Prison Phone Justice

Before The
Federal Communications Commission
Washington, D.C. 20554
In the Matter of
Implementation of Pay Telephone
Reclassification and Compensation
Provisions of the Telecommunications
Act of 1996

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)
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CC Docket No. 96-128

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COMMENTS OF THE
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
David C. Bergmann
Chair, NASUCA Telecommunications Committee
Assistant Consumers’Counsel
Ohio Consumers’Counsel
10 West Broad Street, Suite 1800
Columbus, Ohio 43215-3485
Elizabeth A. Noël
People’s Counsel
Office of the People’s Counsel
D.C. Bar No. 288965
Joy M. Ragsdale
Assistant People’s Counsel
D.C. Bar No. 472458
Office of the People’s Counsel
For the District of Columbia
1133 15th Street, N.W., Suite 500
Washington, D.C. 20005-2710
Gerald A. Norlander, Esq.
Executive Director
Public Utility Law Project
90 State Street, Suite 601
Albany, NY 12207
NASUCA
8300 Colesville Road, Suite 101
Silver Spring, MD 20910

Dated: March 10, 2004

Table of Contents
I. INTRODUCTION ................................................................................................................3
A. SUMMARY STATEMENT ..............................................................................................4
B. RECOMMENDATIONS...................................................................................................4
II. BACKGROUND .................................................................................................................5
III. ARGUMENT .....................................................................................................................7
A.

THE FCC SHOULD BAN COMMISSIONS PAID TO PRISON FACILITIES
BECAUSE THEY DO NOT FURTHER THE FCC’S GOAL OF ENSURING THAT
EVERY AMERICAN HAS ACCESS TO AFFORDABLE TELEPHONE SERVICE AT
JUST AND REASONABLE RATES. .............................................................................7

B.

THE FCC SHOULD ESTALISH A CONSISTENT POLICY TO REMEDY
ARBITRARY INTERSTATE INMATE TELEPHONE CHARGES .............................10

C.

THE COMMISSION SHOULD PROHIBIT THE CONTAMINATION OF
REGULATED TELECOMMUNICATIONS RATES WITH COSTS OF ANCILLARY
SERVICES AND COMMISSIONS...............................................................................15

IV. CONCLUSION ................................................................................................................18

Before The
Federal Communications Commission
Washington, D.C. 20554

In the Matter of
Implementation of Pay Telephone
Reclassification and Compensation
Provisions of the Telecommunications
Act of 1996

)
)
)
)
)

CC Docket No. 96-128

)

COMMENTS OF THE
NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
I. INTRODUCTION
The National Association of State Utility Consumer Advocates1 (“NASUCA”) submits these
comments in response to the Public Notice (“Notice”) released on December 31, 2003, in the
above proceeding.2 Through the Notice, the Federal Communications Commission
(“Commission” or “FCC”) seeks comment on the petition filed by Martha Wright and other
prison inmate and non-inmate petitioners (“Petitioners”) requesting the FCC to prohibit
exclusive calling service agreements and collect call only restrictions at privately administered
prisons. The Commission is considering the Wright Petition as an ex parte presentation in the
Inmate Payphone Rulemaking, thus enlarging the scope of this proceeding to include comments