally First Wright Petition.

115

See GTL NPRM Comments at 23 (considerations such as facility differences, security requirements, training
requirements, and labor costs deter correctional facilities from using multiple ICS providers); see also Verizon and
Verizon Wireless NPRM Comments at 6-7 (suggesting that calling rates may not decrease if multiple ICS providers
are allowed to offer service in a correctional facility).

116

47 U.S.C. § 201(b). As the Commission explained in the Order, under this standard rates “must ordinarily be
cost-based, absent a clear explanation of the Commission’s reasons for a departure from cost-based ratemaking.”
Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14131, para. 45 (citation and internal quotation
marks omitted).

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would declining to prohibit or restrict site commissions in connection with intrastate ICS undermine the
Commission’s ability to ensure lawful interstate ICS rates? Do other statutory provisions inform how the
Commission can or should approach the issue of site commissions in the ICS context? The possible
reforms that we seek comment on would apply to site commissions on both interstate and intrastate ICS
traffic. In what ways would the Commission’s legal basis for its actions differ based on the jurisdiction of
the traffic under particular legal theories? In addition to regulating ICS providers’ payment of site
commissions, does section 276 or other Commission authority enable us to regulate the conduct of
correctional institutions or other third parties if they seek to induce ICS providers to make such
payments? If so, what is that authority?
3.

Possible Reforms to Site Commissions

37.
We seek comment on prohibiting site commission payments for all ICS as part of
comprehensive reform and whether transitioning away from site commission payments is essential to
achieving the statutory requirements of just and reasonable ICS rates and fair ICS compensation.117 We
seek comment on a definition of site commission payments that are subject to any prohibition or
restriction to include “payments in money or services from ICS providers to correctional facilities or
associated government agencies, regardless of the terminology the parties to the agreement use to
describe them.”118 We seek comment on interpreting this language to include any products or any other
thing of value such as, for example, so-called “contract administration” fees.119 This is consistent with the
approach in the Order where the Commission noted that it would treat in-kind payments as site
commissions.120
38.
The Joint Provider Reform Proposal supports the elimination of site commissions and
proposes a similar definition of impermissible site commission payments to include a comprehensive
range of “in-kind payments, exchanges, technology allowances, administrative fees, or the like.”121 It
proposes that “the Commission define as impermissible: any payment, service, or product offered to, or
solicited by an agency (or its agent) that is not directly related to, or integrated with, the provision of
communications service in a correctional facility.”122 We seek comment on these definitions and on any
other ways to define ICS provider payments to correctional institutions that would be subject to any
regulation discussed herein. We also seek comment on whether we should prohibit gifts or charitable
contributions from ICS providers to correctional facilities to ensure they are not used to undermine a
potential site commission prohibition. In an analogous context, the Commission included in its E-rate
program rules a prohibition on gifts by service providers to schools or libraries to ensure that such gifts do
not “circumvent competitive bidding and other E-rate program rules.”123 Additionally, we seek comment
on whether any certification required of ICS providers should include a certification of compliance with
any prohibition on site commissions and gifts the Commission may impose.124

117

But cf. NCIC July 9, 2014 Ex Parte Letter, Attach. at 6 (“The FCC should not focus on whether ICS providers
pay commissions.”).

118

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14135, n.199.

119

See California GTL Contract, supra n.96 (California’s publicly available inmate calling services contract shows
that required contributions include a “Contract Administration Fee” of $800,000).

120

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14137, para. 56.

121

Joint Provider Reform Proposal at 4.

122

Id.

123

47 C.F.R. § 54.503(d)(4); see generally 47 C.F.R. § 54.503 (specifying gift restrictions under the Schools and
Libraries universal service support program).

124

See infra Section III.K.

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39.
Costs Incurred by Correctional Facilities. Although we seek comment on eliminating
site commissions as a category, the Commission acknowledged in the Order that some portion of
payments to correctional facilities “may, in certain circumstances, reimburse correctional facilities for . . .
costs,” such as security costs, that the Commission would likely consider reasonably and directly related
to the provision of ICS.125 Consistent with the Order, we seek comment on whether correctional
institutions incur any costs in the provision of ICS and, if so, how to quantify them and how the facilities
should recover such costs. We seek comment on the idea that any recovery by facilities for costs
reasonably and directly related to making ICS available be built into any per-minute ICS rate caps set by
the Commission.126
40.
We seek comment on any filings in the record attempting to demonstrate “legitimate
costs incurred by correctional facilities . . . related to the provision of inmate calling services.”127 The
Joint Provider Reform Proposal states that “[t]he parties recognize . . . that correctional facilities may
incur administrative and security costs to provide inmates with access to ICS,” referencing them as
“admin-support payments.”128 Yet, the participating providers “have not reached agreement as to what
amount or what percentage (if any) should be required, or how such admin-support payments can
accurately be measured.”129 Some parties suggest that costs to facilities may include monitoring calls,
submitting trouble tickets on equipment, handling billing disputes that inmates may have with the
provider,130 and infrastructure and security costs.131 Praeses asserts that “correctional facilities incur real
costs to enable inmate calling” and lists a number of functions they assert are related to such costs.132
However, other parties question whether the facilities incur any additional costs for the provision of
ICS.133 Also, Securus notes that correctional facilities benefit significantly from having ICS in terms of
reduced recidivism, solving and preventing crimes and inmate control and satisfaction suggesting that any
costs are far outweighed by the benefits.134 Should the Commission be concerned that prohibiting or
restricting site commission payments or prohibiting rates that include recovery of site commissions will
lead correctional facilities to stop allowing inmates access to ICS altogether, or else to restrict inmates’
125

Inmate Calling Report and Order and FNPRM, 28 FC Rcd at 14134-35, nn.196, 203.

126

But see Pay Tel Proposal at 3 (suggesting that facility cost recovery “should be added to each minute of use for
all calls”).

127

GTL Aug. 11, 2014 Ex Parte Letter at 2.

128

See Joint Provider Reform Proposal at 3 (“The parties’ proposal supports the recovery of legitimate costs
incurred by correctional facilities that are directly related to the provision of inmate calling services.”).

129

Id. at 3.

130

See 2014 ICS Workshop Transcript at 95 (Darrell Baker, Director, Utility Services, Alabama PSC).

131

Id. at 187 (Alex Friedmann, Managing Editor, Prison Legal News); see also 2013 ICS Workshop Transcript at
262-63 (Timothy O. Woods, National Sheriffs’ Assoc.) (“[A]gain, one must not neglect to take into consideration
and calculation the substantial cost for jails associated with establishing, maintaining, and updating inmate calling
service systems. The so-called commissions are used by jails as cost recovery mechanisms to recoup the
administration costs of inmate calling services. In addition, depending on the locality, part of the so-called
commissions are used for jail inmate welfare and benefit programs.”).

132

See Praeses Oct. 3, 2014 Ex Parte Letter at 3 (correctional facility costs incurred to enable ICS include “real
estate/facilities expense; capital expenditures for equipment; call monitoring and recording; responding to law
enforcement requests related thereto; compliance and implementation with call security protocols; responding to
inquiries by inmates and inmate call recipients; registering, approving, blocking and unblocking the telephone
numbers of call recipients; coordinating with ICS providers, including escorting ICS provider technicians and
inmates to calling areas; and educating staff, inmates, and inmate call recipients regarding facilities’ ICS policies”).
133

See, e.g., Petitioners NPRM Comments at 17-18.

134

See Securus Sept. 22, 2014 Ex Parte Letter at Attach.

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access to ICS?135 We seek comment on whether correctional institutions in states that have prohibited site
commissions bear any costs and, if so, whether such costs are recovered through ICS rates or are
recovered through the general budget of the correctional institution.
41.
We note that because the Mandatory Data Collection applied to ICS providers, not
correctional institutions, the costs submitted by the providers do not include any costs that may be
incurred by facilities. We seek comment on the actual costs, if any, incurred by correctional facilities in
providing ICS, the amounts associated with these costs, and the appropriate vehicle for enabling facilities
to recover such costs. Is an allocation of a guard’s time for walking a prisoner to an ICS facility
necessary and appropriate to include in ICS costs? Do facilities monitor calls for security purposes or is
such monitoring done by ICS providers? If facilities monitor calls, should such costs be considered a cost
recoverable through ICS rates? The Allegany County, NY Sheriff asserted that his facility “does
experience real costs in administering these services,” but did not quantify or otherwise provide a context
for understanding the relative magnitude of these costs as compared to the county’s correctional budget.136
42.
The record is mixed on whether, and if so, how much facilities spend on ICS. For
example, GTL provides research that suggests significant variations in how facilities apportion costs. For
example, one department of correction that GTL serves allocates 42 full time employees to the provision
of security for ICS, whereas a second, similarly sized, department of correction allocates only 0.5 full
time employees to the provision of security for ICS.137 GTL estimates prisons’ ICS-related costs at
$0.005 per minute of use and jails’ costs at $0.016 per minute of use,138 or 3.4 percent of total ICS
revenue at prisons and 7.6 percent in jails.139 In contrast, CenturyLink asserts that to “monitor just ten
percent of the calls placed by inmates at either a prison or a jail would cost the facility 5.28 cents per
minute applied to all calls placed by inmates at the facility.”140 We seek comment on these estimated
costs, particularly on why they vary so significantly, and the underlying assumptions, i.e., staffing costs
and time commitments. For example, CenturyLink provides a list of “administrative and security
functions” that correctional facilities commonly perform,”141 such as “responding to other law
enforcement requests for records/recordings,” validating attorney or other privileged numbers,
“blocking/unblocking numbers blocked for security issues,” and “administration of debit purchase.”142
We seek comment on this list of functions and whether, in commenters’ experiences, it accurately
represents costs that correctional facilities incur in the provision of ICS. Other comments contend that
ICS facilities do not incur costs in the provision of ICS.143 For example, is it appropriate for any portion
of a salary of a full-time guard to be considered a cost of ICS?
43.
To the extent the record indicates that facilities incur costs related to the provision of ICS,
we seek comment on allowing cost recovery through a per-minute rate cap included in any rate cap
adopted by the Commission, or some other approach. The per-minute approach presumes that facilities’
135

See CenturyLink Aug. 14, 2014 Ex Parte Letter at 2; see also Securus FNPRM Reply at 7.

136

Letter from Ricky L. Whitney, Allegany County Sheriff, to Tom Wheeler, Chairman, FCC, WC Docket No. 12375 (filed Mar. 25, 2014).

137

See Letter from Chérie R. Kiser, Counsel to GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375, Attach. 2 at 5 (filed Sept. 19, 2014 (GTL Sept. 19, 2014 Ex Parte Letter).

138

Id.

139

Id.

140

Letter from Thomas M. Dethlefs, Associate General Counsel-Regulatory, CenturyLink, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 12-375 at 2 (filed Sept. 19, 2014) (CenturyLink Sept. 19, 2014 Ex Parte Letter).

141

CenturyLink Sept. 19, 2014 Ex Parte Letter at 1.

142

CenturyLink Sept. 19, 2014 Ex Parte Letter at Attach. A.

143

See Petitioners NPRM Comments at 17-18.

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costs vary with usage. We seek comment on the variable or fixed nature of correctional institutions’
costs. GTL estimates prisons’ ICS-related costs at $0.005 per minute of use and jails’ costs at $0.016 per
minute of use.144 We seek comment on whether a per-minute amount between $0.005 and $0.016 or at
some other per minute amount would ensure that correctional facilities recover their costs. Would
allowing cost recovery based on a per-minute amount give correctional facilities an incentive to increase
ICS usage? What would be the policy advantages or disadvantages of such an approach? Would
correctional facilities be likely to select ICS providers with lower rates and fees, so as to increase usage
and, depending on the elasticity of demand, thereby increase cost recovery to the facilities? We seek
comment on whether any such cap should be reevaluated and adjusted as minutes of use (MOU) change.
44.
We seek comment on using a per-minute approach over one that would set such
payments at a capped percentage of ICS revenues. This approach would promote simplicity and deter
possible improper incentives tied to a percentage of revenues approach, as occurs today. If, however, we
used a percentage-based approach, we seek comment on the appropriate level of any recovery percentage.
GTL estimates prisons’ ICS-related costs at 3.4 percent of total ICS revenue and jails’ costs at 7.6
percent.145 We seek comment on whether a percent of gross revenues between 3.4 percent and 7.6 percent
or some other percent amount would ensure correctional facilities recover their costs. Would basing cost
recovery on a percentage of ICS revenues encourage gaming and provide no or less incentive to facilities
to lower ICS rates? For example, would basing cost recovery amounts on a percentage of revenues give
ICS providers incentives to maintain rates at the highest allowable level in order to maximize site
commission revenues? Will correctional facilities structure their RFPs so as to require such an outcome?
We seek comment below on a transition period to achieve any cost recovery level.146 Praeses suggests
that the Commission should consider developing “a safe harbor payment level in addition to a payment
cap – in much the same way that the Commission regulated interstate ICS rates in the ICS Report and
Order in light of the varying ICS costs borne by ICS providers with respect to the different types of
correctional facilities served.”147 We seek comment on these and any other alternative regulations that
could govern the relationship between any restriction on site commissions and ICS rate regulations.
45.
To ensure our reforms produce just and reasonable rates and fair compensation, we seek
comment on whether state statutes or regulations that require any site commission payment, as we sought
comment on defining here, are inconsistent with the possible regulation herein and would therefore be
preempted, pursuant to section 276(c) as discussed below.148 What criteria should the Commission use to
determine which state actions are consistent? For example, should state actions to eliminate or restrict
site commissions be considered consistent with any reforms that the Commission adopts? Should such an
approach also preempt state statutes that only mandate how site commissions are to be used, but not
require them in the first instance? Or would such statutes simply be rendered moot to the extent that
correctional institutions elect not to seek, or ICS providers elect not to pay, site commissions in those
states?
46.
We also seek comment on possible state roles to address the issues discussed above. Are
there circumstances where states might be better positioned to engage in oversight? Would states be
limited to oversight in the context of intrastate ICS or could they also play some role in the context of
interstate ICS? If so, what might that role be? Finally, we seek comment on setting interstate and
intrastate ICS rates at levels that do not include the recovery of site commission payments instead of
prohibiting site commission payments directly. If the Commission determines that it does not have
144

See GTL Sept. 19, 2014 Ex Parte Letter at Attach. 3.

145

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14120-21, para. 26.

146

See infra Section III.G.

147

Praeses Oct. 3, 2014 Ex Parte Letter at 3.

148

See infra Section III.E.

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authority over site commission payments, does such an approach still allow for just and reasonable ICS
rates as well as fair compensation? Would such an approach help satisfy the goals, provided in section
276 of the Act, of promoting competition and widespread deployment of payphone services?
B.

Interstate and Intrastate ICS Rate Reform

47.
A goal of ICS reform is to move to a market-based solution to reduce rates. While we
continue to see the benefits of a the approach adopted in the Order last year, now that we are seeking
comment on comprehensively reforming all aspects of ICS (including intrastate rates and site
commissions) this allows the Commission to ask about a more market-based approach to promoting
competition and just and reasonable rates and to ensure fair compensation. Given the high rates,
excessive compensation and market failure we see today, we seek comment on adopting permanent rate
caps to ensure that ICS rates are just and reasonable. These rate caps will serve as a backstop to the
market-based solution described above.149 We seek comment on how to set those rate caps. Specifically,
we seek comment below on the data submitted by ICS providers pursuant to the Mandatory Data
Collection. We also seek comment on the proposals for rate reform filed in the record. In addition, we
seek comment on prohibiting per-connection or per-call charges. Should any such expenses be collected
through a per-minute rate? We seek comment on the best ways to address flat-rate charges for ICS.
48.
We seek comment on adopting permanent rate caps for interstate and intrastate
debit/prepaid and collect ICS calls. In the Order, the Commission adopted a requirement that rates be
cost-based. At that time, because reform was limited to interstate rates, market forces alone would not
bring all rates down to just and reasonable levels because intrastate rates, ancillary charges and site
commission payments on intrastate rates would still thwart market forces. While we continue to see the
benefits of a cost-based approach as adopted in the Order last year, the Commission prefers to allow
market forces to ensure that rates are just and reasonable. Now that we seek comment on
comprehensively reforming all aspects of ICS, including intrastate rates, will the elimination of site
commissions facilitate the market moving to just and reasonable rates? We also seek comment on
adopting permanent rate caps to ensure that ICS rates are just and reasonable and ICS compensation is
fair, particularly while we transition away from site commissions. We ask about the advantages and
disadvantages of this approach as compared to setting safe harbors or simply requiring cost-based rates.
We seek comment above on a possible cost recovery amount for correctional facilities150 and seek
comment on including an amount for correctional facility cost recovery in any rate caps ultimately
adopted by the Commission.
49.
Data Analysis. We seek comment on the data filed by the 14 ICS providers in response
to the Mandatory Data Collection. The data filed by ICS providers include cost, site commission and
ancillary services data, which are informative and useful, and we take this opportunity to remind all ICS
providers of the filing requirement.151 These data include the cost of the full spectrum of safety and
security features, including verification, monitoring and other advanced security capabilities that ensure
that correctional facilities have the security necessary for the provision of ICS. We generally seek
comment on the data and invite parties to analyze the data and submit any analysis consistent with the
terms of the Protective Order. We also invite parties to submit concerns or alternative proposals for the
Commission to consider as it evaluates further reforms. Throughout this section we use 2012 and 2013
actual data filed by the responding ICS providers.

149

During any transition period away from site commission payments adopted by the Commission, the adopted rate
caps, once effective, will serve as the primary mechanism ensuring just and reasonable rates and fair compensation.
See infra Section III.G.

150

See supra Section III.A.3.

151

See generally Data Collection Approval PN; Partial Extension Order.

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50.
While the data are useful to the Commission’s evaluation of further ICS reforms, we seek
comment on some apparent inconsistencies and anomalies. For example, differing cost allocations by
providers were particularly notable and could affect the consistency and reliability of the data as reported.
The Wright Petitioners noted several anomalies based on their analysis of the data, including the fact that
“[t]he average cost per minute of use is substantially less than the interim Interstate ICS hard rate caps
adopted in August 2013; [t]he ICS providers inconsistently allocated their costs among the four cost
categories (Telecom, Equipment, Security, Other); [t]he ICS providers used different methodologies to
allocate costs to facilities and payment methods.”152 We seek comment on these apparent inconsistencies
and how the data may be analyzed to make an allowance for such variances.
51.
A large proportion of costs reported by ICS providers are common costs, which is
consistent with the fact that ICS providers typically use centralized calling platforms to process calls from
the different facilities they serve. The Commission’s Mandatory Data Collection did not dictate a
particular methodology for allocating common costs – and, indeed, doing so could have greatly increased
the administrative burden of providing the data. As a result, the providers took varied and often
inconsistent approaches to allocating common costs among types of facilities and types of services.
Given the preponderance of common costs in ICS providers’ data submissions, analysis of the data is
particularly sensitive to such varied and inconsistent common cost allocation methodologies.
52.
We note that, as a whole, ICS providers allocated common costs among types of facilities
and types of services differently as compared to the volumes of traffic those facilities and services
experienced. Specifically, ICS providers that served both jails and prisons generally allocated a higher
proportion of their common costs to jails than would otherwise be warranted given the minutes of use
from those jails. Although the exact allocation varied by provider, on average about two thirds of
common costs were allocated to jails, whereas only about half the reported total traffic volume originated
from jails.153 The data evidence similar discrepancies between the allocation of common costs to types of
service and the volume of traffic for those services. For example, ICS providers as a whole allocated
about 16 percent of their common costs to collect calls, whereas collect calls represented only about eight
percent of total traffic. It is not readily apparent why common costs (as opposed to direct costs) would
not follow usage more closely. And the results of the data from these allocations show costs for jails that
are higher than proposals for comprehensive reform that the providers themselves submitted, which raises
concerns about the accuracy of their methodology and whether alternative allocation methods would more
accurately represent costs.
53.
One possible approach to addressing apparent inconsistencies in the providers’ common
cost allocation methodologies would be to use minutes of use for each provider as an alternative basis on
which to allocate providers’ common costs. Given the high proportion of common costs reported by the
industry and the centralized nature of its networks, using minutes of use to allocate common costs would
seem likely to reflect the providers’ operational realities. We seek comment on whether employing a
usage-based allocation of common costs would more closely reflect cost causation and provide more
consistent and reliable data. We further seek comment on how these data should inform the rate cap
levels for interstate and intrastate debit/prepaid and collect calls. The following table shows the costs per
minute for jails and prisons when using three different methods to allocate common costs: as submitted
by ICS providers, as reallocated using total minutes of use, and as reallocated using the providers’ cost

152

Letter from Lee G. Petro, Counsel for Petitioners, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375
at 1 (filed Sept. 17, 2014).

153

The proportion of common costs for 2012 and 2013 allocated to jails by all providers was 68.1 percent.
Providers that serve both jails and prisons allocated virtually the same percentage of common costs to jails (67.6
percent). While averaging jail common cost allocations over all providers raises the average allocation amount
marginally, the difference has a negligible impact on our analysis. We use 68 percent in this Second Further Notice
to avoid any potential discrepancy in our analysis.

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allocations between jails and prisons prior to reallocating those costs by minutes of use for each type of
and facility.
Table One

Facility
Type
Jails
Prisons
All

Common Costs as
Allocated by Providers
Average
Average
Debit/Prepaid
Collect
Cost
Cost
15.8 cents
48.7 cents
10.0 cents
13.7 cents
13.3 cents

28.3 cents

Common Costs Allocated
by MOU
Average
Average
Debit/Prepaid
Collect
Cost
Cost
14.8 cents
21.9 cents
14.0 cents
17.2 cents
14.5 cents

19.2 cents

Common Costs Allocated
by Facility Type
Average
Average
Debit/Prepaid
Collect
Cost
Cost
18.1 cents
26.3 cents
9.9 cents
14.3 cents
N/A

N/A

54.
We seek comment on the two reallocation methodologies in Table One, both of which
use minutes of use in different ways as a means of reallocating common costs in manner tied more closely
to usage. We initially examine and seek comment on the reallocation based on total minutes of use. This
method uses the ratio of total industry minutes of use for jails to total minutes of use for all facilities to
reallocate all common costs among facility and service types. Minutes of use for jails represent about 53
percent of all minutes of use, resulting in an allocation of about 53 percent of common costs to jails
instead of the average of approximately 68 percent allocated to jails in the data as reported by providers.
The results of this reallocation methodology are more consistent with provider proposals in the record,
both from 2008 and more recently.154 For purposes of comparison, the 2008 ICS provider proposal
reported costs of $0.164 per minute for debit calls and $0.236 per minute for collect calls, whereas the
providers’ data reported costs of $0.133 per minute for debit and prepaid and $0.283 per minute for
collect.155 Similarly, the Joint Provider Reform Proposal recommends a single per-minute rate cap of
$0.20 for debit and prepaid and $0.24 for collect calling. CenturyLink’s proposal advocates unified rate
caps at the current interstate caps ($0.21 for debit and prepaid and $0.25 for collect).156 We seek
comment on these apparent allocational discrepancies.
55.
This alternative methodology would standardize common cost allocations among the five
providers that serve a mix of jails and prisons. And the fact that providers that serve only jails have no
prison minutes of use would ensure that their common costs would not be allocated to prisons. Does this
method more closely approximate the operational realities of the providers? Is it more effective in
replicating cost causation in the industry? Does it have any disparate impacts on providers that only serve
jails?
56.
We also examine and seek comment on a potential reallocation of providers’ common
costs based on providers’ allocation of common costs to facility types (jails or prisons). This method
accepts each individual provider’s allocation of common costs between jails and prisons and then
154

See generally Don J. Wood, Inmate Calling Services Interstate Call Cost Study (WOOD & WOOD 2008) CC
Docket No. 96-128 (filed Aug. 15, 2008); Letter from Stephanie A. Joyce, Counsel to Securus, to Marlene H.
Dortch, Secretary, FCC, CC Docket No. 96-128 (filed Aug. 22, 2008) (Joyce Aug. 22, 2008 Ex Parte Letter)
(attaching supplemental cost and usage data); Record submission by “several providers of inmate telephone
service,” CC Docket No. 96-128 (filed Oct. 15, 2008) (amending supplemental cost and usage data) (collectively
ICS Provider Data Submission); Joint ICS Provider Reform Proposal; Letter from Thomas M. Dethlefs, Counsel for
CenturyLink, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Oct. 10, 2014) (Oct. 10, 2014 Ex
Parte Letter).

155

ICS Provider Data Submission at 4.

156

CenturyLink Oct. 10, 2014 Ex Parte Letter at 3.

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allocates those costs among facility and service types based on total minutes of use for each type of
facility. This method shifts fewer costs to prisons and results in higher costs for jails than the total
minutes of use allocation due to the reliance on the 68 percent average allocation of common costs to jails
by providers, as noted above. Is this method more appropriate because providers’ initial allocations of
common costs are more accurate? Alternatively, is this method’s greater reliance on the accuracy of
those allocations a potential vulnerability or flaw?
57.
The data provided by ICS providers also allocated costs to different subsets of facilities
based on size of facility. This allocation resulted in a wider range of per-minute costs with some apparent
anomalies, such as per-minute costs for certain facility size groups being well above the range of rate cap
proposals submitted by any ICS provider, including those that exclusively serve purportedly higher-cost
facilities such as jails.157 The cost data generated by facility size groups also resulted in some anomalies
that raised questions about whether smaller facilities have higher costs than larger ones, and vice versa, as
some commenters have asserted in this proceeding.158 Given confidentiality of the data, we cannot
disaggregate all data for jails and prisons by size but we note that while the data indicate that smaller jails
are most costly and the largest jails are less costly to serve, the data did not show the same correlation
between size and cost for prisons. This raises questions about whether assumptions about facility size
determining cost are accurate. Even if size were the appropriate measure, would the administrative
burden of using rates tiered by size and type of facility outweigh the benefits of multiple rate tiers? Can
rate caps for different types of services and facilities provide sufficient flexibility to ensure fair
compensation short of resorting to size-based tiers? Does the Commission need to adopt such a
regulatory approach?
58.
To the extent that particular facilities are more costly to serve than suggested by the rate
cap proposals in the record, can the Commission more effectively ensure fair compensation and reduce
administrative costs to providers by addressing such outliers through the use of the waiver process? We
note that the Commission already granted a waiver of its interim rate caps to one ICS provider to address
unique circumstances.159 Would using a waiver process be easier to manage than adopting and policing
the multiple rate tiers the Commission would otherwise have to adopt?
59.
We also seek comment on other alternative methods of analyzing the ICS providers’ cost
data. For example, would evaluating jail data separately from prison data be useful? We seek comment
on any other methods of evaluating the data that commenters may want to propose that may prove useful
to the Commission in its analysis of this data to ensure just and reasonable rates and fair, not excessive,
compensation.
60.
Previous Data Submissions in the Record. ICS providers have previously filed data in
the record throughout this proceeding. In 2008, seven ICS providers filed a cost study based on
proprietary cost data for certain correctional facilities with varying call cost and call volume
characteristics.160 The study indicated that the per-call cost for debit calls was $0.16 per minute and $0.24
per minute for collect calls.161 In response to the 2012 ICS NPRM, Securus filed data which showed, as
discussed in the Order, “an average per-minute cost for interstate calls from all facilities included in the
157

See Pay Tel Proposal (proposing rate caps of $0.22 per minute for larger jails and $0.26 per minute for smaller
jails).

158

Given the fact that some of the size groups contain too few data points to ensure confidentiality, they have not
been reproduced here. Parties are welcome to examine this data and provide comment and proposals based on it,
consistent with the terms of the Protective Order.

159

See Pay Tel Waiver Order.

160

See generally ICS Provider Data Submission.

161

These estimates are based on per-minute costs and were derived from the per-call and per-minute data developed
by the study, using an assumed 15-minute call duration.

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report to be $0.12 per minute with commissions and $0.04 per minute without them.”162 Pay Tel filed
financial and operational data for its ICS operations.163 The non-confidential cost summary included in
the filing reported actual and projected 2012-2015 average total costs for collect and debit per-minute
calling of approximately $0.23 and $0.21, respectively (including the cost of an advanced security feature
known as continuous voice biometric identification).164 Although CenturyLink did not file a cost study at
that time, it did file summary cost information for its ICS operations.165 Specifically, CenturyLink
reported that its per minute costs to serve state departments of corrections facilities (excluding site
commission payments) averaged $0.116166 and that its per-minute costs to serve county correctional
facilities (excluding site commission payments) averaged $0.137.167 We seek comment on how to
reconcile these data submissions with the data filed in response to the Mandatory Data Collection and the
Commission’s analysis of that data described above, and how these data should inform our selection of
rate caps. We also seek comment on and updates to intrastate rate data currently in the record.168 And we
seek updated comment on international ICS and the need for Commission reform focused on such
services.169
1.

Proposals for a Unitary Rate

61.
Throughout this proceeding interested parties have filed in support of the Commission
adopting unitary ICS rate caps for all intrastate and interstate debit/prepaid and collect calls in all
facilities. We seek comment here on those proposals.
62.
Joint Provider Reform Proposal. The Joint Provider Reform Proposal supports a rate cap
of $0.20 per minute for debit and prepaid interstate and intrastate calls, and a rate cap of $0.24 per minute
for all interstate and intrastate collect calls exclusive of per-call or per-connection charges,170 exclusive of
any facility cost recovery, and regardless of facility size.171 The providers that submitted this proposal
assert that this “simplified rate structure” “will make ICS charges more transparent for inmates and their

162

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14120-21, para. 26. .

163

Letter from Marcus W. Trathen, Counsel for Pay Tel Communications, Inc. to Marlene H. Dortch, Secretary,
FCC, WC Docket No. 12-375, Attach. (filed July 23, 2013) (Pay Tel July 23, 2013 Ex Parte Letter).

164

Pay Tel July 23, 2013 Ex Parte Letter, Attach. at 2 (Pay Tel Cost Summary).

165

See Letter from John E. Benedict, VP – Federal Regulatory Affairs & Regulatory Counsel, CenturyLink, to
Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Aug. 2, 2013) (CenturyLink Aug. 2, 2013 Ex
Parte Letter). We also note that CenturyLink’s predecessor, Embarq, participated in the 2008 ICS Provider Data
Submission. See supra n.160.

166

See CenturyLink Aug. 2, 2013 Ex Parte Letter at 2. CenturyLink states that the state departments of corrections
facilities it serves had a median per-minute cost of $0.108, a low per-minute cost of $0.058 and a high per-minute
cost of $0.188. See id.

167

See CenturyLink Aug. 2, 2013 Ex Parte Letter at 3. CenturyLink states that the county correctional facilities it
serves produced a median per-minute cost of $0.135, a low per-minute cost of $0.051, and a high per-minute cost of
$0.220.

168

See HRDC FNPRM Comments, Exh. A.

169

We note that we sought initial comment in the FNPRM on international ICS. See Inmate Calling Report and
Order and FNPRM, 28 FCC Rcd at 14186-87, para. 166.
170

We discuss per-call or per-connection charges in greater detail below. See infra Section III.B.3.

171

Joint Provider Reform Proposal at 3 (“Accordingly, if the FCC determines that such admin-support payments to
correctional facilities are appropriate, the amount or percentage of such payments will have a direct effect on ICS
provider’s costs to provide ICS, and therefore, the proposed per-minute rate caps may have to be increased, unless
such admin-support payments or percentages are nominal.”).

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friends and family,” as well as “easy for ICS providers and correctional facilities to implement quickly,
and will simplify oversight and enforcement.”172
63.
Pay Tel and the Alabama PSC have raised concerns about the Joint Provider Reform
Proposal for a unitary rate and urged the adoption of different rates for jails and prisons.173 For example,
Pay Tel stated that the rate caps were “excessively high for prisons.”174
64.
We generally seek comment on the rate caps proposed by the Joint Provider Reform
Proposal.175 We seek comment on how our data analysis described above reconciles with the rate caps
proposed by the providers. As noted above, average debit and prepaid costs are lower than $0.20 per
minute. Should we adopt the Joint Provider Reform Proposal’s rate caps because any adopted rate caps
will serve as a backstop to ensure that rates are just and reasonable? Would these rates enable the
Commission to include a per-minute cost recovery of $0.005 for correctional facilities’ cost recovery?
We also seek comment on how ICS providers’ earlier data filings reconcile with the rate caps suggested
in the Joint Provider Reform Proposal.
65.
Current Interim Rate Caps. Some parties have supported making the interim rate caps
permanent for all interstate and intrastate ICS calls. CenturyLink asserts that it could “support a unified
cap approximately at the current interstate cap levels.”176 NCIC asserts that collect ICS rates should be
capped at $0.25 per minute and debit call rates at $0.21 per minute.177 We seek comment on these
proposals in light of the data received in response to the Mandatory Data Collection.178
66.
Wright Petitioners’ Proposal. The Wright Petitioners previously proposed a
$0.07/minute rate cap for all interstate ICS.179 We sought comment on this proposal in the FNPRM,
particularly as it related to distance insensitive rate proposals.180 ICS providers suggested that the rate
may jeopardize ICS security.181 Other commenters suggested that the Commission should adopt a
$0.07/minute rate cap for all ICS and that current rates in states like New Mexico ($0.043/minute) and
New York ($0.048/minute) support this cap.182 We now seek comment on whether we should adopt this
172

Id. at 2.

173

Alabama PSC Sept. 30, 2014 Ex Parte Letter at 6-7 (Alabama asserted that “there are lower costs for serving
prisons than jails” and urged the Commission to study “the need for separate rate structures according to facility
type.”).

174

Pay Tel Oct. 2, 2014 Ex Parte Letter, Attach. at 2-3.

175

Joint Provider Reform Proposal at 2-3.

176

CenturyLink Aug. 14, 2014 Ex Parte Letter at 1.

177

Letter from Glenn S. Richards, Counsel for NCIC, to Marlene H. Dortch, Esq., Secretary, FCC, WC Docket No.
12-375, Attach. at 6 (filed July 9, 2014) (NCIC July 9, 2014 Ex Parte Letter).

178

We note that the Bureau granted a temporary, limited waiver of the Commission’s interim rate caps to Pay Tel,
approving a $0.46 per minute rate in response to the fact that certain states in which Pay Tel operates mandate
intrastate rates that are below Pay Tel’s cost. See generally Pay Tel Waiver Order. In its Petition for Waiver, Pay
Tel reiterated its support for permanent rate caps of $0.21 per minute and $0.25 per minute for both interstate and
intrastate ICS but requested the waiver because some intrastate rate caps in states where it serves correctional
facilities are below cost. See Pay Tel Communications, Inc.’s Petition for Waiver of Interim Interstate ICS Rates,
WC Docket 12-375 at 13-19 (filed Jan. 8, 2014). Given PayTel’s stated support for the interim caps as well as its
current proposal for reform which is well below $0.46, we seek comment on the relevance, if any of the waiver to
the interstate and intrastate rate caps we are considering in this Second Further Notice.

179

See Petitioners NPRM Comments at 17.

180

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14182, para. 155.

181

See GTL FNPRM Comments at 3-4.

182

See PLS FNPRM Comments at 7-8.

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proposal. If the Commission were to adopt this proposal, would rate caps at this level preclude ICS
providers from paying site commissions and therefore negate the need for the Commission to regulate site
commission payments as discussed above?183 What level of rate cap do commenters believe would
change what providers are able to offer correctional facilities? Do the data from the Mandatory Data
Collection support this rate cap? What are the considerations associated with such an approach?
2.

Tiered Rate Caps

67.
While we see certain benefits to a single set of rate caps such as administrative ease and
avoidance of potential loopholes, some commenters recommend rates tied to the size or type of facility.
In the FNPRM the Commission sought comment on the adoption of, and benefits of, tiered rates based on
a facility’s volume of minutes, type (i.e., jail versus prison) or size.184 Responses centered on the
distinction between jails and prisons, with some commenters advocating for different ICS rate tiers for
jails and prisons.185 These same commenters also point out that the differences between jails and prisons
are not absolute, and acknowledge that some prisons “are more costly to serve than jails and the range of
costs of serving jails and prisons is very wide.”186 The record indicates that jail administrators support a
tiered rate instead of a flat rate because jails may face different costs than prisons as a result of their
smaller size, higher turnover rate, and relative inability to take advantage of economies of scale.187 How
do the data collected and reported herein impact our evaluation of these claims?
68.
Pay Tel Proposal. In its proposal Pay Tel recommends separate rates for jails and
prisons.188 Pay Tel proposes an $0.08 per minute rate for all prisons regardless of population.189 Pay Tel
also estimated a $0.067 per minute average rate for the eight state prison systems that barred site
commissions.190 Pay Tel suggests a rate of $0.26 per minute for jails with 1-349 average daily population
[ADP], a $0.22 per minute rate for jails with 350 plus ADP, and a $0.08 per minute rate for all prisons
regardless of size.191 We seek comment on these proposed rate caps.
69.
Alabama recently adopted ICS rates tied to facility type. For example, the Alabama PSC
has adopted per-minute rates of $0.30, decreasing to $0.25 over two years, for jails and $0.25, decreasing
to $0.21 over two years, for prisons.192 We seek comment on this approach.
70.
Commenters suggest that rates tied to the type or size of facility would open loopholes in
ICS reform and allow for gaming.193 Is this accurate? Recently, CenturyLink said it “does not support
183

See GTL FNPRM Comment at 5 (suggesting that the $0.07 all-distance rate proposed in the FNPRM “effectively
will eliminate all commissions in the ICS industry”).

184

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14182-84, para. 156-59.

185

See generally AJA FNPRM Comments; NSA FNPRM Comments. See also CenturyLink FNPRM Comments at
15; Pay Tel FNPRM Comments at 17-24; Alabama PSC Sept. 30, 2014 Ex Parte Letter at 12.

186

CenturyLink FNPRM Reply at 5-6.

187

Transcript of 2014 ICS Workshop at 214-15 (Comments of Elias A. Diggins, Division Chief, Denver Sheriff’s
Department on behalf of the American Jail Association).

188

See Pay Tel Proposal at 1.

189

See id.

190

See id.

191

See id.

192

See Alabama PSC Further Order at 49-50.

193

See 2014 ICS Workshop Transcript at 211 (Comments of Richard A. Smith, CEO, Securus) (“We would go to a
big facility like Florida. If you did, for example, an ADP [average daily population] or a minute of use kind of a
tiering, we’d got to the big facilities and say instead of one contract, we’re going to have 34, one per facility because
they’re different, they have different characteristics, they’re in different parts of the state so we migrate up to a
(continued…)

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complex or tiered rate caps.”194 Other commenters contend that an insufficient record exists from which
to develop rate tiers, and point to evidence that many jails house long-term inmates, which may indicate
that costly account set-up fees are less of an issue than suggested.195 Do the data received in response to
the Mandatory Data Collection assuage the concern regarding the sufficiency of the record? The data also
suggest that certain ICS providers reported a large proportion of the costs of ICS as common costs, rather
than direct or facility-specific costs. Does this further call into question the cost allocation methods used
by providers in their data submissions to allocate common and direct costs? Or does it suggest that ICS
providers did not use uniform standards to distinguish between direct and common costs? We seek
updated comment on interested parties’ opinions on tiered rates for different types of facilities.196
Specifically, if the Commission adopts a market-based approach of addressing site commission payments
and allowing competition to drive rates closer to cost, should we consider rate tiers, or should we instead
adopt common rate caps for all correctional institutions to accommodate any differences between jails and
prisons? Would the adoption of tiered rates help promote competition among ICS providers and promote
the widespread deployment of ICS—a form of payphone service—consistent with the goals of section
276?197 For example, would a lower rate cap for ICS in prison facilities promote additional usage, a
potential means of promoting widespread deployment of payphone ICS service?
71.
The Commission seeks comment above on prohibiting site commissions to address the
primary cause of the ICS market failure. If the Commission does not prohibit site commissions should
we focus more on rates tied to facility size or type? If the Commission were to set tiered rates, we seek
comment on defining a jail facility as a correctional facility operated by a political subdivision of a state
or its agent and defining a prison facility as a state-run or federally-run correctional facility.198 How
would differences in tiered rate caps be administered? We seek comment on a simpler approach. Would
a variety of rate caps cause confusion? We also seek comment on the administrability of cost on ICS
providers on an approach that varies by size and type of facility. CenturyLink urges the Commission to
exclude from ICS rate reform certain types of facilities that it considers high-cost, such as juvenile
detention centers and secure mental health facilities.199 Do other commenters agree that these types of
facilities are particularly high cost?200 If so, why? Are there other categories of facilities that the
Commission should consider exempting because they are high cost? Would doing so be in keeping with
our statutory mandate? How should the Commission regulate the provision of ICS at such facilities?

(Continued from previous page)
higher rate. Within the facilities, I’d start to look at booking areas versus detention areas versus the women’s area
and the men’s area.”).
194

CenturyLink Aug. 14, 2014 Ex Parte Letter at 1.

195

See Petitioners FNPRM Comments at 11-12; see also PLS FNPRM Comments at 8.

196

Transcript of 2014 ICS Workshop at 98-99 (Comments of Cheryl A. Leanza, Policy Advisor, United Church of
Christ, OC Inc.) (“So, in fact, there may not be that same cost differential for a small jail as a large facility, because
in fact the provider is centralizing those services at a single place so their volume is distributed over the whole
facility.”).

197

See 47 U.S.C. § 276(b).

198

See NSA FNPRM Comments at 3.

199

See CenturyLink Aug. 14, 2014 Ex Parte Letter at 2 (“[H]igh-cost facilities such as juvenile detention centers and
secure mental health facilities should be exempted from any rate caps that are imposed. . . . Limits on ancillary fees,
however, should nonetheless be imposed on high-cost facilities such as juvenile detention centers and secure mental
health facilities.”).
200

See Joint Provider Reform Proposal at n.5 (“For example, waivers could be sought to provide service to
individual mental health facilities, youth work camps, and other facilities with unique environments (security,
geographic or otherwise) that increase the cost of providing service beyond the cap.”).

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Should it exempt such facilities from ICS rate reform? We seek comment on the appropriate definitions
for juvenile detention facilities and secure mental health facilities.
72.
In the FNPRM, the Commission also sought comment on rate tiers based on facility size
as measured by the average daily population of the facility.201 The Prison Policy Initiative suggested that
the Commission could use the Census of Jail Facilities population data to capture facility size but could
also use more recent data.202 Would following the Census numbers result in too few or too many tiers?
We seek comment on what interested parties believe to be the appropriate inflection points, in terms of
ICS providers’ scalability of costs, with regard to possible tiered rates. Some states have recently adopted
ICS rate tiering. We seek comment on the jail and prison rates adopted by the Alabama PSC or any other
states.203
3.

Additional Considerations Related to ICS Rates

73.
Debit/Prepaid and Collect Calling. In the Order the Commission treated debit and
prepaid ICS alike and collect ICS separately because “[t]he record indicates that prepaid calling is
generally less expensive than collect calling but can be about equal in rates to debit calling.”204 Data from
the Mandatory Data Collection suggest a difference in cost between collect ICS calling and debit/prepaid
ICS calling. The data also show, however, that debit and prepaid ICS costs are very similar. Commenters
have recommended higher rates for collect calls.205 The Alabama PSC adopted different rate caps for
different types of service from prisons.206 Other commenters have opposed differentiated rate caps for
different types of ICS.207 We seek comment on retaining this distinction and adopting a rate cap for debit
and prepaid calls and a rate cap for collect calls.208 We also seek comment on the appropriate differential,
if any, between the debit/prepaid cap and the collect cap.
74.
Per-Call or Per-Connection Charges. Per-call or per-connection charges are one-time
fees often charged to ICS users at call initiation.209 We seek comment on banning the imposition of percall or per-connection charges.210 In the Inmate Calling Report and Order and FNPRM the Commission
noted several problems with per-call or per-connection charges, including the level of some of the
charges, their effect on the rate for short calls, and evidence of premature, non-security related call
terminations, and the assessment of multiple per-call charges for what was, in effect, a single
conversation.211 The Commission, recognizing that many different ways to address per-call charges exist,
did not prohibit all per-call charges in the Order but sought comment in the FNPRM.212 In the FNPRM
201

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14183, para. 158.

202

See Prison Policy Initiative FNPRM Reply at 4 (“A more robust and future-proof methodology might be just to
require disclosure of the average daily population in the previous year”).

203

See Alabama PSC Further Order at 49-50.

204

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14120, para. 24.

205

GTL NPRM Comments at 20 (“collect calling is generally more expensive for the ICS provider than prepaid
calling because of billing cost and uncollectibles”).

206

Alabama PSC Further Order at 50.

207

See, e.g., Petitioners NPRM Comments at 3.

208

The data from the Mandatory Data Collection show that in 2013 collect calls accounted for less than nine percent
of revenue producing minutes for the respondents and is projected to decrease.

209

These terms are used interchangeably throughout this Second Further Notice.

210

The Alabama PSC has proposed eliminating per-call charges as well. See Alabama PSC Further Order at 1-2.

211

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14154-55, para. 85.

212

See id. at 14155, para. 87.

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the Commission noted the flexibility it gave ICS providers to use a rate structure that included per call
charges and sought further comment on the risks and benefits of allowing per call charges.213
Specifically, the Commission “express[ed] serious concerns about such charges.”214 Some commenters
suggested that the Commission eliminate per-call charges and that doing so would be beneficial because it
“would lead to significant reductions in customer complaints regarding charges associated with dropped
calls and in the amount of time providers are required to spend analyzing and resolving such
complaints.”215 Is there continuing evidence of premature, non-security related call terminations since the
Commission adopted the Order? The per-minute rate caps proposed by Joint ICS Providers do not
contemplate the continued charging of a per-call or per-connection fee.216
75.
We seek comment on our legal authority to ban the imposition of per-call or perconnection charges, for both interstate ICS calls and intrastate ICS calls. More specifically, we seek
comment on whether such fees are part of the rate for ICS and therefore subject to the section 276
mandate to ensure fair compensation.217 Alternatively, should the Commission consider per-call or perconnection charges an ancillary service as discussed in section 276(d)? Are there instances in which the
correctional facility or some other third party assesses a per-call or per-connection fee? If so, we seek
comment on our authority to ban such charges. Would the elimination of per-call charges allow for just
and reasonable interstate and intrastate ICS rates and fair compensation for providers? Would pure perminute rate caps at an appropriate level or levels ensure fair compensation for ICS providers? Section
276 specifically requires us to “establish a per call compensation plan.” We seek comment on whether
section 276 gives the Commission the legal authority to ban per-call compensation. We seek comment on
whether we should also rely on our section 201 authority to ban per-call charges for interstate calls. The
record has not shown significant per-call costs that could not reasonably be recovered using per-minute
charges. With one exception, ICS providers have successfully implemented the interim per-minute rate
caps for interstate ICS mandated by the Order. We seek comment below on transitions and whether rate
caps should be effective 90 days after the effective date of a Commission order. If the Commission
continues to allow per-call charges, should it nonetheless disallow an additional per-call charge when a
call has been reinitiated within one or two minutes of having been mistakenly disconnected?218 If states
have conducted ICS reform, we seek comment on whether we should review the effective rates for
consistency with the Commission’s regulations based on the calculation of the cost of a 15-minute ICS
call. Are there other considerations relating to per-call charges in the ICS context that the Commission
should consider?
76.
Flat-Rate Charges. We seek comment on whether or not it is necessary to ban flat-rated
charges for calls of a fixed duration to ensure rates are just and reasonable and fair. In the Order the
Commission stated that “a rate will be considered consistent with our rate cap for a 15-minute
conversation if it does not exceed $3.75 for a 15-minute call using collect calling, or $3.15 for a 15minute call using debit, prepaid, or prepaid collect calling.”219 Rule 64.6030 mirrors this language and
was intended to illustrate that a five-minute collect call would equal $1.25 and a five-minute debit or
prepaid ICS call would equal $1.05, while a 30-minute collect call could equal no more than $7.50 and a
30-minute debit or prepaid ICS call could equal no more than $6.30. 220 In the FNPRM the Commission
213

Id. at 14185, paras. 161-62.

214

Id. at 14185, para. 162.

215

See Pay Tel FNPRM Reply at 17.

216

See Joint Provider Reform Proposal at 2.

217

47 U.S.C. § 276(b)(1)(A).

218

See Petitioners FNPRM Comments at 18.

219

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14156, n.330.

220

See 47 C.F.R. § 64.6030.

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sought comment on whether it should adopt an overall rate cap based on call duration, how such a rate
cap might ensure that ICS rates are just, reasonable, and fair, and whether a per-minute cap is still
necessary to ensure that shorter calls are reasonably priced.221 Commenters expressed concern that
“consumers who make shorter calls would necessarily be penalized”222 and that “there is no principled
basis for capping the amount that can be charged for a call.”223 The Public Service Commission of the
District of Columbia discussed the benefits of its $1.75 per-call cap regardless of call length.224
77.
Subsequent to the FNPRM comment deadline, Securus sought additional guidance on
whether the Order allows providers to use a flat-rated charge based on the interim rate caps for a 15minute call regardless of call duration.225 We seek comment on this practice. Should we allow ICS
providers to charge fixed call duration pricing for all interstate ICS usage regardless of call duration? Is
this an appropriate interpretation and application of rule 64.6030 and the relevant discussion in the
Order?226 We also seek comment on how we should address the use of flat-rate charges for ICS going
forward and our legal authority to act on such charges. We seek comment on whether we should revise
the existing rules to prohibit flat-rate charges or develop new rules prohibiting flat-rated charges. If not,
how much flexibility should the Commission allow if flat-rate charges are permitted? How can we ensure
that flat-rate charges allow for just and reasonable ICS rates to end users as well as fair compensation to
ICS providers?
78.
One commenter asserts that correctional facilities seek such flat-rated charges.227 Is this
the case and, if so, why? What impact would allowing this level of flexibility have on the effective perminute rates end users pay? If the Commission adopted a lesser degree of flexibility, how would it work?
Should such a flat rate be used only for calls 15 minutes in length?228 Will flat-rated charges, at the rate
caps discussed above, for a 15-minute call duration allow for just and reasonable ICS rates and fair
compensation? In the Order, the Commission found that the record supported 15-minute average call
duration.229 Data from the Mandatory Data Collection show that the average call length reported by
respondents was below 13 minutes in 2013. Is 15 minutes still a useful average call duration for purposes
of discussing flat-rate charges? If not, what would be an appropriate average call duration?
79.
Waivers. The Order made clear that the Commission’s standard waiver process applies
to ICS,230 specifically, that ICS providers seeking a waiver of the interim rules must demonstrate good
cause.231 The Commission delegated to the Bureau the authority to seek additional information necessary
for evaluating waivers.232 Since release of the Order, the Bureau has processed three waiver requests.233
221

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14184-85, para. 160.

222

PLS FNPRM Comments at 8.

223

CenturyLink FNPRM Comments at 16.

224

See DC PSC FNPRM Comments at 3.

225

Letter from Stephanie A. Joyce, Counsel for Securus, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375 (filed Feb. 10, 2014) (Securus Feb. 10, 2014 Ex Parte Letter); see also Inmate Calling Report and Order and
FNPRM, 28 FCC Rcd at 14155-56, para. 88; Securus July 30, 2014 Ex Parte Letter at 1-2.

226

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 141447-54, paras. 73-81.

227

Securus Feb. 10, 2014 Ex Parte Letter at 1 (“several correctional authorities . . . would prefer this rate
structure.”); see also Securus July 30, 2014 Ex Parte Letter at 1-2.

228

See 47 C.F.R. § 64.6030.

229

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14142, n.232.

230

Id. at 14153-54, paras. 82-84.

231

See 47 C.F.R. § 1.3.

232

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14154, para. 84.

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CenturyLink suggests that the Commission “invite waivers where new rules conflict with state statutes, or
where they would force ICS providers to offer service at a loss.”234 The ICS providers that submitted the
Joint Provider Reform Proposal suggest that the Commission “permit an ICS provider to seek a waiver of
the rate cap for a particular correctional facility if the ICS provider can demonstrate that the proposed rate
cap does not allow the ICS provider to economically serve the correctional facility. However, such
waivers should be permissible only on a facility-by-facility basis.”235 We seek comment on these
suggestions. Specifically, is such action necessary if the Commission preempts inconsistent state
regulations pursuant to section 276(c) of the Act? We seek comment on how the Commission would
determine that rates are below-cost in a waiver proceeding and how any adopted regulations should
address this issue. We further seek comment on what information would be important for providers to
demonstrate when seeking a waiver in the ICS context. We also seek comment on whether exempting a
provider’s highest-cost facilities from the final, adopted regulations would be a suitable remedy to a
waiver request. Conversely, would such an exemption encourage ICS providers to focus on particular
facilities so as to arbitrage our rules?
C.

Reforms to Ancillary Charges
1.

Background

80.
In addition to unreasonable rates, ICS providers typically assess a wide range of separate
charges for services ancillary to the provision of ICS. These charges impose significant additional
burdens on consumers and considerably inflate the effective price they pay for ICS. The record indicates
that ancillary charges represent a significant proportion of the total expense of ICS to consumers. The
Prison Policy Initiative estimated that ancillary charges represent 38 percent of all consumer payments for
ICS.236 Others have suggested that this estimate may be low.237 Fees to open, fund, maintain, close, and
refund an ICS account represent just a few of a variety of ancillary charges assessed by ICS providers.238
(Continued from previous page)
233
See generally Pay Tel Waiver Order; see also Rates for Interstate Inmate Calling Services; Securus Technologies
Inc. Petition to Expand Pay Tel Waiver; Securus Technologies Inc. Petition for Leave to Add Fee for Voice
Biometrics Technology, Order, WC Docket No. 12-375, 29 FCC Rcd 5973 (2014).
234

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2.

235

Joint Provider Reform Proposal at 2-3 (citing, for example, “mental health facilities, youth work camps, and
other facilities with unique environments”).

236

See Letter from Peter Wagner, Exec. Dir., Prison Policy Initiative, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 12-375, Attach. at 10 (filed May 9, 2013) (Please Deposit All of Your Money Study).

237

See, e.g., 2014 ICS Workshop Transcript at 152 (Vincent Townsend, President, Pay Tel) (“I would argue that it’s
actually getting higher with the advent of the single-call program.”).

238

See, e.g., Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14156-57, para. 90, n.335 (citing
examples of charges). Ancillary charges reported in response to the Mandatory Data Collection included an account
close-out fee, account transfer fee, automated information services, automated operator recharge fee, bill processing
charge for direct billed calls, bill processing fee, bill statement fee, biometric service charge, carrier cost recovery
fee, collect call bill statement fee, collect call regulatory fee, collect interstate USF cost recovery fee, continuous
voice verification, credit card charge-back fee, credit card processing fee, federal regulatory recovery fee, federal
USF, federal USF administration fee for LEC billed calls, federal USF administration fee for non-LEC billed calls,
funding fee, funding fee from cashier’s check deposit, funding fee from credit/debit cards, funding fee from money
order deposit, funding fee from Western Union deposit, live operator recharge fee, live prepaid account set-up fee,
load fee, location validation, minimum payment fee, monthly bill statement fee, payment fee - IVR/web, payment
fee - live operator, per call administrative fee for calls from county facilities in Tennessee, prepaid accounts, prepaid
deposit fees, processing fee, refund fee, regulatory assessment fee, sales tax, state cost recovery fee, state regulatory
cost recovery fee for LEC billed calls, state regulatory cost recovery fee for non-LEC billed calls, state USF, state
USF administration fee for LEC billed calls, technology, threads, USF administrative fee, USF federal, USF federal
(LEC billed), validation recovery fee, VINE, voice biometrics, web interface account set-up and recharge fee, and
wireless administration fee.

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The sheer number of ancillary charges, their varying nomenclature, and the variability of the amounts
charged cause considerable customer confusion, let alone consternation.
81.
In the Order, the Commission “question[ed] whether such charges are reasonable in and
of themselves” and noted that “the levels of such charges do not appear to be cost-based.” 239 The
Commission required that all interstate ancillary service charges be cost-based and reasonably and
directly related to provision of ICS. The Commission concluded that it had the jurisdiction and authority
to regulate ancillary service charges.240 The Commission also required ICS providers to file cost data
about ancillary services as part of the Mandatory Data Collection, and in the FNPRM sought comment on
additional steps the Commission could take to address ancillary service charges and ensure that they are
cost-based. 241 We now seek further comment on issues related to ICS ancillary charges.
82.
Since the release of the Order, evidence indicates that ancillary charges have increased,242
suggesting that any reforms limited to ICS rates could be circumvented through increased and new
ancillary charges.243 As the Commission stated in the Order, ICS reform and ensuring just and reasonable
rates to end users “could not be achieved if ancillary charges were not also controlled.”244 Given that
ancillary charges are typically shielded from site commission assessments in correctional institutions’
contracts with providers, ICS providers appear to have an incentive to assess additional ancillary charges
as an alternative source of revenue to compensate for lowered ICS rates or for increasingly high site
commission payments.245 We seek comment on the extent to which the proliferation of ancillary charges
may be a result of the market distorting effects of site commissions.
83.
There is broad consensus in the record on the need for the Commission to reform
ancillary charges. The Wright Petitioners and prisoner advocacy groups have recommended the
regulation or elimination of ancillary charges.246 A number of ICS providers have made similar
recommendations. For example, CenturyLink stated that “the Commission should prohibit all or all but a
very narrow class of ancillary fees. Ancillary fees are the chief source of consumer abuse and allow
239

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14156-57, para. 90.

240

Id. at 14157-58, para. 91.

241

Id. at 14187-89, paras. 167-71.

242

See Pay Tel July 10, 2014 Ex Parte Letter, Attach. (“FCC Workshop on Inmate Calling Services – Panel 2,
Ancillary Charges”); Alabama PSC FNPRM Comments at 6 (the Alabama PSC “observed a tendency for the ICS
industry to increase both the number and magnitude of fees”).
243

See, e.g., 2014 ICS Workshop Transcript at 140 (Vincent Townsend, President, Pay Tel) (“They’ve increased –
payment fees have gone up with most providers since then”).

244

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14158, n.338. See also 2014 ICS Workshop
Transcript at 136 (Vincent Townsend, President, Pay Tel) (“unless the FCC addresses the issue of fees, we’re
wasting a lot of everybody’s time because without addressing the fees, you’re never going to be able to bring real
relief to the families that are paying these bills.”).

245

See Letter from Lee G. Petro, Counsel to Petitioners, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375 at 1 (filed July 14, 2014) (Petitioners July 14, 2014 Ex Parte Letter) (“ancillary fees are non-commissionable,
i.e., the ICS providers do not share the revenue earned from ancillary fees with the correctional institutions”); 2014
ICS Workshop Transcript at 122-23 (Aleks Kajstura, Legal Director, Prison Policy Initiative) (“companies have
developed fees as a way to shield that profit from the commission system”); Alabama PSC Further Order at 20
(“The Commission postulates that ICS providers offering abnormally high site commissions are either grossly
exaggerating their reported service costs or they are compensating for calling revenue losses by substantially
inflating ICS charges that are not exposed to site commissions.”).

246

See, e.g., Petitioners FNPRM Reply at 14 (“Petitioners do not support rules authorizing ancillary fees, as most
fees merely reflect standard overhead costs”); 2014 ICS Workshop Transcript at 123 (Aleks Kajstura, Legal
Director, Prison Policy Initiative) (“regulating ancillary fees is a significant and important part of regulating the cost
of the phone services in correctional facilities”).

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circumvention of rate caps.”247 NCIC stated “[a]lthough telecom companies don’t normally welcome a
regulation, we see the need for the FCC and state regulators to set a standard rate and fee structure.”248
Pay Tel stated “you ought to get rid of all of them except the fees where the consumer makes a choice.”249
And Securus stated that it “offered, however, to cease passing through several types of fees and to cap its
fees for optional, convenient payment methods for a period of five years.”250
84.
Mandatory Data Collection. ICS providers submitted a significant amount of ancillary
service cost and usage data in response to the Mandatory Data Collection. The ancillary services data
provide some useful insight into the costs of ancillary services. For example, the data show that
approximately 82 percent of total ancillary costs incurred by ICS providers pertain to the provision of bill
processing services, particularly for the processing of credit and debit card transactions.251 Conversely,
only about 10 percent of providers’ ancillary costs pertain to ancillary services that are typically treated as
normal utility overhead.252 Even so, the data have some limitations given providers’ inconsistent
approaches in assessing and labeling such fees, different allocation methodologies, and different ways of
reporting those costs. The data, while mixed, also show that the per transaction cost of processing
financial transactions point to the reasonable nature of the $3.00 caps for financial transaction processing
fees set by the Alabama PSC.253 We seek comment on these general observations and on the ancillary
charge data generally.
2.

Legal Authority for Ancillary Charge Reform

85.
In the Order, the Commission asserted jurisdiction over interstate ICS ancillary charges,
citing as sources of authority sections 201(b) and 276 of the Act.254 Given section 276’s mandate of fair
compensation “for each and every completed intrastate and interstate call,” and its inclusion of “inmate
telephone service” and “any ancillary services” in the definition of “payphone service,” we seek comment
on whether section 276 gives the Commission authority to regulate both interstate and intrastate charges
for ICS ancillary services.255 While the Commission has previously adopted a definition of ancillary
charges,256 we have not adopted a definition for “ancillary services” and therefore seek comment on such
a definition. Additionally, given the absence of any qualifying statutory language to the contrary, we seek
comment on whether section 276 gives the Commission jurisdiction over charges that are ancillary to ICS
to the extent such services are considered IP-enabled services. Further, in the Order the Commission
asserted in regard to ICS generally that “[o]ur exercise of authority under sections 201 and 276 is further
informed by the principles of Title I of the Act.”257
86.
We seek comment on whether this assertion also encompasses the Commission’s
regulation of services ancillary to the provision of ICS to the extent that ICS may be considered an IPenabled service. Additionally, to the extent that ancillary charges are assessed in connection with ICS
247

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2; CenturyLink FNPRM Comments at 18 (“Without controls on
ancillary charges, the practical effect of rate caps is likely to be limited, if not wholly neutralized.”).
248

2014 ICS Workshop Transcript at 132 (William Pope, President, NCIC).

249

Id. at 140 (Vincent Townsend, President, Pay Tel Communications).

250

Securus July 23, 2014 Ex Parte Letter at 2.

251

Staff calculation based on aggregated data from the Mandatory Data Collection.

252

Id. Taxes and fees constituted the balance of providers’ ancillary costs. See infra Section III.C.3.b.

253

See Alabama PSC Further Order at 79-82.

254

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14157-58, para. 91.

255

47 U.S.C. §§ 276(b)(1)(A), 276(d).

256

See 47 C.F.R. § 64.6000(1).

257

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14115, para. 15.

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provided through wireless phones, we seek comment on whether sections 276 and 332(c) confer
jurisdiction on the Commission to reform such fees.258 We also seek comment on assertions that charges
for ancillary services are primarily related to billing and collection and therefore may not be considered to
be communications services subject to Commission regulation.259 Finally, we seek comment on whether
regulation by the Commission of ICS ancillary services should be treated as a default federal framework,
with states encouraged to adopt additional reforms to the extent they are consistent with the
Commission’s regulations. Regarding the jurisdictional nature of ancillary charges, the Alabama PSC
stated that “any schedule of ancillary fees applies to both the interstate and intrastate jurisdictions.”260
Are ancillary charges inherently dual jurisdictional in nature? We seek comment on this assertion and its
impact on our legal authority to regulate such charges.261
3.

Discussion
a.

Prohibition of Certain Ancillary Charges

87.
The FNPRM sought comment on whether certain ancillary charges constituted unjust and
unreasonable practices under section 201(b), or practices that would result in providers being unfairly
compensated under section 276.262 We now seek comment on prohibiting separate charges for certain
ancillary services that are basic requirements for consumers to gain access to ICS, and that are typically
recovered through rates as part of normal utility overhead costs. We also seek comment on capping
charges for certain other ancillary services such as payment processing for credit and debit card payments
that enhance convenience for ICS consumers. We seek comment on whether this approach will promote
the Commission’s mandate of ensuring just and reasonable ICS rates and fair compensation for ICS
providers, as well as promote competition and deployment in the ICS market.
88.
The record, including the discussion at the Commission’s 2014 ICS Workshop, supports
the notion that the Commission should prohibit separate ancillary charges for services that represent
normal utility overhead but allow other charges for services that represent an additional option or
convenience for consumers. For example, the Alabama PSC workshop participant stated that its approach
“is first, establish a basic level of ICS service and what is included in that basic service at no additional
charge to the customer. . . . Beyond that basic level, the Commission will consider fees.”263 The
Alabama PSC participant described its goal to be to “[m]ake the rates a true reflection of cost for
providing the service.”264 Other commenters support making a similar distinction. For example, Pay
Tel’s President stated at the 2014 ICS Workshop “what I characterize as ancillary fees are all these extra
things that really should be incorporated into the cost of the call. . . . [T]he fees that should be separated
are the ones that are driven by consumer choice.”265 Securus similarly proposed “not to have any
mandatory fees and to have only fees for optional, convenience-related payment methods.”266 The
258

47 U.S.C. § 332(c).

259

See, e.g., GTL FNPRM Comments at 10-11; Securus FNPRM Comments at 20-21. But cf. Securus July 23, 2014
Ex Parte Letter at Attach.; Joint Provider Reform Proposal at 4-6.
260

Alabama PSC Sept. 30, 2014 Ex Parte Letter at 8.

261

See infra Section III.C.2.

262

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14188, para. 171; see also id., at 141888, para.
168 (“We seek comment on whether the Commission should identify certain ancillary charges that are unreasonable
practices and therefore prohibited under the Act.”).
263

2014 ICS Workshop Transcript at 117 (Darrell Baker, Director, Utility Services Division, Alabama PSC).

264

Id. at 121.

265

Id. at 171 (Vincent Townsend, President, Pay Tel).

266

Securus July 23, 2014 Ex Parte Letter at 2.

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Minnesota Department of Commerce stated that if an ancillary charge applies “to all ICS end-users at a
facility, or cannot be avoided by a purchaser of ICS (e.g., in a situation in which a no-cost alternative is
not offered), the ancillary charge or line-item fee should be incorporated in the per-minute rate, and
should be subject to the per-minute rate cap.”267
89.
We seek comment on prohibiting separate ancillary charges for functions that are
typically a part of normal utility overhead and should be included in the rate for any basic ICS offering.
These functions should include account establishment by check or bank account debit; account
maintenance; payment by cash, check or money order; monthly electronic account statements; account
closure; and refund of remaining balances. Separate charges for such ancillary services can often
represent unreasonable practices and result in unfair compensation. For example, the record indicates that
GTL currently requires a minimum deposit of $25 to create a prepaid collect account for an inmate’s
family member.268 If the customer does not spend the $25 in the account, GTL charges a $5 refund
charge that is only triggered once the customer asks for a refund.269 If the account remains inactive for
180 days, the remaining funds become the property of GTL.270 We seek comment on prohibiting separate
charges for these functions and on whether separate charges for other services should also be prohibited.
Would such prohibitions help ensure just and reasonable ICS rates and fair, not excessive, ICS
compensation?
90.
The Alabama PSC implemented such an approach to the regulation of ancillary charges
in its Further Order. It defined basic utility overhead services as including account set-up, account
maintenance, account funding, payment by check or money order, monthly electronic billing statements,
and refunds,271 declining to authorize separate fees for these services.272 The Alabama PSC took other
steps to address fees and practices, including barring payment limits for certain forms of customer
payments, barring wireless administration fees for linking wireless numbers to an account, and requiring
providers to include up to five pre-approved numbers on the call list for prepaid ICS at no charge.273 In
contrast, it authorized, but capped, separate ancillary charges for other services, including debit/credit
card payment, payment via live agent, bill processing for collect calls billed by a call recipient’s local
telecommunications service provider, third party payment services, inmate canteen/trust fund transfers,
and paper billing statements.274 We seek comment on whether the Alabama PSC’s approach to
prohibiting certain fees and capping others is reasonable and would lead to just and reasonable rates and
fair ICS compensation. We also seek comment on the approach taken by the New Mexico Public
Regulation Commission, which adopted a similar but more proscriptive approach, barring all fees except
payment processing fees for credit card or check by phone payments and a refund fee.275

267

MNDOC FNPRM Comments at 6; but see CenturyLink FNPRM Comments at 18 (the cost of providing ancillary
services “should not be included as part of ICS rates”).

268

See HRDC Sept. 17, 2014 Ex Parte Letter at Exh. 1 (citing David Lazarus, Gouging L.A. County Inmates with
High Phone Fees, LOS ANGELES TIMES, Sept. 8, 2014).

269

See id.

270

See id.

271

2014 ICS Workshop Transcript at 117 (Darrell Baker, Director, Utility Services Division, Alabama PSC).

272

See Alabama PSC Further Order at 70-74.

273

See id. at 22-37.

274

See id. at 74-88.

275

See Marks July 12, 2013 Ex Parte Letter at Attach. (New Mexico Public Regulation Commission, Petition to
Commence Rulemaking Proceeding for Institutional Operator Service Providers, Case No. 10-00198-UT, Final
Order and Final Rule (issued Nov. 8, 2012)).

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91.
We seek comment on other proposals in the record to reform ICS ancillary charges. The
Wright Petitioners recommend prohibiting all ancillary charges but, if the Commission were to permit
ancillary fees, it suggests adopting an approach similar to Alabama’s and New Mexico’s.276 The Prison
Policy Initiative recommends “ban[ning] all illegitimate fees.”277 Several ICS providers also recommend
reforming ancillary charges. Pay Tel recommends that ancillary charges be “generally prohibited, subject
to a narrow list of clearly-defined exemptions,” particularly “fees associated with the processing of
payments.”278 CenturyLink suggests similar treatment.279 Securus proposes eliminating all mandatory
fees, bill statement fees, federal regulatory recovery fees and state cost recovery fees, and capping all
convenience fees, including transaction funding fees, for five years.280
92.
We also seek comment on the Joint Provider Reform Proposal, which includes a proposal
“that ancillary fees are limited to a specified list of permissible fees,”281 proposing to eliminate a number
of types of fees, including per call fees, account set-up fees, billing statement fees, account close-out and
refund fees, wireless administration fees, voice biometrics and other technology fees, and regulatory
assessment fees and the capping of rates for remaining fees.282 The Proposal also requires providers to
offer free payment processing options such as payment by check or money order when offering single call
payment options.283 The Alabama PSC raised concerns with the Joint Proposal, including its treatment of
site commissions, proposed rate caps that purportedly overcompensate providers serving prisons, and
proposed ancillary fees that it asserted would result in substantial net revenue increases for providers.284
Pay Tel also identified concerns with the Proposal, stating that it “lacked legitimacy from a number of
perspectives” and “would allow the Proposers . . . to continue to burden inmates and their friends and
family with excessive fees and practices that significantly and unjustifiably increase the cost of ICS.”285
The Alabama PSC’s and Pay Tel’s concerns are addressed at greater length below. Will the suggestions
in the Joint Provider Reform Proposal result in just and reasonable rates for consumers and fair, not
excessive, compensation? If the use of ancillary charges was driven by pressure from increasingly high
site commissions and the Commission were to prohibit site commissions, is there continued justification
for allowing providers to assess ancillary fees generally?
93.
If the Commission were to prohibit some ancillary charges, should ICS providers be
required to seek prior Commission approval before assessing a new ancillary charge? If so, what should
such an approval process involve and what information should providers file? Certain states already
require prior approval of new ancillary charges.286 Should states continue to play such a role even if the
Commission regulates ICS ancillary charges? In lieu of seeking approval, should ICS providers file a
276

See Petitioners FNPRM Comments at 12-16.

277

Please Deposit All of Your Money Study at 16.

278

Pay Tel FNPRM Comments at 31.

279

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2.

280

Securus July 23, 2014 Ex Parte Letter at Attach.

281

Joint Provider Reform Proposal at 4.

282

Id. at 4-6, Attach. (proposing the elimination of 19 types of ancillary fees).

283

Joint Provider Reform Proposal at 6. Securus asserts that approximately 15% of its current customers “fund their
accounts with a free option, such as a check, and thus do not pay any funding fees.” See Letter from Stephanie A.
Joyce, Counsel to Securus, to Chairman Tom Wheeler et al., WC Docket No. 12-375 (filed Oct. 8, 2014).

284

See generally Alabama PSC Sept. 30, 2014 Ex Parte Letter.

285

Pay Tel Oct. 2, 2014 Ex Parte Letter, Attach. at 1.

286

See, e.g., Alabama PSC Proposed Order at 19; Alabama PSC Further Order at 74; N.M. Admin. Code §
17.11.28.14 (G) (“An [ICS provider] may not bill or charge any transactional fee . . . that has not been previously
approved for that purpose by the Commission.”).

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notice about a change such as 60 days before? If we take this approach, should the new fee be allowed to
go into effect absent Commission or a state action? We seek comment on these approaches, including the
administrability and relative burden associated with each approach.
b.

Rate Caps for Ancillary Charges

94.
We seek further comment on whether the Commission should set rate caps for ancillary
charges that it finds permissible to ensure those charges are just and reasonable and ensure fair
compensation. Commenters, including some ICS providers, support the use of rate caps.287 Some
commenters note with approval the Alabama PSC’s Further Order that capped rates for ancillary charges
it allows.288 For example, the Wright Petitioners support the use of rate caps for ancillary charges if the
Commission decides to authorize them, and cites with approval the two states that already proposed
taking such a step.289 Would either the Alabama PSC’s or the New Mexico PRC’s approaches to capping
ancillary charges be appropriate models for the Commission to consider? If the Commission were to
establish rate caps for ancillary charges it did not prohibit, what would be appropriate levels for such rate
caps? We seek comment specifically on the Alabama PSC’s rate caps for debit and credit card payment
fees via the web, an IVR, or a kiosk ($3.00 maximum) and for live operator assisted payments ($5.95
maximum).290 NCIC and Pay Tel expressly support ancillary charge rate caps at these levels,291 as other
ICS providers reportedly have.292 How do these rate caps compare to providers’ costs?
95.
In the alternative, we seek comment on whether we should prohibit separate ancillary
fees and instead permit the recovery of such costs using a per minute rate cap. The data submitted by ICS
providers on the cost of processing financial transactions yields a wide range of per-minute costs. We
seek comment on establishing a per-minute ancillary charge rate cap or safe harbors. If so, how should
these charges be set and what level is appropriate? If so, what would permanent rate caps inclusive of
such charges be?
96.
We also seek comment on the Joint Provider Reform Proposal which proposes to (1) cap
deposit fees to fund prepaid and debit ICS accounts at $7.95 for three years, (2) allow providers to charge
a $2.50 administrative fee to process payments made through third party payment processing companies
such as Western Union and MoneyGram in addition to the fees they charge, (3) allow providers to charge
a per call validation fee of eight percent to compensate providers for call-specific security functions, and
(4) cap fees for “convenience or premium payment options” for single call services at current rates for
three years.293 The Alabama PSC generally opposes these fee proposals.294 AmTel agrees and asserts that
287

See NCIC FNPRM Comments at 3; Pay Tel FNPRM Reply at 19-22.

288

NCIC FNPRM Comments at 3 (“NCIC urges the FCC to establish a nationwide safe harbor, rate cap schedule for
account funding fees based on the Alabama PSC’s order.”); see also Alabama PSC Further Order at 81 (setting rates
for debit and credit card payment fees by phone, web or interactive voice response (IVR) system at $3.00 and rates
for payments via live operator at $5.95).

289

Petitioners FNPRM Comments at 14-15 (“should the FCC elect to itemize the caps on ancillary fees, then the
Alabama Order and the New Mexico rules provides [sic] guidance for ascertaining a cost-based rate.”).

290

Alabama PSC Further Order at 81.

291

NCIC FNPRM Comments at 3; NCIC July 9, 2014 Ex Parte Letter, Attach. at 3 (filed July 9, 2014) (“The FCC
should adopt the Alabama PSC schedule for account funding fees as a nationwide safe harbor rate cap.”); Pay Tel
FNPRM Reply at 21 (“Pay Tel acknowledges the public benefits of an approach similar to that taken in the Alabama
IPS Order and encourages the Commission to use that Order”).
292

See Alabama PSC Further Order at 81 (“CenturyLink, NCIC, Pay Tel and AmTel support the recommended
maximum [debit/credit card] payment fees”).

293

The Joint Provider Reform Proposal at 4-6. The Proposal references these types of services as “convenience or
premium payment options.” In response to a staff inquiry, an ICS provider clarified that “convenience or premium
payment options” is intended to reference single call or single payment services.

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the “Proposal is very misleading and will not lower prices to inmate families.”295 Pay Tel comments that
“the consumer benefits of the proposed ancillary fees’ ‘reduction’ are illusory.296 For example, Pay Tel
suggested that “[v]alidation is a legitimate expense, but one that is included in Pay Tel’s normal cost of
providing service. In no event does this expense rise to the level of 8% of gross call revenue.”297 We
seek comment on whether these proposals would ensure reasonable rates and fair compensation. How do
these proposed caps compare with providers’ costs? How do they compare with previous proposals made
by ICS providers?
97.
The following table is provided as a means of facilitating comparison of several of the
ancillary charge reform proposals referenced herein. The fees included in this table represent a nonexhaustive list of fees addressed in the various proposals.
Table Two
Ancillary Charge Proposals

Check/money
order payment
Debit/credit
card payment or
deposit fees
Single
call/single
payment
services

Alabama PSC
Further Order
No charge298

ICS Provider Reform
Proposal
No charge

Pay Tel Proposal

$3.00 cap (web/IVR)
$5.95 cap (live operator)

$7.95 cap for 3 years

$3.00 cap (web/IVR)
$5.95 cap (live operator)

Sum of $3.00 cap on bill
processing fee plus capped
per minute charge for a 12
minute call

Cap at existing fees (as
high as $14.99 billed to
card, $9.99 billed to cell
phone) for 3 years

Jails (ADP 1-349): $6.12
Jails (ADP 350+): $5.64
Prisons: Prohibit service

No charge

(Continued from previous page)
294
See Alabama PSC Sept. 30, 2014 Ex Parte Letter at 9 (regarding payment transfer fees: “ICS providers can
contract for lower payment transfer fees for their customers from Western Union and MoneyGram”); id. at 10
(regarding an eight percent validation fee: “[validation] costs are already accounted for in the existing call rates”);
id. at 11 (regarding convenience or premium payment options: “allowing such enormously profitable calls to
continue in excess of the rate caps can only incentivize these providers to drive as many inmate calls as possible
away from prepaid service toward this more profitable alternative”).
295

Letter from Wyman Westberry, Chairman of the Board, AmTel, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 12-375 (filed Oct. 2, 2014) (AmTel Oct. 2, 2014 Ex Parte Letter). Specifically, AmTel asserts that the
“parties to the Proposal call for elimination of many fees that most small to medium-sized providers do not currently
charge our customers and seek Commission approval for a $7.95 Transaction or Deposit Fee applicable to every
customer transaction. . . . The recommended Transaction or Deposit Fee, the $2.50 third-party, payment transfer fee
add-on, and the 8% Call Validation Fee all share one characteristic that distinguishes them from the ancillary fees
submitted for elimination; they apply far more frequently and, in the case of the Call Validation Fee, to every call.
As a result, these charges will increase provider revenue.” AmTel further asserts that the “Proposal permits these
providers to shield from regulation a source of non-commissionable revenue they consider sacrosanct; the highly
profitable Convenience or Premium Payment Options”.

296

Pay Tel Oct. 2, 2014 Ex Parte Letter at 5.

297

Id. at 7.

298

See Alabama PSC Proposed Order at 16.

Federal Communications Commission
Account set-up,
maintenance,
closure, and
refund fees
Bill processing
fee for collect
calls (by call
recipient’s
carrier)
Bill statement
fee
Money transfer
fees

FCC 14-158

Prohibited

Not addressed

$3.00 cap

Not addressed

No charge for electronic
bill. $2.00 cap for paper
bill
Fees above $5.95 require
affidavit and are subject to
investigation

Not addressed

No charge for electronic
bill. $2.00 cap for paper
bill
$5.95 cap (Western Union)
$5.65 cap (MoneyGram)
No additional fee

Regulatory cost
recovery fees

State regulatory cost
recovery fees prohibited

Security fees

Allow separate security
biometrics fee

Existing fees (as high as
$11.95) plus an additional
administrative fee capped
at $2.50
Various regulatory cost
recovery fees prohibited
(but “federal and state
regulatory fees” allowed)
Validation fee of up to 8%
per call. Prohibited fees
include VINE, location
validation fees, voice
biometrics fees, and
technology fees

Not addressed (but pass
through government
mandated taxes and fees)
$0.02 per minute voice
biometric fee (only where
deployed; lower in
prisons)
Vendors may apply for
new technology fees

Charges for Other Services

98.
Single Call Services. ICS providers also make available so-called single payment or
single call services. These services enable the billing of ICS collect calls through third party billing
entities on a call-by-call basis to parties whose carriers refuse to bill collect calls. The Alabama PSC
addressed single call services in its Further Order, asserting jurisdiction over intrastate single call services
and capping the rates ICS providers may charge for them.299 By some accounts, the use of single call
services has increased dramatically, particularly since the adoption of the Inmate Calling Report and
Order and FNPRM.300 One commenter stated that such services have recently been estimated to account
for as much as 40 percent of provider revenues.301 We seek further comment on the prevalence of the use
of single call services in the ICS industry. Have such services become more prevalent in the market since
the Commission’s Order? If so, why? Are such services effectively an end run around the Commission’s
rate caps302 or are customers fully apprised of the higher costs and select such services for convenience or
299

See generally Alabama PSC Further Order at 50-62.

300

See 2014 ICS Workshop Transcript at 153 (Vincent Townsend, President, Pay Tel Communications) (“more
companies have started engaging in that practice since the order”); id. at 155 (Darrell Baker, Director, Utility
Services Division, Alabama PSC) (“if the FCC looks at what’s happened since February when they implemented the
interim rates, a lot of these providers have jumped in now and started offering single-payment services”).

301

Id. at 153-54 (Vincent Townsend, President, Pay Tel Communications) (“I’ve seen some as high as 40 percent of
the [ICS provider’s] revenue . . . has been in the single calls.”).

302

See Alabama PSC Further Order at 56 (“Single pay services allow for the de facto circumvention of the
Commission’s capped ICS rates.”).

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value? We also seek comment on how significant a role such services play in the ICS market today and
what usage trends for such services are likely to be.
99.
While ICS providers appear to offer single call services under a variety of names, they
appear to be generally two types. The first involves a one-time credit or debit card payment to enable the
completion of a single collect call to a wireline phone.303 Examples of this type of single call service
include Securus’ “Pay Now” and GTL’s “Collect2Card” services, both of which are priced at a flat rate of
$14.99 per call, substantially higher than the Alabama PSC’s proposed interim intrastate rate caps.304 A
second type of single call service involves a similar payment arrangement for the completion of a single
collect call to a wireless phone, the charge for which is confirmed by a text message to the called party’s
wireless phone. Examples of this type of single call service include Securus’ “Text2Collect” and GTL’s
“collect2phone” services, both of which are priced at a flat rate of $9.99 per call, also well above the
Alabama PSC’s intrastate rate caps, as well as the Commission’s interstate rate caps.305 Do charges for
such services circumvent or violate either set of rate caps or are such services sufficiently distinct from
collect ICS to warrant separate pricing? Both types of single call services are charged on a flat rate basis,
regardless of call duration, further distorting the effective per-minute charge consumers pay and raising
concerns about multiple charges in the case of inadvertent call disconnection. Consumers using these
services may be unaware that they could dramatically reduce the charges for ICS simply by establishing
an account with an ICS provider. Some ICS providers have been successful in educating consumers on
lower cost options.306 We seek comment on whether these rates are just and reasonable and whether they
ensure fair and not excessive compensation for providers. We also seek comment on whether ICS
providers incur additional costs in providing single call services, and if so, what they are.
100.
Providers have challenged the Alabama PSC’s jurisdiction over both types of single call
services. In the case of single call services to wireline phones, ICS providers disputed the Alabama
PSC’s authority to regulate such services, citing interference with their contractual relationships with third
party billing and payment processing entities which typically contract with ICS providers to provide the
service.307 The Alabama PSC characterized these entities as “third party billing aggregators”308 which
performed the “the billing and delivery functions for ICS calls.”309 We seek comment on the nature of
these services and the types of functions such entities provide. For example, do these third parties
perform functions analogous to those performed by third party billing entities used by local exchange
carriers? Do the third parties actually contribute any facilities or services used to provide these services?
The Alabama PSC also noted that ICS providers advertise and provide these services in their own name
and bills refer consumers to an ICS provider website.310 The Alabama PSC determined that it had
“jurisdiction over the charges for collect calls originating from Alabama confinement facilities regardless

303

Alabama PSC Further Order at 4457.

304

See Alabama PSC Further Order at 616158 (“the Commission seeks to ensure that its ICS rate caps are not
circumvented using single payment call services”); see also Petitioners FNPRM Reply at 15-16.

305

See id. at 57.

306

See 2014 ICS Workshop Transcript at 174 (Vincent Townsend, President, Pay Tel) (“about 40 percent of our
customer base, the families, we saw were making payments with cash”).

307

Alabama PSC Further Order at 55-56.

308

Id. at 52.

309

Id. at 56.

310

Id. at 53-54 (citing Securus as an example, the Alabama PSC quoted Securus’ website which described one of its
single call service offerings, stating “ʻPay NowTM is . . . offered exclusively by Securus Technologies, Inc.’” The
Alabama PSC added that “[t]he Pay Now call recipient’s debit/credit card statement contains a URL to Securus’
website for Pay Now.”).

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of any intermediaries the ICS provider chooses to include prior to call termination.”311 We seek comment
on whether Commission regulation of single call services would not impermissibly infringe on such
contractual relationships.
101.
In the case of single call services to wireless phones, ICS providers have asserted that
such services are not subject to state commissions’ authority since they entail the use of a text message to
confirm the source and charges for the call and involve calls to wireless phones, the rates for which are
not subject to state jurisdiction.312 We seek comment on the concept that neither the fact that such calls
are preceded by a text message nor the fact that the called party uses a wireless phone alters the nature of
the ICS provided. If, however, the Commission were to determine that either of these factors is relevant
to determining the nature of the ICS, we seek comment on whether the Commission’s section 276
jurisdiction over all forms of ICS give it authority to regulate such services.
102.
The Alabama PSC set a rate cap for single call services at a flat rate amount that included
a billing or payment charge capped at $3.00 per call and a usage charge derived from its per-minute rate
caps. We seek comment on this approach. Should the Commission adopt a rate cap for single call
services? Should ICS providers be required to charge a per-minute rate on the basis of actual call
duration? Should the rates for such calls reflect the per-minute charge for collect calls along with an
appropriate bill or payment processing fee? Should there be a transition period to allow providers to
adapt their single call service offerings? Are ICS providers required to publish on their websites their
charges for single call services and notify consumers of the option of establishing an account to obtain a
more reasonable rate? Alternatively, should these services be considered ancillary services?
103.
Money Transfer Services. The FNPRM sought comment on fees assessed by third parties
such as Western Union and MoneyGram to process debit and prepaid account payments for ICS.313 The
Prison Policy Initiative previously noted that third party payment processing fees for the provision of ICS
are typically higher than such fees in other industries and suggested that ICS providers were receiving
compensation from such third party service providers.314 We seek comment, data and other evidence on
how prevalent the use of third party money transfer services is and what percent of account funding is
accomplished through such services. We also seek comment on the Alabama PSC Proposed Order which
acknowledges that money transfer “fees are set by these financial services but [the PSC] is also aware that
agents hosting such services are paid a portion of the fee.”315 The Alabama PSC Proposed Order states
that “ICS providers are prohibited from receiving any portion of fees paid by their customers to thirdparty financial services.”316 It also proposed a rate cap of $5.95 per transaction, above which providers
would face an investigation of their rates and potential refund liability.317 Similarly, CenturyLink
suggests that “[c]ertain consumer-optional third party fees such as Western Union charges should be
allowed, but without mark-ups, revenue sharing arrangements or volume rebates.”318 In contrast, the Joint
Provider Reform Proposal suggested adding an additional administrative fee of a maximum of $2.50 per

311

Id. at 56.

312

Id. at 51.

313

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14187-88, para. 168.

314

Please Deposit All of Your Money Study at 8 (“Western Union fees, for example, vary from $5.95 to $11.95. . . .
The fee to send payments to most other companies ranges from $1.50-$3.00.”).

315

Alabama PSC Proposed Order at 16; see also Please Deposit All of Your Money Study at 8 (certain data “suggest
that Western Union is sharing a portion of its fees with the prison phone companies”).

316

Alabama PSC Proposed Order at 16; see also Alabama PSC Further Order at 82-87.

317

Id. at 86-87.

318

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2.

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transaction on top of existing money transfer fees.319 We seek further comment on these proposals and on
whether ICS providers’ receipt of payments from payment processing companies in connection with their
provision of ICS represents an unreasonable practice under section 201(b) or results in unfair
compensation under section 276.
104.
We seek comment on how the Commission should ensure that money transfer service
fees paid by ICS consumers are just and reasonable and represent fair compensation. Are money transfer
services ancillary services under section 276(d)? Are they a practice that causes unjust rates or unfair
compensation? Are such charges encompassed by the definition of “ancillary charges” in the
Commission’s rules? To the extent they involve charges placed by a third party on a call recipients’
phone bill, are they analogous to third party fees that are the subject of our “cramming” rules? To ensure
just and reasonable rates and fair compensation, should the Commission prohibit ICS providers from
entering into revenue sharing arrangements with money transfer services, receiving payments from such
services, or including the costs of such services in their rates? To enforce a similar prohibition, the
Alabama PSC proposes to require ICS providers operating in the state to report the payment transfer fees
third parties charge their customers. It also proposes to require providers to justify fees over $5.95, and
subject such fees to investigation and potential refund liability.320 Should the Commission adopt a similar
enforcement mechanism? Should it allow states to enforce such a mechanism? What impact would any
such requirements have on contracts between ICS providers and third party money transfer services? The
Alabama PSC notes that, according to its research, contracts between ICS providers and Western Union
may be cancelled on 30 days’ notice.321 It also notes that Western Union contracts with providers include
a provision requiring vendor compliance with all regulatory requirements and laws.322 Do commenters’
experiences confirm the Alabama PSC’s observations? Are there other approaches to enforcement that
the Commission should consider?
105.
Regulatory Recovery Fees. Commenters have previously highlighted ICS providers’ use
of fees to recover the cost of regulatory compliance.323 The amount of such fees industry-wide can be
quite substantial.324 The Alabama PSC noted that “[s]everal ICS providers presently absorb regulatory
costs electing not to charge consumers a separate recovery fee”325 and barred separate intrastate regulatory
fees, stating that their rate caps were “sufficient to recover reasonable regulatory costs incurred by the
provider.”326
106.
A number of ICS providers have also opposed the use of regulatory recovery fees. The
Joint Provider Reform Proposal recommends eliminating various types of regulatory recovery fees and
does not include such a fee among the fees it proposes to retain.327 Pay Tel, in its advocacy before the
Alabama PSC, stated “these expenses are a cost of doing business reflected in the overall average cost per

319

Joint Provider Reform Proposal at 5.

320

See Alabama PSC Further Order at 86-87.

321

See Alabama PSC Further Order at 86.

322

Id.

323

See Please Deposit All of Your Money Study at 10-13 (such fees are variously described as federal cost recovery
fees, federal regulatory recovery fees, and regulatory assessment fees); Alabama PSC Further Order at 70-73.

324

Please Deposit All of Your Money Study at 10 (estimating that such fees could cost consumers approximately
$65 million annually).

325

Alabama PSC Further Order at 71.

326

Id. at 73.

327

See Joint Provider Reform Proposal at 4-6, Attach.

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minute. Pay Tel supports the prohibition of such fees.”328 Securus proposes to eliminate its federal and
state regulatory recovery fees.329 We seek comment on whether the cost of regulatory compliance should
be considered a normal cost of doing business and as such should be recovered through basic ICS rates,
not additional ancillary fees. In the alternative, if the Commission permits the separate recovery of
regulatory fees, should it require that they be broken out as a line item on an ICS end users’ billing
statement?
107.
Security Fees. Some ICS providers suggest that the Commission allow fees to recover
new security technology expenses for correctional institutions.330 The Joint Provider Reform Proposal
proposed the elimination of three or four types of fees likely related to security and the retention of a
single technology-related fee.331 However, as part of its comprehensive proposal, Securus suggests that
providers be allowed to charge “incremental product pricing above rate caps if necessary” for “safety and
security features” and proposes such charges “be filed with [the] FCC for approval.”332
108.
We seek comment on whether security costs represent a core function in the provision of
ICS, the costs of which should be included in rates and not as ancillary fees. The Commission’s interim
interstate rate caps were based on ICS providers’ cost data that included the costs incurred in developing,
deploying and provisioning security features. The Order also expressly accounted for the cost of
continuous voice biometrics in its debit and prepaid rate cap it adopted.333 Pay Tel’s Proposal suggests
that a voice biometric fee of $0.02 per minute be applied to its proposed rates.334 If the Commission were
to allow providers to assess customers separate ancillary charges for such services, how would it evaluate
providers’ claims regarding the need for such functions or their cost? How would it ensure that ICS
providers were not recovering the cost of security features twice – once through their rates and again
through an ancillary charge – short of a full analysis of the provider’s costs? If the Commission were to
allow separate fees to recover security costs, should it require prior approval or 60 days’ notice for such
charges?
d.

Consumer Disclosures

109.
We also seek comment on how to ensure that rates and fees are more transparent to
consumers. We therefore seek comment on the requirement that ICS providers notify their customers
regarding the ICS options available to them and the cost of those options. One ICS provider underscores
the importance of “educating the consumer, giving them the choice, what’s the most economical way if
they want to get money on an account and do it quickly.”335 The same provider states that when it
advertises on its website the most economical way to fund ICS calls, a substantial percent of its customer

328

Alabama PSC Further Order at 73 (also noting that “NCIC expressed support for the Commission’s position with
respect to regulatory recovery fees.”).

329

Securus July 23, 2014 Ex Parte Letter at Attach. (proposing to eliminate the state cost recovery fee, federal cost
recovery fee, collect call recovery fee and regulatory assessment fee).
330

See Pay Tel FNPRM Comments at 33; Pay Tel FNPRM Reply at 22-24; Letter from Thomas M. Dethlefs,
Counsel for CenturyLink, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Apr. 2, 2014).

331

Joint Provider Reform Proposal at 5, Attach.

332

Securus July 23, 2014 Ex Parte Letter, Attach; see also Pay Tel FNPRM Reply at 22-24 (suggesting that the
Commission establish a separate mechanism by which a provider could seek express approval to charge an ancillary
fee for a security new technology).
333

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14148-49, para. 76.

334

See Pay Tel Proposal at 3.

335

Transcript of 2014 ICS Workshop Transcript at 173-74 (Vincent Townsend, President, Pay Tel
Communications).

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base uses that method, reducing consumer expense significantly.336 ICS providers that offer interstate toll
service are already required to post their rates on their websites and, to the extent they offer inmate
operator services, their live agents are already required to make certain notifications to customers.337
Should providers’ websites, automated IVRs, and live agents be required to offer in a more prominent
fashion no-cost or lower-cost options available to consumers before offering other, higher-priced optional
services? To what extent would any such regulation implicate the First Amendment? Should the
Commission take other steps to ensure consumers are aware of lower-priced service options?
110.
The Joint Provider Reform Proposal acknowledged existing requirements to publish
ancillary fee rates on providers’ websites338 and offered a detailed proposal regarding notification
requirements for financial transactions, including:
!

The ICS provider shall fully inform customers of all payment methods
available (including the no-charge option), the payment processing charges
associated with each payment method, and the estimated time required to
establish service applicable to each payment option.
The ICS provider shall clearly and conspicuously identify the required
information. The information should be presented clearly and prominently
so that it is actually noticed and understood by the customer.
o The ICS provider shall provide a brief, clear, non-misleading, plain
language description of the required information. The description
must be sufficiently clear in presentation and specific enough in
content so that the customer can accurately assess each of the available
payment methods.
o An ICS provider shall clearly and conspicuously disclose any
information the customer may need to make inquiries about the
available payment methods, such as a toll-free number, e-mail address,
or web site address by which customers may inquire or dispute
any charges. An ICS provider shall include any restrictions or
limitation applicable to each payment method available.339

In its proposal Pay Tel suggests that:
!
!
!

Vendors must post facility-specific rates and fees for all services, to be visible to inmates onsite and to consumers on the Vendor website prior to setting up an account.
Vendor websites must provide a link to the FCC Enforcement Bureau Website and the
applicable State Regulatory Agency website.
Posting/Notice Must Include:
o Call rates and transaction fees (at time of call, printed material available at facility,
Automated IVR, Live Agent & Website).
o Refund instructions (website).
o Terms and conditions for service (website).
o Cost information for calls, email and messaging services, video visitation and any
other communication services offered (website). 340

336

Id. at 173 (Vincent Townsend, President, Pay Tel).

337

See 47 C.F.R. §§ 42.10, 64.710.

338

Joint Provider Reform Proposal at 5.

339

Id. at 6.

340

Pay Tel Proposal at 4.

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We seek comment on these proposals as they relate to ICS financial transactions and more generally to
ICS practices in general. We also seek comment on alternative proposals to make rates and fees more
transparent to inmates, their families, friends and other users of inmate calling services.
e.

Other Issues

111.
Some ICS providers impose additional policies beyond their assessment of ancillary fees
that further restrict consumers’ access to ICS. In regard to such policies, CenturyLink expresses the
concern that “policies such as funding minimums and maximums, prepaid account refund requirements,
and account expiration policies must be tightly controlled to avoid gaming.”341 We seek comment on
whether we should prohibit ICS providers from these and similar practices that effectively limit end
users’ ability to access and use ICS. What other types of limiting practices should we prohibit or restrict
to preclude such gaming?
112.
GTL asserts that the Commission’s Truth-in-Billing rules give providers flexibility to
recover their costs either through rates or other line item charges.342 The Minnesota Department of
Commerce asserts that ancillary charges that exceed a provider’s costs are inherently deceptive and
violate the Commission’s Truth-in-Billing rules.343 We seek comment on whether it would be necessary
to harmonize Commission regulation of ICS ancillary charges with its Truth-in-Billing rules.344 To the
extent that such fees are not commensurate with providers’ costs, does existing precedent support the
view that those fees violate the Truth-in-Billing rules, or should we clarify that the fees are considered
misleading and a violation of the Commission’s Truth-in-Billing rules, unreasonable under section 201(b)
or unfairly compensatory under section 276? Should the Commission clarify that pursuant to section 276,
Truth-in-Billing rules apply to all ICS providers, including any that may claim they provide VoIP
services?
D.

Additional Ways to Promote Competition

113.
Over the last 30 years, real competition, as opposed to rate regulation, has been the
preferred method to advance consumer protection, lower rates, increase feature and functionality of
equipment and services, reduce the government involvement and costs, and improve the overall consumer
experience. To date, however, correctional facilities generally have not permitted competition for
consumers within the ICS market.
114.
As an alternative to the ideas explored in this item to reduce inmate calling rates, we
continue to explore whether the advent of competition within the inmate facilities may provide a different
course of action. The 2013 Inmate Calling Report and Order and FNPRM sought comment on how to
promote competition within the correctional facilities, but the Commission received insufficient
information in response to the questions posed, so we seek to provide more targeted questions in order to
solicit further responses.345 Accordingly, we seek further comment on ways to remove barriers to entry
and promote competition in the ICS market. Aspects of the current ICS market appear to contribute to the
market failure. One is the practice of site commission payments, and we seek comment above on
whether, and under what authority, the Commission should restrict such payments.346 Another is the fact
that correctional facilities award ICS providers exclusive contracts and therefore do not permit
341

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2.

342

See GTL FNPRM Comments at 9-12.

343

See MNDOC FNPRM Comments at 6 (“MNDOC believes that it is deceptive, and a violation of the FCC’s truthin-billing rules, for ICS providers to imply that the amount of a charge is attributable to recovery of a specific cost
when in fact the aggregate charges to customers may well exceed the aggregate costs incurred by the provider.”).

344

See 47 C.F.R. § 64.2401.

345

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd 14107 at 14190, para. 177.

346

See supra Section III.A.3.

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competition within the facilities.347 The Commission previously sought comment on the impact of
exclusive contracts and whether they should be prohibited.348 While some commenters opposed the idea
due to security and cost concerns,349 another commenter suggested that the Commission revisit whether
those concerns continue to justify exclusive contracts in light of technological advances.350 We seek
additional comment on these views. Moreover, some commenters have questioned whether facilities
incur any additional costs for the provision of ICS and we seek comment above on quantifying these
costs.351 If facilities do not incur costs when there is one provider, what additional costs are incurred by
introducing multiple providers? We ask commenters to specify and quantify any additional costs.
115.
We also seek comment on whether there are other barriers and, if so, what steps we
should take to address them and under what authority. For example, are there ways to allow greater
competition within ICS without banning exclusive contracts? Are providers willing to compete on price,
quality of voice and/or video service, service disruption and outage rates, and other factors that would be
applicable with multiple providers? Would multiple providers be willing to serve an inmate facility if
there is already an established provider? What impact could new technologies have on competition
within inmate facilities?
E.

Harmonization of State Regulations Under Section 276(c)

116.
In this section, we seek comment on how state reform of ICS may be harmonized with
any federal framework we may adopt and on the continuing roles states should play in advancing ICS
reform. In the FNPRM, the Commission “tentatively conclude[d]” that section 276 “affords the
Commission broad discretion to . . . preempt inconsistent state requirements.”352 In response, some
commenters opposed state preemption,353 while others supported it as crucial to the Commission’s reform
efforts.354 While we seek comment on whether it is necessary to have a comprehensive framework for
interstate and intrastate ICS, we nonetheless seek comment on how consistent state regulation of ICS
could be harmonized with our framework. For example, should we establish guidelines regarding what a
347

See generally First Wright Petition.

348

2012 ICS NPRM, 27 FCC Rcd at 16642, para. 36; Inmate Calling Report and Order and FNPRM, 28 FCC Rcd
14107 at 14190, para. 176.

349

La. DOC NPRM Comments at 2-3; GTL NPRM Comments at 23; Telmate NPRM Comments at 5-6.

350

Verizon NPRM Comments at 6.

351

NJ ISJ NPRM Reply at 4–5; see supra Section III.A.3.

352

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14175, para. 135.

353

See, e.g., NARUC FNPRM Comments at 5 (“individual States are (and remain) in the best position to oversee
and investigate matters relating to ICS INTRAstate rates and service quality”) (emphasis in original); Securus
FNPRM Comments at 9 (asserting that, “[e]ven assuming that the Commission has jurisdiction or authority to”
preempt intrastate rates, “its intervention into intrastate calls is demonstrably unwarranted.”). Securus further asserts
that “there is no market failure in the intrastate calling market to warrant Commission intervention,” and “state
commissions are demonstrably willing and able to review intrastate inmate calling rates.” Id. at 7-8. Contra
Securus July 23, 2014 Ex Parte Letter at Attach. (Securus urges the Commission to “[s]et interstate rate
cap=intrastate rate cap”).
354

See, e.g., Petitioners July 14, 2014 Ex Parte Letter at 1 (urging the Commission to “use its statutory authority
provided in Section 201 and Section 276 of the Communications Act of 1934, as amended, to cap ICS Intrastate
rates,” and that a “postalized ICS rate that would apply to all ICS calls is statutorily mandated”); see also GTL Aug.
11, 2014 Ex Parte Letter at 2 (reporting that “there is general industry support for a rate cap on both interstate and
intrastate ICS” and that “Section 276 of the Act provides the primary legal authority for addressing these issues, but
support can be found in other provisions and precedence”); CenturyLink Aug. 14, 2014 Ex Parte Letter at 1 (stating
that, “[s]etting aside concerns about the limits of Commission authority,” CenturyLink advocates that the
“Commission should adopt a simple, uniform rate cap for both interstate and intrastate calls, with just an additional
allowance for collect calling”).

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state would have to do on ICS reform to not be preempted? What would those guidelines include?
Should we include reform of site commission payments, rate caps, actions addressing state prisons, as
well as county or city jails?
117.
We recognize the substantial ICS reform already accomplished in a handful of states such
as Alabama, New Jersey, New York, and New Mexico.355 Such states have provided important leadership
in the effort to reform ICS. In the FNPRM, the Commission commended such states and “encourage[d]
more states to eliminate site commissions, adopt rate caps, disallow or reduce per-call charges, or take
other steps to reform ICS rates.”356 In her opening remarks at the 2014 ICS Workshop, Commissioner
Clyburn urged states to “follow the FCC’s lead, grab the baton, and enact their own reforms.”357 Some
states have taken steps to advance ICS reform since the release of the Order. New Jersey, for example,
has set lower rates for ICS.358 Alabama has recently proposed comprehensive regulation of intrastate
ICS.359 However, the vast majority of states have not taken up our repeated calls for ICS reform.360 In
addition, states have inconsistently addressed site commission payments.361 For example, while the Order
noted seven states that had eliminated site commissions for intrastate ICS, by implication the vast
majority have not.362 We again encourage states to act on ICS in their jurisdictions and note that state
action that is consistent with the regulations that the Commission ultimately adopts would not be subject
to preemption. We also recognize, however, that most states either cannot or will not act and the
Commission must adopt a nationwide framework to apply in these states to ensure that ICS rates are just,
reasonable and fair.
118.
We seek more focused comment on section 276(c), which states in reference to payphone
regulation363 that “[t]o the extent that any State requirements are inconsistent with the Commission’s
355

See supra note 9; para. 17; see also Letter from Anthony Annucci, Acting Commissioners, NY Dept. of
Corrections and Community Supervision, to Gregory Haledjian, Attorney-Advisor, FCC, WC Docket No. 12-375 at
1 (filed July 16, 2013) (noting that New York has per-minute ICS rates of $0.048).

356

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14173, para. 130.

357

2014 ICS Workshop Transcript at 18 (Mignon Clyburn, Commissioner, FCC).

358

See State of New Jersey, Dept. of the Treasury, Contract #A61618, Amendment #10 available at
http://www.njphonejustice.org/wp-content/uploads/2014/02/T1934PriceDecrease10.pdf (last visited Sept. 24, 2014)
(in February 2014, New Jersey lowered interstate and intrastate rates for ICS calls from its state correctional and
juvenile facilities from $0.33 per minute to $0.19 per minute.); see also State of New Jersey, Dept. of the Treasury,
Contract #A61618, Amendment #11 available at http://www.njphonejustice.org/ (“State lowers rate to
$0.17/minute”) (last visited Sept. 24, 2014) (in March 2014, New Jersey further reduced rates for interstate and
intrastate ICS calls from state prisons from $0.19 per minute to $0.17 per minute.); State of New Jersey, Dept. of the
Treasury, Contract #61618, Amendment #12 available at http://www.njphonejustice.org/wpcontent/uploads/2014/09/T1934ContractExtension12.pdf (last visited Sept. 24, 2014) (in September 2014, New
Jersey further reduced rates for interstate and intrastate ICS calls from $0.17 per minute to $0.15 per minute.).
359

See generally Alabama PSC Further Order.

360

See, e.g., Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14173, para. 130.

361

For example, the Alabama PSC in its Further Order maintains site commissions in the state “to safeguard the
public interests.” Alabama PSC Further Order at 18. New York, on the other hand, eliminated its 57.5%
commission years ago. See Letter from Anthony J. Annucci, Acting Commissioner, NY Dept. of Corrections and
Community Supervision, to Gregory V. Haledjian, Attorney-Advisor, FCC, WC Docket No. 12-375 at 1 (filed July
3, 2014).

362

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14141, para. 62.

363

47 U.S.C. § 276(d) (“As used in this section, the term ‘payphone service’ means the provision of public or semipublic pay telephones, the provision of inmate telephone service in correctional institutions, and any ancillary
services.”).

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regulations, the Commission’s regulations on such matters shall preempt such State requirements.”364 We
believe that the Commission has broad discretion to find that a particular state requirement, or category of
state requirements, is either consistent or inconsistent with Commission ICS regulations under section
276(c). We also seek comment on the whether preemption is self-effectuating under section 276(c) and
will occur automatically as a consequence of the inconsistency.
119.
If preemption is not self-effectuating, and there is no Commission decision defining the
scope of any inconsistency between federal and state requirements, how would states and other parties
know that a particular state requirement had been preempted because it was inconsistent under section
276(c)? In the absence of a prior Commission decision, should any disputes regarding the inconsistency
of a state requirement be resolved by the Commission on a case-by-case basis: e.g., through declaratory
ruling or the section 208 complaint process? Are certain types of state requirements inherently
“inconsistent”? Other preemption provisions in Title II of the Act require the Commission to make
certain decisions before a state law can be preempted,365 whereas section 276(c) does not directly address
the issue.
120.
Exemptions to Preemption. To encourage states to reform ICS, the FNPRM also sought
comment on possible exemptions to preemption, asking whether “the Commission [should] only take
action to reform intrastate ICS rates in states that have not reformed rates to levels that are at or below our
interim safe harbor.”366 We expand on this concept here. What specific types of state actions to reform
ICS should the Commission interpret as consistent with its regulations? Should, for example, the
Commission list scenarios in which state regulations would be presumed to be consistent with the federal
framework, such as when states address site commissions and reform ancillary charges? If so, what
should the Commission consider “reform” or “partial reform” in this context? For example, we note that
the Alabama PSC proposes capping ancillary fees but maintaining site commission payments.367 If the
state regulates ICS rates in a manner that is consistent with Commission regulations, but regulates
ancillary services in a manner inconsistent with Commission regulations, would all state regulations be
viewed as preempted, or would just the regulation of ancillary services be treated as preempted? To the
extent the question would depend on how the Commission crafts its regulations, should the Commission
design them in a way that makes inconsistency regarding one dimension severable from consistency
regarding other dimensions? If so, how?
121.
One FNPRM commenter suggests a “cooperative federalism” approach that would allow
“states to regulate intrastate rates provided that the regulatory framework complies with the core
principles contained in the Order.”368 We seek further comment on this and other approaches to
364

47 U.S.C. § 276(c) (emphasis added).

365

For instance, section 252(e)(5) requires the Commission to issue an order if certain conditions are in place: “If a
State commission fails to act to carry out its responsibility under this section in any proceeding or other matter under
this section, then the Commission shall issue an order preempting the State commission’s jurisdiction of that
proceeding or matter within 90 days after being notified (or taking notice) of such failure, and shall assume the
responsibility of the State commission under this section with respect to the proceeding or matter and act for the
State commission.” 47 U.S.C. § 252(e)(5). Similarly, section 253(d) requires the Commission to make a
preliminary assessment and then to issue a preemption decision: “If, after notice and an opportunity for public
comment, the Commission determines that a State or local government has permitted or imposed any statute,
regulation, or legal requirement that violates subsection (a) or (b) of this section, the Commission shall preempt the
enforcement of such statute, regulation, or legal requirement to the extent necessary to correct such violation or
inconsistency.” 47 U.S.C. § 253(d).

366

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14174-75, para. 132; but see Securus Techs.
Partial Stay Order.

367

See generally Alabama PSC Final Order.

368

Raher FNPRM Comments at 2.

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harmonizing federal and state ICS reform. Some states have adopted laws that effectively require
intrastate ICS rates to be provided at below-cost rates, with the difference presumably to be recouped by
charging interstate rates that are set significantly above costs.369 Would any such state laws that require
below-cost intrastate ICS rates be consistent with a Commission cap on intrastate ICS rates, even if the
state rate was more “aggressive” than the Commission cap? For example, if the Commission adopts a
per-minute cap on ICS rates, should states be free to regulate the level of per-call and per-minute charges
for intrastate ICS so long as the resulting charge for a call of a particular duration is within the
Commission’s cap? Should states have other flexibility as it relates to site commission payments, ICS
rates, charges for ancillary services, or other ICS regulation? If so, how can the Commission craft its
regulations so that such state ICS reforms are interpreted as being consistent with its regulations? Should
the Commission be concerned that some state reform actions could undercut the market-based approach
that we seek comment on herein? How would the Commission then balance the benefits of encouraging
state reform efforts with the need to ensure just and reasonable rates and fair compensation for ICS, as
required by sections 201 and 276 of the Act?
122.
If the Commission’s final ICS rules are silent on certain issues (for example, arguendo,
quality of service regulation), we seek comment on how the Commission should interpret state rules.
Does the Commission have broad authority to enforce section 276(c) on a case-by-case basis even in
situations where it has not previously adopted an applicable rule or provided relevant guidance? If a state
commission has an active ICS proceeding, is it consistent with section 276(c) to permit the state
commission a reasonable period of time to complete its proceeding prior to a Commission determination
of whether such state reform is consistent with Commission reform? What might constitute such a
reasonable period of time?
F.

Existing Contracts

123.
Background. The Wright Petitioners previously discussed the possibility of a one-year
fresh look period, essentially a one-year period during which existing ICS contracts may be revised
regardless of terms within the contracts that may prohibit such action.370 The Commission sought
comment on this proposal in the 2012 ICS NPRM.371
124.
In the Order, the Commission did not directly override existing contracts between
correctional facilities and ICS providers.372 Rather, the Commission noted that if “any particular
agreement needs to be revisited or amended . . . such result would only occur because agreements cannot
supersede the Commission’s authority to ensure that the rates paid by individuals who are not parties to
those agreements are fair, just, and reasonable.”373 The Commission acknowledged that “[t]o the extent
that the contracts contain ‘change of law’ provisions, those may well be triggered by the Commission’s
action today.”374
125.
Discussion. We seek comment on the implementation of the requirements adopted in the
Order and their impact, if any, on ICS contracts. The record indicates that the interim rates were
implemented with little to no contract renegotiation.375 The record also indicates that several ICS
providers have unilaterally made decisions about site commission payments without initiating contract
369

See, e.g., Pay Tel FNPRM Comments at n.32.

370

See Petitioners NPRM Comments at 28-29.

371

See 2012 ICS NPRM, 27 FCC Rcd at 16646, paras. 45-47.

372

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14162, para. 100.

373

Id. at 14162, para. 101.

374

Id. at 14162-63, para. 102.

375

See Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Martha Wright, et al. Consolidated
Comments, Exh. B at 1 (filed Mar. 11, 2014).

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renegotiations or cancellations.376 Is this accurate? We seek comment on any challenges associated with
these practices. To the extent that commenters suggest alternatives to the regulatory approaches
discussed above that could modify or otherwise affect existing agreements, we seek comment on the
Commission’s authority to take such action, why it should exercise such authority, and how any
modification or other effect on existing agreements should be implemented.
126.
We seek comment on a transition period for comprehensive ICS reform. Given the
transition that we seek comment on herein, we seek comment on whether we should retain the approach
in the Order and allow for change-of-law provisions to govern changes or whether we should take an
alternative approach with respect to existing contracts. Should we allow for a “fresh look” to enable
providers to renegotiate contracts or do most contracts include change-in-law provisions so a fresh look is
not warranted? If the Commission adopts a transition period for existing ICS contracts, should it stagger
the transition period as previously suggested by Telmate? Specifically, Telmate suggests that
“[s]taggering the fresh look window among the many thousands of ICS contracts nationwide . . . [is] the
only practical way to harmonize the existence of long-term contracts and the unreasonable burden on
smaller ICS providers in competing for correctional facility business at thousands of locations at the same
time nationwide.”377 If so, should the Commission stagger any transition period based on contract
expiration dates or some other metric?
127.
Alternatively, we seek comment on whether we should abrogate ICS contracts or modify
particular terms of such contracts. Will abrogation of contracts that are focused on site commission
payments better enable the market-based approach described herein to be implemented?378 In the Order
the Commission concluded that it has the authority to abrogate or modify contracts.379 We seek comment
on our legal authority to do so. In the alternative, should the Commission grandfather existing ICS
contracts for some period of time and then allow them to expire? Given that ICS contracts are often
multiple years in duration, is it consistent with the statute’s requirement that ICS rates be just, reasonable
and fair if we allow such rates to continue for an extended period of time? Are there ways the
Commission could mitigate the possible disadvantages of a grandfathering approach? We seek comment
on these issues, including our legal authority for each approach.
G.

Transition Periods

128.
In the Order, the Commission delayed the effective date of the new rules until 90 days
following publication in the Federal Register to give parties “time to renegotiate contracts or take other
appropriate steps.”380 The FNPRM sought further comment on “how the Commission should proceed in
establishing ICS rates for interstate and intrastate ICS.”381 Comments were mixed. Several commenters
requested that, if the Commission takes further steps toward ICS reform, it implement a transition period
“that is sufficiently long to enable correctional facilities to revise budgets and find replacement sources of

376

See id.

377

See Letter from Glenn Manishin, Counsel to Telmate, to Marlene H. Dortch, Secretary, FCC, WC Docket No.
12-375 at 1 (filed July 30, 2013).

378

CenturyLink Aug. 14, 2014 Ex Parte Letter at 2 (“A chief concern for both correctional facilities and ICS
providers is the impact of new rules on existing contracts. ICS reform will be more durable and effective if it is not
disrupting existing contracts and state procurement laws and allows ICS providers and correctional facilities time to
adjust.”).
379

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14162, n.365 (finding that if the Commission’s
action in the Order “were somehow construed as modifying particular contractual provisions or abrogating
particular contracts, we still would be acting within our lawful authority.”).
380

Id. at 14162-63, para. 102.

381

Id. at 14185, para. 163.

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funding.”382 Conversely, one commenter opined that rate changes pursuant to the interim Order may
have been accomplished through a simple notification letter from ICS providers to correctional
facilities.383
129.
Discussion. The ICS providers that submitted the Joint Provider Reform Proposal
suggest that “[t]he new rate caps should become effective 90 days after adoption, along with any site
commission reductions and ancillary fee changes outlined below.”384 The providers that submitted the
Proposal assert that “[t]his period for implementation should ensure ICS providers and correctional
facilities have adequate time to implement the new rate caps and any corresponding reductions in site
commissions, including any contract amendments or adjustments that may be necessary.”385 Pay Tel
suggests a 90-day, after final order publication transition period for transaction fees, third party money
transfer service fees, and ancillary fees and an 18-month transition period for jail and prison rate caps.386
Commenters advocating for a transition to the new rate caps should identify the appropriate transition and
the justification for doing so.
130.
We seek comment on whether 90 days after the effective date of the order is the
appropriate transition to comply with all new requirements, including any rate caps, elimination of percall charges, and ancillary fee changes for existing contracts. We also seek comment on whether any new
ICS contracts entered into after adoption of an ICS reform order must comply with the terms of the order
immediately after the effective date of the order.
131.
In addition, we seek comment on a two-year transition period or at least one state or state
subdivision budget cycle to transition away from site commission payments to allow facilities and states
time to adjust. If we adopt a cost recovery amount for facilities, how should the transition be
implemented in a manner that does not delay comprehensive reform? How would the transition work if
the Commission gave a 90-day transition for rates to be at or below the cap, while allowing two years for
site commissions to be eliminated? Would a period of two years allow sufficient time for correctional
facilities to prepare for forthcoming ICS reform and its effect on their budgets? Or should we consider a
longer transition such as a three year transition?387 Should the transition be shorter to minimize the
potential for abuse?388 If so, should the transition be one year, the same as the 90-day transition to rate
caps, or something else? The record suggests that site commission payments make up less than fivetenths of a percent of facilities’ operating budgets.389 Securus suggests that site commissions should be

382

Securus July 23, 2014 Ex Parte Letter at 2; see also Securus July 17, 2014 Ex Parte Letter at 2 (“If Commissions
are eliminated there must be a transition period that will allow facilities to replace these funds with other revenue
streams,” as “an orderly transition is in the best interest of all constituents.”) (emphasis omitted). See also Letter
from Chérie R. Kiser, Counsel for GTL, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 at 2 (filed
June 3, 2014) (discussing “the need for a transition period to address existing contracts”).
383

See Martha Wright, et al. Consolidated Comments, WC Docket No. 12-375 at Exh. B (filed Mar. 11, 2014).

384

See Joint Provider Reform Proposal at 2.

385

Id.

386

See generally Pay Tel Proposal.

387

GTL previously suggested that site commission “payment decreases could be phased in over a three-year period.”
GTL Aug. 11, 2014 Ex Parte Letter at 2.

388

See Letter from Lee G. Petro, Counsel to Petitioners, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375, at 4 (filed July 18, 2013) (predicting that any disparity in the application of new rules “would be ripe for abuse,
as every current party to a contract [might take] steps to extend, renew, restate, or use some other mechanism to
perpetuate high ICS rates and ancillary fees”).

389

See Securus Sept. 22, 2014 Ex Parte Letter at Attach.

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completely eliminated by January 1, 2016 and rate reform should also be accomplished by that date.390
We seek comment on these proposals.
132.
If the Commission adopts a two-year transition to the elimination of site commission
payments, how should the payments be reduced? Should they be reduced in equal increments over two
years, or should we align the reductions to state or state subdivision budget cycles? How have other
states that reduced or eliminated site commissions implemented this change? Did they adopt a transition
plan or implement the change immediately? We seek comment on whether any new contracts that
include any potential cost recovery payments to facilities and a ban on site commissions that are entered
into after the adoption of the final order be required to comply with the order. Should there be exceptions
to a transition period based on whether interstate or intrastate rates are already below the prescribed rate
level?
H.

Accessible Inmate Calling Services

133.
Our goal with ICS reform is to ensure that ICS is accessible to all inmates and their
families at just and reasonable rates that represent fair compensation to ICS providers. Below, we seek
focused comment on several disability access issues raised in the Inmate Calling Report and Order and
FNPRM that merit further inquiry.
134.
Background. In the Order, the Commission highlighted the telecommunications
challenges faced by inmates who are deaf and hard of hearing, as well as by inmates communicating with
family members or friends who are deaf and hard of hearing, such as extremely high rates for calls placed
via the Telecommunications Relay Service (TRS).391 In the Order, the Commission “clarif[ied] that ICS
providers may not levy or collect an additional charge for any form of” telecommunications relay services
(TRS) call because “such charges would be inconsistent with section 225 of the Act.”392 However, the
record indicates continuing problems, such as, for example, “nearly half of deaf inmates surveyed did not
have access to TTY at their facilities.”393
135.
In the FNPRM, the Commission sought comment on a number of questions to ensure that
ICS is accessible.394 The Commission also tentatively concluded that inmate calling service rates perminute for TTY calls should be set at 25 percent of the safe harbor rate for inmate calls, and sought
comment on this proposal.395 The Commission sought comment on how ICS providers should recover the
costs of providing such discounted TTY calls, and on the possibility of allowing ICS providers to recover
the cost of a TTY call from the Telecommunications Relay Service Fund.396 In the Joint Provider Reform
Proposal, the providers “commit to continue to comply with their existing obligations” under applicable
laws, and “also will work closely with correction facilities ‘to ensure that deaf and hard of hearing
inmates are afforded access to telecommunications that is equivalent to the access available to hearing

390

See Securus July 23, 2014 Ex Parte Letter at Attach.

391

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14110, para. 3.

392

Id. at 14159-60, para. 95. Title IV of the Americans with Disabilities Act requires “that users of
telecommunications relay services pay rates no greater than the rates paid for functionally equivalent voice
communications services.” 47 U.S.C. § 225(d)(1)(D).

393

HEARD FNPRM Comments at 5.

394

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14178-81, paras. 142-151. We make clear
that when we refer to the disability communications issues related to ICS, we are referring to both the needs of
inmates that must use accessibility services because they are disabled themselves and the needs of inmates that must
use accessibility services to contact non-incarcerated people that are disabled.

395

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14179, para. 144.

396

Id. at 14179-80, paras. 146-47.

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inmates.’”397 Pay Tel’s Proposal states that “ICS Vendors will work with confinement facilities where
requested to enable video relay services,” “[c]omply with all existing obligations and laws regarding
service people with disabilities,” and “[r]equire that deaf and hard of hearing inmates will have full access
to TDD/TTY services at no additional charge.”398 We seek comment on these proposals.
136.
Discussion. In the Order, the Commission noted commenters’ general agreement with
the Commission’s statement in the 2012 ICS NPRM that TTY-to-voice calls take at least three to four
times longer than voice-to-voice conversations to deliver the same conversational content, not including
the time it takes to connect to the operator.399 In the FNPRM, the Commission tentatively concluded that
ICS per-minute rates for TTY calls should be set at 25 percent of the interim safe harbor rate for standard
ICS calls, and sought comment on this proposal.400 CenturyLink asserts that “a discounted rate of 25% of
the interstate safe harbor rate for TTY calls . . . is far too low. In CenturyLink’s experience, TTY calls
can take up to two times as long as regular calls, not the three or four times suggested by some
commenters.”401 HEARD, however, asserts that the proposed discounted rate is insufficient, as it “does
not account for varying literacy rates of deaf prisoners˗˗many of whom use sign language as their primary
or only method of communication.”402 HEARD urges a greater discount, based on the assertion that
“prison TTY telephone calls are typically at least six to eight times longer than a hearing phone call.”403
We seek specific comment on the actual relative length of TTY-to-TTY and TTY-to-voice calls as
compared to voice-to-voice calls. Given the wide range of assertions in the record, we request that
comments be backed by data on the actual lengths of TTY-to-TTY, TTY-to-voice, and voice-to-voice
conversations. Commenters should describe the methodology they used to collect the information with
specificity.
137.
The Commission has observed that, in implementing section 276 of the Act, section
276(b)(1)(A) exempts TRS calls from the per-call compensation requirement, and it requires payphone
service providers to provide free access to connect to TRS.404 However, if the outgoing portion of a TRS
call is a long distance call, a caller is required to pay for that portion.405 Is it the case that no ICS provider
charges inmates for voice-to-TTY or TTY-to-voice calls because the “interexchange company holding the
[state] TRS contract carries the call to the called party?”406 If so, should final reduced ICS per-minute
rates for TTY calls be applicable only to TTY-to-TTY calls, as those calls are indistinguishable from
standard voice calls because the inmate is dialing the called party directly, using the called party’s

397

Joint Provider Reform Proposal at 7 (citing Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at
14160, para. 54).

398

See Pay Tel Proposal at 4.

399

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14178, para. 143.

400

See id. at 14179, para. 144. But see Securus Techs. Partial Stay Order.

401

CenturyLink FNPRM Comments at 11-12.

402

HEARD FNPRM Comments at 4.

403

Id.

404

See, e.g., Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996 et al., Report and Order, CC Docket Nos. 96-128, 91-35, 11 FCC Rcd 20541 at
20545, para. 6 (1996). See also Telecommunications Relay Services and the Americans with Disabilities Act of
1990, Fifth Report and Order, CC Docket No. 90-571, 17 FCC Rcd 21233 at 21244-45, para. 24 (2002) (“A call
made from a payphone connects to a TRS facility via free local calling.”).

405

See Telecommunications Relay Services and the Americans with Disabilities Act of 1990, 17 FCC Rcd at 2124445, para. 24.

406

See Securus FNPRM Comments at 17-18; see also id. at Hopfinger Decl. at 1-2.

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terminating phone number, and thus the call data looks identical to the call data from a typical voice
call?407
138.
With respect to TTY-to-voice and voice-to-TTY calls, we seek comment on AT&T’s
request for clarification that the “manner in which it handles operator-assisted collect calls from inmates
via TRS” is “subject to the rate requirements set out in the order in WC Docket No. 12-375.”408 AT&T
describes the issue as follows:
Pursuant to contract with state authorities, AT&T provides TRS service in eight
states plus the District of Columbia. Often times, but not always, the TRS
Communications Assistant (CA) can see that the call has originated from a
detention facility. For security, operator services practices limit inmate calling to
collect calls. Upon receiving the call, the inmate can direct the CA to forward
the call to any interexchange carrier on the carrier of choice list. The CA in the
states where AT&T provides the service is an AT&T employee. If the inmate
selects AT&T as the IXC for the call, the CA then functions as the operator
service provider and the called party will be charged at the tariffed rate for the
call, which is higher than the rate cap for a collect call specified in the ICS order.
AT&T interexchange collect calling toll services are not limited to inmates only;
anyone making the same type of TRS collect call will be treated and charged in
the same manner.409
139.
Section 64.6000 of our rules defines ICS as “the offering of interstate calling capabilities
from an Inmate Telephone;” and Inmate Telephone as “a telephone instrument or other device capable of
initiating telephone calls set aside by authorities of a correctional institution for use by Inmates.”410 We
seek comment on whether AT&T and other entities that provide TRS are providing ICS for TRS calls
placed by inmates. Is it relevant that “TRS [communications] assistants may place only [operator
assisted] collect calls on behalf of inmates using TRS?”411 Would it be relevant if inmates are not
charged for calling TRS, but only for the long distance component of a TRS call?412
140.
We seek further comment as to whether the rates and charges levied for operator-assisted
collect calls from inmates via TRS are subject to the rate requirements set out in the Order. Does the fact
that an inmate “can direct the CA to forward the call to any interexchange carrier on the carrier of choice
list” indicate that the interexchange portion of the call is no longer ICS, and therefore not subject to our
rate requirements?
141.
TTYs are only one form of accessible equipment, and TTY relay is only one form of
TRS, and commenters to the FNPRM, as well as some 2014 ICS Workshop participants, decry
correctional facilities’ continued reliance on TTY equipment, as well as their failure to make newer
equipment technology such as videophones for Video Relay Service (VRS)413 and point-to-point video

407

Id. at 17 (citing Hopfinger Decl. at para 4-8).

408

Letter from William L. Roughton, Jr., General Attorney, AT&T Services, Inc., to Marlene H. Dortch, Secretary,
FCC, WC Docket No. 12-375 at 1 (filed Jan. 10, 2014) (AT&T Jan. 10, 2014 Ex Parte Letter).

409

Letter from William L. Roughton, Jr., General Attorney, AT&T Services, Inc., to Marlene H. Dortch, Secretary,
FCC, WC Docket No. 12-375 at 1-2 (filed Dec. 5, 2013).

410

47 C.F.R. § 64.6000.

411

AT&T Jan. 10, 2014 Ex Parte Letter at 1.

412

See supra para. 137.

413

VRS is “[a] telecommunications relay service that allows people with hearing or speech disabilities who use sign
language to communicate with voice telephone users through video equipment. The video link allows the
(continued…)

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communications, devices for Internet Protocol Relay Service (IP Relay)414 and Internet Protocol
Captioned Telephone Services (IP CTS),415 available to inmates.416 We seek comment on the availability
of these technologies as well as any other advanced technologies that meet persons with disabilities
communication needs in correctional facilities. Should all correctional facilities be required to install a
certain type or types of equipment for inmates with disabilities, such as videophone equipment, IP CTS
devices or other assistive technologies? Should they do so upon the request of an inmate with a
disability? We seek comment on our authority to regulate correctional facilities in this manner. If
correctional facilities are required to provide such equipment, how should the facilities recover the costs
of purchasing and installing the necessary equipment, and how should ICS providers recover the costs of
the calls? In the alternative, are ICS providers responsible for providing any communications equipment
needed to meet the communications demands of all inmates regardless of ability? How would such a
requirement fit into the Commission’s section 225 authority? Do ICS providers meet criteria as a
common carrier for offering telecommunications relay service eligible for cost recovery from the TRS
Fund? Why or why not? And, if not, is there a justification for different treatment in this industry? Will
ICS providers or facilities incur costs to install equipment for use by any inmate with a disability? What
is the impact of such approaches on ICS providers? Should providers be able to recover any additional
costs if they are unable to do so through the TRS Fund?
142.
The Commission has imposed differing registration requirements for users of the various
types of TRS. We seek comment on how the Commission’s evolving relay service registration
requirements can be met in an institutional setting where more than one user will be utilizing equipment.
We also seek comment about security issues related to IP telephone technologies, such as VRS, IPcaptioned telephone service, and IP Relay. Do these types of advanced technologies pose a security risk
in a correctional setting? If so, what is the nature of such risk? Is the risk greater or lesser than that
associated with traditional telecommunications and interconnected VoIP services utilized by ICS
providers?
143.
What are just, reasonable and fair per-minute rates for end users and ICS providers for
forms of TRS other than traditional TTY TRS that will allow service to be accessible to all inmates
regardless of ability?417 HRDC suggests that, consistent with section 225 of the Act, the rates for
accessible communications technology from correctional facilities should be no more than calls made
from traditional telephones.418 Would it be appropriate to discount the per-minute rate for ICS calls made
(Continued from previous page)
[communications assistant] to view and interpret the party’s signed conversation and relay the conversation back and
forth with a voice caller.” 47 C.F.R. § 64.601(a)(40).
414

Internet Protocol Relay Service (IP Relay) is “[a] telecommunications relay service that permits an individual
with a hearing or a speech disability to communicate in text using an Internet Protocol-enabled device via the
Internet, rather than using a text telephone (TTY) and the public switched telephone network.” 47 C.F.R. §
64.601(a)(17).

415

Internet Protocol Captioned Telephone Service (IP CTS) is “[a] telecommunications relay service that permits an
individual who can speak but who has difficulty hearing over the telephone to use a telephone and an Internet
Protocol-enabled device via the Internet to simultaneously listen to the other party and read captions of what the
other party is saying.” 47 C.F.R. § 64.601(a)(16).

416

See, e.g., HEARD FNPRM Comments at 4 (“That ICS providers and prisons have resisted installing modern
technology should not justify the continued exclusive use of obsolete technology that does not connect to the vast
majority of the Deaf Community and that does not allow for equal communication access between deaf prisoners
and hearing individuals outside of the prison walls.”); HEARD FNPRM Reply at 2-3; HRDC FNPRM Comments at
13. See also 2014 ICS Workshop Transcript at 36-43 (Talila Lewis, Founder, HEARD).

417

See supra para.141.

418

See HRDC FNPRM Comments at 13; see also 47 U.S.C. § 225(d)(1)(D).

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using other accessible equipment or other forms of TRS, such as Speech to Speech relay services419 or
Captioned Telephone Service, as previously proposed for TTY calls? Would different rate setting
methodologies be appropriate given the differing nature of TTY and other forms of TRS?
144.
TRS Reporting Requirements. In the FNPRM the Commission asked whether ICS
providers should be required to submit TRS usage data and report on user complaints.420 Commenter
HEARD asserts that “nearly half of deaf inmates surveyed did not have access to TTY at their
facilities”421 and suggests that correctional facilities begin to track and report to the Commission the
number of relay calls being made.422 We seek further comment on this proposal. Should ICS providers
be required to report to the Commission the number of disability-related calls they provide, the number of
problems they experience with such calls, or related complaints they receive?423 Or should any such data
collection be more narrowly tailored as suggested by the Federal Bureau of Prisons?424 Should such data
be part of the periodic review we seek comment on below?425
I.

Advanced Inmate Communications Services

145.
We seek comment on newer technologies and services available for inmate
communications. We believe that our core goals for inmates and their families remain the same
regardless of the technologies used—ensure competition and continued widespread deployment of ICS
and the societal benefits that they bring. We expect that new technologies available in correctional
settings—like new technologies available to consumers in the general public—should offer improvements
and innovations that benefit users and thus serve our goals for ICS reform. In this section we seek
comment on these newer technologies, on whether there are any pertinent differences that justify any
differences in rules, and on the legal considerations that may need to be addressed.
146.
Background. In the FNPRM, the Commission sought comment on “the impact of
technological advancements on the ICS industry.”426 The Commission also invited comment on the
Commission’s legal authority to regulate the rates for services provided over newer technologies.427 In
response, Pay Tel states that “[t]here is no question that new technologies will continue to emerge that
will affect and improve provision and quality of, and security related to, ICS.”428 The Prison Policy
Initiative suggests that there are benefits to advanced technologies in correctional settings such as video
visitation systems (VVS), but cautions that there is “clear evidence that the video communications market
is currently driven by the same perverse incentives that caused market failure in the correctional
telephone industry.”429
419

Speech-to-speech relay service (STS) is a “telecommunications relay service that allows individuals with speech
disabilities to communicate with voice telephone users through the use of specially trained [communications
assistants] who understand the speech patterns of persons with speech disabilities and can repeat the words spoken
by that person.” 47 C.F.R. § 64.601(a)(30).

420

HEARD FNPRM Comments at 5.

421

Id.

422

Id.

423

Id.

424

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14185-86, para. 164.

425

See infra Section III.J.

426

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14185-86, para. 164.

427

See id. at 14185-86, paras. 164-65.

428

Pay Tel FNPRM Reply at 23.

429

Prison Policy Initiative FNPRM Comments at 1.

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147.
At the Commission’s 2014 ICS Workshop, MeshIP discussed its “secure prison cell
phone solution that gives detainees highly customized cell phones with all the security and control
features of prison payphones.”430 JLG Technologies described for the audience voice biometrics
technology, the second generation of voice biometrics, known as continuous voice identification, and next
generation voice biometrics technology currently under development.431 GTL believes the biggest
technological trends in inmate communications will be access to wall-mounted, multiservice kiosks,
which offer more frequent and better contacts with the inmates’ families and friends and then a shift to
hand-held devices.432
148.
Discussion. We seek a greater factual understanding of the availability of these and other
services. What kinds of services are available? Are they available commonly in most facilities, or only in
certain ones? What is the demand for these services and what rates and fees are charged? What
additional functionalities do they offer? Do they provide any greater benefits to inmates, their families, or
others, than traditional services? What are ICS providers’ rates for other services such as email,
voicemail or text messaging? The record indicates that some ICS providers offer tablet computers and
kiosks that allow inmates to access games, music, educational tools, law library tools and commissary
ordering.433 What is the compensation mechanism for access to these offerings?
149.
Are there additional costs to ICS providers in developing, provisioning, or offering these
services? Participants at the 2014 ICS Workshop suggest that there are “huge challenges in anticipating
and funding costs associated with developing, implementing, and maintaining these new systems and
services.”434 GTL noted that ICS providers bear the costs of the “development for the kiosk, to put that
device on the wall . . . to provide the additional bandwidth, to develop and do the software development
research for the applications that go in that device, for the additional maintenance and support to support
the device once it’s on the wall.”435 We seek comment on the costs of these services in general. We also
seek comment on the rates and fees charged for their use.
150.
We seek comment on whether there is a similar market failure for service provided by
new technology as described above for existing ICS. For instance, in response to evidence of
unreasonable rates, the Alabama PSC capped VVS rates at $0.50 per minute and VVS recorded message
download at “$1.00 for the first minute and $0.50 for each additional recorded minute.”436 Do
commenters consider these just and reasonable rates and fair compensation for VVS? We seek comment
on Pay Tel’s proposal that the Commission establish a discrete mechanism by which providers may seek
approval for a separate ancillary charge related to some type of advanced technology.437 How would such
a charge function in the context of the proposed reform of ancillary charges discussed above?438 Securus
also suggests that the Commission allow for “incremental product pricing above rate caps if necessary”
430

2014 ICS Workshop Transcript at 246 (Brian F. Byrne, Founder and Managing Partner, MeshIP).

431

Id. at 249-51 (Jay L. Gainsboro, Founder, JLG Technologies).

432

Id. at 260-61 (Chris Moore, VP - Product Management, GTL).

433

Id. at 254 (Grant Gongaware, Chief Architect, Telmate); Id. at 260 (Chris Moore, VP - Product Management,
GTL).

434

Id. at 255-58 (Grant Gongaware, Chief Architect, Telmate) (discussing the difficulty in engineering
countermeasures to inmate abuses of communications services and tools; significant new storage and maintenance
costs for self-contained and supervised services; and the need to anticipate the changing costs of regulatory
compliance).

435

Id. at 260-61 (Chris Moore, VP - Product Management, GTL).

436

See Alabama Further Order at 66-67.

437

See Pay Tel FNPRM Reply at 23-24; see also Pay Tel Proposal at 3.

438

See supra Section III.C.

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for “[p]roduct [e]xceptions.”439 Is such a separate mechanism necessary? If so, how do proponents of
such a mechanism suggest that it function? Will advanced ICS technologies continue to be developed and
deployed without a separate and discrete recovery mechanism? Finally, if the Commission were to adopt
regulations for advanced technologies like video visitation and video calling, what is the best way to
harmonize our approach with that of the states?
151.
In the Order, the Commission found that the application of section 276 is not restricted to
any one form of communications technology and made clear that reforms apply to ICS regardless of
technology used to provision the service, such as IP-based and TDM-based provisioning.440 Some ICS
providers are developing wireless options.441 We therefore seek comment on whether ICS provisioned
through wireless technology will also be subject to any final reforms adopted by the Commission under
section 276.442 We also seek comment on whether advanced services like video visitation service and
video calling services constitute “inmate telephone service” within the meaning of the term in section
276.443 Given the technologically neutral nature of section 276 and the fact that video calling shares many
of the attributes of traditional ICS, including the fact that it is a pay per use service involving real time,
two-way voice communications, are these services “inmate telephone service”? Does the Commission’s
recognition of video relay service as a reimbursable relay service under section 225 of the Act (defining
the video service as “functionally equivalent” to traditional TRS) provide analogous support for including
video calling as an inmate telephone service?444 To the extent any communications services available to
inmates fall outside the statutory definition of “inmate telephone service,” what other sources of authority
provide the Commission with the ability to ensure that rates are just and reasonable? Could such services
be regulated pursuant to sections 201 and 202 to ensure the rates, charges, and practices associated with
those services are just, reasonable, and not unreasonably discriminatory? Could regulation of these
services be supported through the use of the Commission’s ancillary authority? For example, the record
shows that some correctional institutions have eliminated all in-person visitation and replaced it with
video visitation.445 What if providers were to eliminate all payphone calling in favor of video calling and
charged rates for those services far in excess of the Commission’s rate caps? Would such a shift
effectively void the section 276 requirement of fair compensation and preclude the Commission from
discharging its statutory mandate?

439

Securus July 23, 2014 Ex Parte Letter at Attach.

440

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14115, para. 14 (“Section 276 makes no mention
of the technology used to provide payphone service and makes no reference to ‘common carrier’ or
‘telecommunications service’ definitions. Thus, the use of VoIP or any other technology for any or all of an ICS
provider’s service does not affect our authority under section 276.”).

441

See, e.g., GTL, “Personal hand-held devices to provide enhanced services for offenders,” available at
http://www.gtl.net/correctional-facility-services/inmate-communication-solutions/handheld-devices/ (last visited
Sept. 12, 2014).
442

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14115, para. 14.

443

See 47 U.S.C. § 276(d).

444

See Telecommunications Relay Services and Speech-to-Speech Services for Individuals with Hearing and Speech
Disabilities, CC Docket No. 98-67, Report and Order and Further Notice of Proposed Rulemaking, 15 FCC Rcd
5140 at 5152-54, paras. 21-27 (2000).

445

See, e.g., Alabama PSC Further Order at 69-70 (addressing VVS End User Agreements that eliminate all face to
face visitation in favor of video visitation); 2014 ICS Workshop Transcript at 28 (Darrell Baker, Director, Utilities
Division, Alabama PSC) (“Some inmate providers are pressuring confinement facilities to eliminate face-to-face
visitation with the lure of 20 percent site commissions.”); Prison Policy Initiative FNPRM Comments at 1-2
(discussing similar action in five jurisdictions).

Federal Communications Commission
J.

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Periodic Review

152.
We seek comment on whether a periodic review of how the reforms we seek comment on
above are impacting ICS rates, demand, ancillary charges and site commission levels is essential to ensure
that our adopted reforms are creating and maintaining the proper incentives to drive end user rates to
competitive levels. We seek comment on the benefits of establishing a periodic review process.
153.
In the Order the Commission adopted an Annual Reporting and Certification
Requirement that included the submission of interstate and intrastate ICS rate and demand data as well as
the average duration of calls.446 In the FNPRM the Commission sought further comment on adjusting ICS
rates over time.447 In response, the Wright Petitioners suggested that the Commission “adopt rules to
review the interim rates no later than 180 days after the ICS providers have submitted their second round
of data collected under Section 64.6060 of the Commission’s rules.”448
154.
The ICS providers that signed on to the Joint Provider Reform Proposal suggest that “ICS
providers should be required to provide certain information to the Commission annually for three (3)
years to ensure the caps on per-minute rates and any admin-support payments adopted are implemented as
required.”449 Specifically, they suggest that “[s]uch information should include a list of the ICS
provider’s current interstate and intrastate per-minute ICS rates, the ICS provider’s current fee amounts,
the locations where the ICS provider makes admin-support payments, and the amount of those adminsupport payments.”450 We seek comment on this portion of the Proposal. In addition to the information
suggested by the ICS providers, we suggest that providers also be required to file demand and call
duration data. Finally, we seek comment on whether any information gathered for an annual review must
be certified as accurate by an officer of the reporting company.451
K.

Enforcement

155.
In the Order, the Commission described its standard enforcement authority as it relates to
ICS.452 The Commission also made clear, and we remind interested parties, that the Commission’s
general section 208 complaint procedures apply.453
156.
The Commission also made clear that penalties or failure to comply with the
Commission’s rules may result in monetary forfeitures of up to “$160,000 for each violation or each day
of a continuing violation, up to a maximum of $1,575,000 per continuing violation.”454 We seek comment
on how to interpret “violation” for use in the ICS context in light of the reforms discussed herein. For
example, would each non-compliant ICS rate charged by a provider be a single violation? Would the
446

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14169-70, paras. 116-17; 47 C.F.R. §
64.6060; but see Securus Techs. Partial Stay Order.

447

See id. at 14185, para. 154 (“Should we maintain the current safe harbors and make them permanent or should
they be reduced over time[?]”).

448

Petitioners FNPRM Comments at 2, 10 (the Commission should “take into account the information provided by
the ICS providers in connection with the annual data collection required under the new FCC rules, and reduce rates
when necessary.”).

449

Joint Provider Reform Proposal at 7.

450

Id.

451

See id. at 7 (“In addition, all ICS providers should be required to submit an annual certification by the company
Chief Executive Officer, Chief Financial Officer and General Counsel, under penalty of perjury, certifying that the
company is in compliance with the FCC ICS rate rules and any admin-support payment rules adopted.”).

452

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14169-73, paras. 115-26.

453

See id. at 14171-72, paras. 120-23.

454

Id. at 14170, para. 118.

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continued payment of site commissions to a correctional facility constitute a single violation? Would the
imposition of one ancillary charge over any cap or caps ultimately adopted by the Commission to one
consumer constitute a single violation?
157.
Securus has urged the Commission to require that the CEO, CFO, and General Counsel
of each ICS provider all certify to the companies’ compliance with the Commission’s ICS rules and
regulations.455 In the Order, the Commission also adopted an Annual Reporting and Certification
Requirement that required “an officer or director of each ICS provider annually to certify the accuracy of
the data and information in the certification, and the provider’s compliance with all portions of this
Order.”456 We note that this rule was stayed by the D.C. Circuit so we have not evaluated the
effectiveness or impact of such a certification.457 Should the Commission adopt such a requirement?
How does such a certification requirement function with the proposed periodic review requirement we
seek comment on above?
158.
We seek comment on whether states should continue to exercise enforcement functions
with respect to any state requirements that are consistent with the Commission’s regulations. We seek
comment on whether states should continue to exercise their enforcement functions with respect to any
final rules that the Commission may adopt as part of comprehensive ICS reform. Should the Commission
expressly allow states to exercise such enforcement authority, e.g., to be carried out through their
complaint resolution process, or some other role in the oversight process of state commissions? If the
Commission did so, what if any oversight role should the Commission adopt with respect to state
proceedings involving the enforcement of Commission rules? Would our authority to provide for such a
state role apply regardless of whether certain state laws have been found to be inconsistent with any ICS
rules governing intrastate ICS?
L.

Cost/Benefit Analysis of Proposals

159.
Acknowledging the potential difficulty of quantifying costs and benefits, we seek to
determine whether each of the proposals above will provide public benefits that outweigh their costs. We
also seek to maximize the net benefits to the public from any proposals we adopt. For example,
commenters have argued that inmate recidivism decreases with regular family contact.458 This not only
benefits the public broadly by reducing crimes, lessening the need for additional correctional facilities and
cutting overall costs to society,459 but also likely has a positive effect on the welfare of inmates’
children.460 On the other hand, commenters have argued that eliminating site commissions would directly
affect jail revenues and lead to a reduction in recreational and rehabilitation services provided to inmates
by facilities.461 Such a reduction could produce its own wave of negative aftereffects that offset some of
455

See Securus Sept. 22, 2014 Ex Parte Letter at Attach.

456

Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14169-70, para. 117; see also 47 C.F.R. §
64.6060 (Annual Reporting and Certification Requirement).
457

See generally Securus Techs. Partial Stay Order.

458

See Inmate Calling Report and Order and FNPRM, 28 FCC Rcd at 14109-10, paras. 2-3.

459

See Petitioners 2013 Comments Exh. C, Bazelon Decl. at para. 48; Petitioners 2013 Reply, Exh. A, Bazelon Decl.
at para. 10.

460

See 2013 ICS Workshop Transcript at 11 (Mignon Clyburn, Acting Chairman, FCC) (“Regardless of why that
inmate is in jail, the exorbitant inmate calling regime deeply and chronically affects the most vulnerable among us.
If you were to ask their teachers, it is affecting their [children’s] academic performance. If you ask the school
counselors, it affects their behavior and attitudes. And if you were to speak with the guardians, families and friends,
it impacts their ability to adequately and affordably care for these children.”).

461

See Letter from Harrison A. Moody, President, Virginia Association of Counties, to the Honorable Tom Wheeler,
Chairman, FCC, WC Docket No. 12-375 (filed September 3, 2014) (“Local and regional jails in Virginia stand to
lose a total of around $13.5 million in annual revenue if the FCC decides to eliminate commissions from their phone
(continued…)

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the purported benefits.462 Accordingly, we seek specific comment on the costs and benefits of the
proposals above and any additional proposals received in response to this Second Further Notice. We
also seek any information or analysis that would help us to quantify these costs or benefits. We request
that interested parties discuss whether, how, and by how much they will be impacted in terms of costs and
benefits of the proposals included herein. Additionally, we ask that parties consider whether the above
proposals have multiplier effects beyond their immediate impact that could affect their interest or, more
broadly, the public interest. Further, we seek comment on any considerations regarding the manner in
which the proposals could be implemented that would increase the number of people who benefit from
them, or otherwise increase their net public benefit. We recognize that the costs and benefits may vary
based on such factors as the correctional facility served and the ICS provider. We request that parties file
specific analyses and facts to support any claims of significant costs or benefits associated with the
proposals herein.
IV.

PROCEDURAL MATTERS
A.

Filing Instructions

160.
Pursuant to sections 1.415 and 1.419 of the Commission’s rules, 47 C.F.R. §§ 1.415,
1.419, interested parties may file comments and reply comments on or before the dates indicated on the
first page of this document. Comments may be filed using the Commission’s Electronic Comment Filing
System (ECFS). See Electronic Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
Comments and reply comments on this Second FNPRM must be filed in WC Docket No. 12-375.
!

Electronic Filers: Comments may be filed electronically using the Internet by accessing
the ECFS: http://fjallfoss.fcc.gov/ecfs2/.

Paper Filers: Parties who choose to file by paper must file an original and one copy of
each filing. If more than one docket or rulemaking number appears in the caption of this
proceeding, filers must submit two additional copies for each additional docket or
rulemaking number.

Filings can be sent by hand or messenger delivery, by commercial overnight courier, or
by first-class or overnight U.S. Postal Service mail. All filings must be addressed to the
Commission’s Secretary, Office of the Secretary, Federal Communications Commission.

All hand-delivered or messenger-delivered paper filings for the Commission’s
Secretary must be delivered to FCC Headquarters at 445 12th St., SW, Room
TW-A325, Washington, DC 20554. The filing hours are 8:00 a.m. to 7:00 p.m.
All hand deliveries must be held together with rubber bands or fasteners. Any
envelopes and boxes must be disposed of before entering the building.

Commercial overnight mail (other than U.S. Postal Service Express Mail and
Priority Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD
20743.

(Continued from previous page)
contracts. This revenue currently offsets the costs to jails of providing this service and in many local and regional
jails the revenue is also used to provide additional direct services for inmates.”).
462

See, e.g., Arizona Detention Association FNPRM Comments at 1 (asserting that Arizona law requires any
revenue received from ICS contracts to be deposited in an Inmate Welfare Fund, which in turn funds programs and
services that directly benefit the inmates, and that if such funds were to diminish, the burden to provide the same
level of program services would be placed on the back of the tax payers and general fund); Correctional Institutions
FNPRM Comments at 7 (stating that, by curtailing the availability of site commissions, the FCC has placed it in the
unenviable position of terminating inmate programs and services or attempting to find other ways to cover the costs
for the programs).

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U.S. Postal Service first-class, Express, and Priority mail must be addressed to
445 12th Street, SW, Washington DC 20554.

People with Disabilities: To request materials in accessible formats for people with disabilities (braille,
large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call the Consumer &
Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (tty).
B.

Ex Parte Requirements

161.
This proceeding shall be treated as a “permit-but-disclose” proceeding in accordance with
the Commission’s ex parte rules.463 Persons making ex parte presentations must file a copy of any
written presentation or a memorandum summarizing any oral presentation within two business days after
the presentation (unless a different deadline applicable to the Sunshine period applies). Persons making
oral ex parte presentations are reminded that memoranda summarizing the presentation must (1) list all
persons attending or otherwise participating in the meeting at which the ex parte presentation was made,
and (2) summarize all data presented and arguments made during the presentation. Memoranda must
contain a summary of the substance of the ex parte presentation ad not merely a list of the subjects
discussed. More than a one or two sentence description of the views arguments presented is generally
required. If the oral presentation consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter’s written comments, memoranda or other filings in the proceeding, the
presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be
found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission
staff during ex parte meetings are deemed to be written ex parte presentations and must be filed
consistent with rule 1.1206(b). In proceedings governed by rule 1.49(f) or for which the Commission has
made available a method of electronic filing, written ex parte presentations and memoranda summarizing
oral ex parte presentations, and all attachments thereto, must be filed through the electronic comment
filing system available for that proceeding, and must be filed in their native format (e.g., .doc, .xml, .ppt,
searchable .pdf). Participants in this proceeding should familiarize themselves with the Commission’s ex
parte rules.
C.

Paperwork Reduction Act Analysis

162.
This document does not contain proposed information collection(s) subject to the
Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore, it does not contain
any new or modified information collection burden for small business concerns with fewer than 25
employees, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44
U.S.C. 3506(c)(4).
D.

Initial Regulatory Flexibility Analysis

163.
As required by the Regulatory Flexibility Act of 1980 (RFA),464 the Commission has
prepared an Initial Regulatory Flexibility Analysis (IRFA) for this Second Further Notice, of the possible
significant economic impact on small entities of the policies and rules addressed in this document. The
IRFA is set forth as the Appendix. Written public comments are requested on this IRFA. Comments
must be identified as responses to the IRFA and must be filed on or before the dates on the first page of
this Second Further Notice. The Commission’s Consumer and Governmental Affairs Bureau, Reference
Information Center, will send a copy of this Second Further Notice, including the IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration (SBA).465

463

47 C.F.R. §§ 1.1200 et seq.

464

See 5 U.S.C. § 603.

465

See 5 U.S.C. § 603(a).

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V.

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ORDERING CLAUSES

164.
ACCORDINGLY, IT IS ORDERED that, pursuant to sections 1, 2, 4(i)–(j), 201(b), 276,
and 332 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154(i)–(j), 201(b), 276,
and 332, this Second Further Notice of Proposed Rulemaking IS ADOPTED.
165.
IT IS FURTHER ORDERED, that the Commission’s Consumer and Governmental
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Second Further Notice of
Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
166.
IT IS FURTHER ORDERED, that pursuant to sections 1.4(b)(1) and 1.103(a) of the
Commission’s rules, 47 C.F.R. §§ 1.4(b)(1) and 1.103(a), that this Second Further Notice of Proposed
Rulemaking SHALL BE EFFECTIVE 30 days after publication of a summary thereof in the Federal
Register.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch
Secretary

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APPENDIX
Initial Regulatory Flexibility Analysis
1.
As required by the Regulatory Flexibility Act of 1980, as amended (RFA)1 the Federal
Communications Commission (Commission) has prepared this Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on a substantial number of small entities by the
policies and rules proposed in this Second Further Notice of Proposed Rulemaking (Second Further
Notice). Written comments are requested on this IRFA. Comments must be identified as responses to the
IRFA and must be filed by the deadlines for comments on the Second Further Notice. The Commission
will send a copy of the Second Further Notice, including this IRFA, to the Chief Counsel for Advocacy of
the Small Business Administration (SBA).2 In addition, the Second Further Notice and IRFA (or
summaries thereof) will be published in the Federal Register.3
A.

Need for, and Objectives of, the Notice

2.
In today’s Second Further Notice the Commission seeks comment on additional measures
it could take to ensure that interstate and intrastate inmate calling service (ICS) are provided consistent
with the statute and public interest and the Commission’s authority to implement these measures. The
Commission believes that additional action on ICS will help maintain familial contacts stressed by
confinement and will better serve inmates with special needs while still ensuring the critical security
needs of correctional facilities of various sizes. Specifically, the Second Further Notice seeks comment
on:

Limiting site commission payments;

Final interstate and intrastate ICS rate cap reform;

Limiting ancillary charges;

Harmonizing inconsistent state regulations pursuant to Section 276(c) of the
Communications Act of 1934, as amended;

Treatment of existing ICS contracts;

Appropriate transition period;

Accessible inmate calling services;

Advanced inmate communications services;

Periodic review of the industry;

Enforcement; and

Cost/Benefit analysis of proposals.
Legal Basis

3.
The legal basis for any action that may be taken pursuant to the Second Further Notice is
contained in sections 1, 2, 4(i)-(j), 201(b) and 276 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 151, 152, 154(i)-(j), 201(b) and 276.
1

See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601–612, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).

See 5 U.S.C. § 603(a).

See id.

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Description and Estimate of the Number of Small Entities to Which the Proposed
Rules Will Apply

4.
The RFA directs agencies to provide a description of, and where feasible, an estimate of
the number of small entities that may be affected by the proposed rules, if adopted.4 The RFA generally
defines the term “small entity” as having the same meaning as the terms “small business,” “small
organization,” and “small governmental jurisdiction.”5 In addition, the term “small business” has the
same meaning as the term “small-business concern” under the Small Business Act.6 A “small-business
concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the SBA.7
5.
Small Businesses. Nationwide, there are a total of approximately 28.2 million small
businesses, according to the SBA.8
6.
Wired Telecommunications Carriers. The SBA has developed a small business size
standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or
fewer employees.9 According to Census Bureau data for 2007, there were 3,188 firms in this category,
total, that operated for the entire year.10 Of this total, 3,144 firms had employment of 999 or fewer
employees, and 44 firms had employment of 1,000 employees or more.11 Thus, under this size standard,
the majority of firms can be considered small.
7.
Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed
a size standard for small businesses specifically applicable to local exchange services. The closest
applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.12 According to Commission data,
1,307 carriers reported that they were incumbent local exchange service providers.13 Of these 1,307
carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees.14
Consequently, the Commission estimates that most providers of local exchange service are small entities
that may be affected by our action.
4

See 5 U.S.C. § 603(b)(3).

See 5 U.S.C. § 601(6).

See 5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the Small Business
Act, 15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an
agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity
for public comment, establishes one or more definitions of such term which are appropriate to the activities of the
agency and publishes such definition(s) in the Federal Register.”

See 15 U.S.C. § 632.

See SBA, Office of Advocacy, “Frequently Asked Questions,”
http://www.sba.gov/sites/default/files/advocacy/FAQ_March_2014_0.pdf (last visited July 21, 2014).

13 C.F.R. § 121.201, NAICS code 517110.

U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and Firm
Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010).

See id.

13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry
Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service).

See id.

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8.
Incumbent Local Exchange Carriers (incumbent LECs). Neither the Commission nor
the SBA has developed a size standard for small businesses specifically applicable to incumbent local
exchange services. The closest applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer
employees.15 According to Commission data, 1,307 carriers reported that they were incumbent local
exchange service providers.16 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees
and 301 have more than 1,500 employees.17 Consequently, the Commission estimates that most providers
of incumbent local exchange service are small businesses that may be affected by our action.
9.
We have included small incumbent LECs in this present RFA analysis. As noted above,
a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard
(e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its
field” of operation.18 The SBA’s Office of Advocacy contends that, for RFA purposes, small incumbent
LECs are not dominant in their field of operation because any such dominance is not “national” in
scope.19 We have therefore included small incumbent LECs in this RFA analysis, although we emphasize
that this RFA action has no effect on Commission analyses and determinations in other, non-RFA
contexts.
10.
Competitive Local Exchange Carriers (competitive LECs), Competitive Access
Providers (CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither
the Commission nor the SBA has developed a small business size standard specifically for these service
providers. The appropriate size standard under SBA rules is for the category Wired Telecommunications
Carriers. Under that size standard, such a business is small if it has 1,500 or fewer employees.20
According to Commission data, 1,442 carriers reported that they were engaged in the provision of either
competitive local exchange services or competitive access provider services.21 Of these 1,442 carriers, an
estimated 1,256 have 1,500 or fewer employees and 186 have more than 1,500 employees.22 In addition,
17 carriers have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have
1,500 or fewer employees.23 In addition, 72 carriers have reported that they are Other Local Service
Providers.24 Of the 72, 70 have 1,500 or fewer employees and two have more than 1,500 employees.25
Consequently, the Commission estimates that most providers of competitive local exchange service,
competitive access providers, Shared-Tenant Service Providers, and Other Local Service Providers are
small entities that may be affected by our action.
15

See 13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service at Table 5.3.

See id.

5 U.S.C. § 601(4).

See Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to William E. Kennard, Chairman, FCC (May
27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA incorporates
into its own definition of “small business.” See 15 U.S.C. § 632(a); see also 5 U.S.C. § 601(4). SBA regulations
interpret “small business concern” to include the concept of dominance on a national basis. See 13 C.F.R. §
121.102(b).
20

See 13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service at Table 5.3.

See id.

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11.
Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a
size standard for small businesses specifically applicable to interexchange services. The closest
applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.26 According to Commission data,
359 companies reported that their primary telecommunications service activity was the provision of
interexchange services.27 Of these 359 companies, an estimated 317 have 1,500 or fewer employees and
42 have more than 1,500 employees.28 Consequently, the Commission estimates that the majority of
interexchange service providers are small entities that may be affected by our action.
12.
Local Resellers. The SBA has developed a small business size standard for the category
of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or
fewer employees.29 According to Commission data, 213 carriers have reported that they are engaged in
the provision of local resale services.30 Of these, an estimated 211 have 1,500 or fewer employees and
two have more than 1,500 employees.31 Consequently, the Commission estimates that the majority of
local resellers are small entities that may be affected by our action.
13.
Toll Resellers. The SBA has developed a small business size standard for the category
of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or
fewer employees.32 According to Commission data, 881 carriers have reported that they are engaged in
the provision of toll resale services.33 Of these, an estimated 857 have 1,500 or fewer employees and 24
have more than 1,500 employees.34 Consequently, the Commission estimates that the majority of toll
resellers are small entities that may be affected by our action.
14.
Other Toll Carriers. Neither the Commission nor the SBA has developed a size
standard for small businesses specifically applicable to Other Toll Carriers. This category includes toll
carriers that do not fall within the categories of interexchange carriers, operator service providers, prepaid
calling card providers, satellite service carriers, or toll resellers. The closest applicable size standard
under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a business is
small if it has 1,500 or fewer employees.35 According to Commission data, 284 companies reported that
their primary telecommunications service activity was the provision of other toll carriage.36 Of these, an
estimated 279 have 1,500 or fewer employees and five have more than 1,500 employees.37 Consequently,
the Commission estimates that most Other Toll Carriers are small entities that may be affected by our
action.

See 13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service at Table 5.3.

See id.

See 13 C.F.R. § 121.201, NAICS code 517911.

See Trends in Telephone Service at Table 5.3.

See id.

See 13 C.F.R. § 121.201, NAICS code 517911.

See Trends in Telephone Service at Table 5.3.

See id.

See 13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service at Table 5.3.

See id.

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15.
Payphone Service Providers (PSPs). Neither the Commission nor the SBA has
developed a small business size standard specifically for payphone services providers. The appropriate
size standard under SBA rules is for the category Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees.38 According to Commission data,39
535 carriers have reported that they are engaged in the provision of payphone services. Of these, an
estimated 531 have 1,500 or fewer employees and four have more than 1,500 employees.40 Consequently,
the Commission estimates that the majority of payphone service providers are small entities that may be
affected by our action.
D.

Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements for Small Entities

16.
In this Second Further Notice, the Commission seeks public comment on options to
reform the inmate calling service market. Possible new rules could affect all ICS providers, including
small entities. In proposing these reforms, the Commission seeks comment on various options discussed
and additional options for reforming the ICS market.
E.

Steps Taken to Minimize the Significant Economic Impact on Small Entities, and
Significant Alternatives Considered

17.
The RFA requires an agency to describe any significant, specifically small business,
alternatives that it has considered in reaching its proposed approach, which may include the following
four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements
or timetables that take into account the resources available to small entities; (2) the clarification,
consolidation, or simplification of compliance and reporting requirements under the rules for such small
entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of
the rule, or any part thereof, for such small entities.”41
18.
The Second Further Notice seeks comment from all interested parties. The Commission
is aware that some of the proposals under consideration may impact small entities. Small entities are
encouraged to bring to the Commission’s attention any specific concerns they may have with the
proposals outlined in the Second Further Notice.
19.
The Commission expects to consider the economic impact on small entities, as identified
in comments filed in response to the Second Further Notice, in reaching its final conclusions and taking
action in this proceeding. Specifically, the Commission will conduct a cost/benefit analysis as part of this
Second Further Notice and consider the public benefits of any such requirements it might adopt, to ensure
that they outweigh their impacts on small businesses.
F.

Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

20.

None.

See 13 C.F.R. § 121.201, NAICS code 517110.

See Trends in Telephone Service at Table 5.3.

See id.

5 U.S.C. § 603(c)(1)–(c)(4).

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STATEMENT OF
CHAIRMAN TOM WHEELER
Re:

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375.

Last summer, thanks to the leadership of Chairwoman Clyburn, the Commission took an
important step forward to reform exorbitant inmate calling service (ICS) rates. The action, which was a
decade overdue, was the right thing to do, not just for the families who directly benefit from lower rates,
but for all of us. No one can deny the societal benefits of reducing recidivism rates by enabling inmates to
stay connected with their families and loved ones. I won’t restate the many, many clear reasons that
tackling this issue is so important. I will simply fully associate myself with the comments and leadership
of Commissioner Clyburn on this topic.
When I became Chairman, one of the easiest decisions I made was to communicate my
commitment to Commissioner Clyburn to continue the ICS reform process and to do so with
Commissioner Clyburn as the undisputed leader on the issue. Today’s item reflects that commitment and
I am pleased to support it for several reasons.
First, despite positive steps forward on interstate rates, it is clear that a more comprehensive
approach to reform is necessary to address problems that continue to drive up rates. Namely, charges for
“ancillary services” for an increasing array of services are on the rise; intrastate rates, which encompass
the vast majority of calls from correctional facilities, remain very high in many states; and, most
importantly, site commissions – payments required by correctional institutions from ICS providers for the
privilege of serving those facilities – continue to be demanded and appear to be the driving force behind
increased rates and ancillary fees. There are some positive signs that reform of interstate rates has resulted
in reduced rates and increased calling, but absent a comprehensive solution to the problem we will
continue to find ourselves in a never ending game of ICS rate whack-a-mole.
Second, the item is consistent with my belief that the best way to bring high-quality, affordable
service to consumers is through competition. No one could mistake ICS as a competitive market today
when exorbitant rates are driven by site commissions demanded by correctional facilities, not by who can
provide the best service at the lowest price. As I have said in the context of broadband competition, where
competition can exist, we will encourage it and where meaningful competition is not available, the
Commission will work to create it. The same principles hold true here. Today’s item seeks comment on a
variety of issues which are fundamentally seeking a comprehensive path forward that ensures ICS rates
are driven by competition wherever possible. To that end, I am pleased that Commissioner O’Rielly
offered a section in the item specifically seeking comment on additional ways in which we can facilitate
increased competition in the ICS market.
Third, the item recognizes that correctional facilities may incur some costs in the provision of ICS
and, if so, seeks comment on how facilities should recover these costs. The record is sparse with
information on this topic, so we invite parties to submit additional data in to the record and ideas on how
to ensure that facilities can recover costs incurred to operate calling systems, but not for unrelated
activities. The item also seeks comment on appropriate transition periods for reform so providers and
facilities can adapt. In short, the item strikes the right balance between reforming a system to ensure just
and reasonable rates while also ensuring that providers are fairly compensated and facilities are able to
adjust to reform.
As always, I want to thank Julie Veach and the talented team in the Wireline Bureau for their
hard work on this item. Finally, in praising Commissioner Clyburn for her leadership on this issue, I
would be remiss if I did not acknowledge Rebekah Goodheart, Commissioner Clyburn’s wireline legal
advisor, who has so effectively and diligently coordinated this item with the Bureau and the other
Commissioner offices. Hats off to you, Rebekah, for your great work.

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STATEMENT OF
COMMISSIONER MIGNON CLYBURN
Re:

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375.

If ever there were a time to stand up for fundamental fairness, this is it. As one of America’s
most beloved heroes famously observed: “The moral test of government, is how it treats those who are in
the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the
shadows of life, the sick, the needy and the handicapped.” That great man was Vice President Hubert H.
Humphrey, a leader who put humanity before politics. And as I think about the action we took last year, I
believe he would have been proud.
For nearly a decade, the earnest efforts of beleaguered lawyers and loved ones of American
inmates fell short in the pursuit of equity and due process. Their quest for something as basic as making a
phone call to family and friends-- at a reasonable and affordable price-- was set aside as the FCC pursued
some more lofty goals. But for the persistent pleas of an unlikely heroine—Mrs. Martha Wright, a
grandmother from Washington, D.C., who wanted nothing more than to stay in touch with her grandson -thousands of mothers, fathers, and families of inmates would not have more of an opportunity to do what
the rest of us take for granted--to stay in touch with the people we care about the most.
When the FCC took its first steps to provide relief to the families of inmates, we struck a chord
for the public interest. We brought scores of families closer to parity with other Americans, who are able
to call anywhere in our country without making critical economic trade-offs.
With the support of my colleague Commissioner Rosenworcel, the impact of the first phase of
reform of our nation’s inmate calling regime has been tremendous. Our decision shows that doing the
right thing can have reverberating benefits. Since February, when the interstate rate caps of $0.21 for
debit/prepaid calls and $0.25 for collect calls went into effect, call volumes across state lines have
increased nearly 70% in some facilities, and over 300% at one state department of corrections.
These are not just empty statistics. More affordable rates can help bring about increased and
regular contact between inmates and their families. Studies show that having meaningful communication
beyond prison walls can make a real difference when it comes to maintaining community ties, promoting
rehabilitation, and reducing recidivism.
And recent data underscore the critical need, to reduce recidivism rates in our nation. In April
2014, the Department of Justice released a report analyzing the five-year recidivism rates for over
400,000 prisoners in 30 states and the results are troubling. Two-thirds were rearrested within three years,
and three-quarters were rearrested within five years. These trends come with enormous societal costs. In
addition to more crime, crowded correctional facilities, more expensive prisons, and the judicial time
required to prosecute these offenses, it costs an average of $31,000 per year to house each inmate.
But what the statistics do not show, is the personal impact: 2.7 million children, who have
committed no crime, are being punished by an unjust and unreasonable inmate calling structure. In
addition to the anxiety associated with a parent who is absent on a daily basis, these young people suffer
severe economic and personal hardships and more likely to do poorly in school all exacerbated by an
unreasonable rate regime.
While an affordable calling structure will not solve every problem, by reforming the inmate
calling regime, we can make a difference for struggling families wishing to maintain contact. And as a
public servant, I strongly believe that those who have the power and the ability to promote the public
interest should not make excuses or hesitate to do so.
While the results from last year’s Order are significant, we have a lot more work left to do. The
majority of calls from facilities are to friends, family and legal representatives within the same state, and
our Order did not address these intrastate calls. While I sincerely hoped that the states which have yet to
72

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reform their intrastate inmate calling rate structures would have followed the FCC’s lead, only a few have
elected to do so.
And what has been the result of that inaction? Since our Order was released, we have witnessed
disturbing trends. New and increased ancillary charges have appeared, intrastate rates have inched higher
than the already outrageous costs, and payments from the providers to those facilities – known as site
commissions – have skyrocketed to as high as 96% of gross revenues. While I made it clear early on that
I prefer to refrain from regulation, in this instance the record shows, that a comprehensive approach which
addresses all rates and fees to enable this market to function properly is warranted.
In my 16 years as a regulator, this is the clearest, most egregious case of market failure I have
seen. Instead of getting better, rates and fees for consumers are more onerous. Thus, it is imperative for
us to move quickly to adopt an Order for total reform.
While we sought comment on permanent interstate and intrastate reforms last year, intervening
developments necessitate launching a Second Further Notice of Proposed Rulemaking, to ensure we are
on solid ground, to reform to address all aspects of inmate calling services. The Commission has
concluded tentatively, that Congress gave it express authority in Section 276, to establish a per-call
compensation plan “for each and every intrastate and interstate call” and it also directs that the
Commission “shall preempt” any inconsistent state regulations. Congress’s directive could not be more
clear here, and it is past time for the FCC to act consistent with the statute and bring certainty to the
industry and consumers.
Launching this Second Further Notice also gives us the unique opportunity to evaluate the impact
our reforms have had on inmates, consumers, providers and correctional facilities, and ask how best to
structure comprehensive reforms, for interstate and intrastate rates. There have also been intervening
developments that would benefit from comments from the public, including the submission of data from
inmate calling providers in August of 2014, as required by last year’s Order proposals, for comprehensive
reform filed by several ICS providers, and action by the Alabama Public Service Commission, which
included the adoption of caps on ancillary charges.
While I continue to support the cost-based approach in the Order, moving forward with
comprehensive reform allows us to seek comment on a simpler framework with the goal of allowing
market forces to put pressure on rates, rather than the Commission setting up a more regulatory, separate
rate tied per facility. Such framework was not possible with the incremental interstate only approach. To
the contrary, as we have seen, intrastate rates and fees can circumvent some of the benefits of interstateonly reforms. The disturbing trends of higher site commissions, coupled with new and increasing
ancillary charges, underscore the fact that we need a comprehensive approach that addresses all rates and
fees for the market to function properly.
This Second Further Notice represents a balanced approach that includes rates that are higher than
I would have proposed, and transitions that are longer than I would have preferred, but it addresses
concerns raised in the record and strikes a reasonable path forward that is administratively simple and less
burdensome for consumers, providers, facilities and the Commission.
I want to thank my colleagues for their collaboration on this item. I am extremely thankful to the
Chairman for continuing to make this issue a priority for the agency. And I will be forever grateful for
the continued assistance of my friend Commissioner Jessica Rosenworcel, whose support today, and vote
last year, has enabled this nation to realize the tremendous results we see today. And I appreciate the
constructive input of Commissioner O’Rielly, including his suggestion to seek comment on others ways
to promote competition in this industry without regulation.
For as long as I can remember, the benefits and trade-offs from compromises have netted some
impressive policy results. We should not, however, compromise the means we possess to grant relief to
the most vulnerable in our society. All told, we offered edits to nearly 45% of the paragraphs in the item
in the spirit of compromise.
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But I could not agree to seek comment on a reading of the statute that suggested Congress
intended section 276 to require the payment of site commissions, nor could I agree to questions that
undercut last year’s Order or previous decisions made by this agency. Today, I can say with comfort and
good conscience that I cast my vote knowing that I did everything possible to reach a good faith
consensus, and I am pleased to offer my full support of this Second Further Notice. As Hubert Humphrey
said: “You can always debate about what you should have done. The question is what are you going to
do?”
While today’s vote cannot make up for the inactions of the past, it is my hope that an expeditious
move to a final order will finally bring relief to the 2.7 million children who just want to hear their
parents’ voice and show that the process can work for them too.
Mr. Chairman, as I yield, allow me to thank the small but dedicated team of the Wireline
Competition Bureau led by Julie Veach, including Kalpak Gude, Lynne Engledow, David Zesiger,
Rhonda Lien, Don Sussman, Doug Galbi as well as the support of Patrick Halley on behalf of the
Chairman’s office, Valery Galasso from Commissioner Rosenworcel’s office, my law clerk Christine
Sanquist and my legal advisor Rebekah Goodheart.

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FCC 14-158

STATEMENT OF
COMMISSIONER JESSICA ROSENWORCEL
Re:

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375.

With this rulemaking, we take a critical step toward addressing the high cost that prison inmates
and their families pay for phone service. This is not just an issue of markets and rates—this is a broader
issue of social justice.
In many cases, inmates are separated from their families by hundreds of miles, and families may
lack the time and means to make regular visits. Phone calls are the only way these families can stay
connected. But when a single call may cost as much as what you and I pay for unlimited phone service,
the financial burden of staying in touch may be too much for inmates’ families to bear. This harms the
families and children of the incarcerated. But it goes beyond that. It harms all of us because we know
that regular contact between prisoners and family members reduces recidivism. And in a country with the
highest per capita incarceration rate in the world, where we spend nearly $58 billion annually to manage
its prison population—all of us should care about reducing recidivism.
Last year, the Commission took its first big step to address this problem. As a result, we reduced
interstate long-distance inmate calling rates by nearly 40 percent. But we vowed to do more—and that is
why we are here today. This new rulemaking seeks to address the exorbitant rates that prisoners and
families of prisoners still face for in-state calls and slew of suspect fees for ancillary services and
commission charges.
I am pleased to support today’s rulemaking. I believe that when history is written, we will be
able to say we did good and cleaned up questionable charges and usurious rates. Moreover, I believe that
when history is written, it will show that there are two women who deserve credit for righting this wrong.
The first is Martha Wright, who more than a decade ago, petitioned this agency because she thought it
was unacceptable that she had to pay outlandish fees just to stay in touch with her grandson. The second
is my colleague Commissioner Mignon Clyburn, who has been a tireless advocate for fixing this problem.
Our arc for action may be far too long, but it will bend toward justice. These two women are chiefly
responsible—and I am proud to support them.

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FCC 14-158

STATEMENT OF
COMMISSIONER AJIT PAI
CONCURRING IN PART AND DISSENTING IN PART
Re:

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375.

Two years ago when we opened this docket with a unanimous Notice of Proposed Rulemaking, I
welcomed the opportunity to address the petition filed by Martha Wright almost a decade before, when
she came to the FCC seeking redress for the high rates she paid to speak with her then-incarcerated
grandson. As I said then, “I am open to exploring whether there is action we can and should take,
consistent with our legal authority, to address the issues identified in Martha Wright’s petition for
rulemaking.”1 That remains true today.
But I cannot support rules that lack a solid legal foundation. While I did not doubt that last year’s
order was motivated by the best of intentions, I could not countenance its legal flaws—flaws that
ultimately led the D.C. Circuit to stay most of the adopted rules, a stay that remains in effect today.2
When this Second Further Notice first circulated, I feared the Commission was headed down that
path again. The proposals seemed to assume that the Communications Act set no limits on our authority,
the data analysis was one-sided, and alternatives to highly intrusive regulation were few.
That’s why I was pleased when I reached an agreement with my colleagues that we would work
together to modify the Second Further Notice so that it would be like the initiating Notice: All
Commissioners would be able to ask questions, assess the data, and seek comment on alternatives. As a
firm believer in the marketplace of ideas, I welcomed this inclusive process because it offered the hope
that the Commission would explore all issues fully and fairly, ensuring that we would have a solid record
on both the law and the facts before making a decision.
But when I offered my suggestions, some topics suddenly became off limits and the deal was
taken off the table. I was told that additional questions concerning our legal authority would not be asked
and that data showing that the costs of providing service at the smallest jails exceed the costs at prisons on
average by 14.5 cents would not be included.3 I was shocked and disappointed at this decision—a
decision which unnecessarily and unwisely rejects an open-minded, consensus-based approach to
examining this issue, and one which I cannot support. I fear this decision bodes poorly for this
proceeding. For if we cannot agree to gather all the evidence, and if we refuse to consider the limits of
our authority, how can we possibly agree on a solution that comports with the law?
Nevertheless, I appreciate that my colleagues amended the Second Further Notice to include
alternatives to their preferred course of action, and I will accordingly be voting to concur in part.

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed Rulemaking, 27 FCC Rcd
16629, 16662 (2012) (Statement of Commissioner Ajit Pai).

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Report and Order and Further Notice of
Proposed Rulemaking, 28 FCC Rcd 14107, 14218 (2013) (Dissenting Statement of Commissioner Ajit Pai); Securus
Techs. v. FCC, No. 13-1280, Order (D.C. Cir. Jan. 13, 2014).

Table One reports the average per-minute debit/prepaid costs of prisons as 10.0 cents, 14.0 cents, and 9.9 cents
using three separate methodologies. Applying those same methodologies to the smallest jails (i.e., those with
average daily populations of 0–99) yields average costs of 26.3 cents, 18.8 cents, and 32.2 cents. Thus the
difference in average costs ranges from 4.8–22.3 cents with an average difference of 14.5 cents.

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STATEMENT OF
COMMISSIONER MICHAEL O’RIELLY
CONCURRING IN PART AND DISSENTING IN PART
Re:

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375.

There is no dispute that the prison payphone market as a whole does not seem to be functioning
properly. I concur with the initiation of this Second Further Notice to review and consider comments to
address the problem. Where I may differ from some of my colleagues is on how best to tackle it. I would
prefer to permit real competition within the facilities because, over time, competition has proven to be the
best way to protect and benefit consumers, lower costs, and encourage innovation. Therefore, I am glad
that the Second Further Notice now includes a section on ways to reduce barriers to entry and
competition.
Working with Commissioner Clyburn and her staff, as well as with the Chairman’s office and
Bureau staff, questions about ways to remove barriers to competition were added and the item was edited
to strike a more neutral balance throughout. This process worked for me, and it is what enables me to
concur in part.
The reason I dissent in part, however, is that absent a compelling and actionable record on
competition, the Second Further Notice leads us down a highly regulatory path that I would not have
imagined possible based on the statute alone. Section 276 was intended to protect payphone providers
that had been unable to receive fair compensation for their service, not to dictate, for example, whether
they charge per minute or per call, or how they recover legitimate fees. Moreover, while we all must
review the record in response to the Second Further Notice, I am concerned that this extensive item and
the Commission’s previous work in this area have set the stage for extreme rate regulation once more that
I am unlikely to favor.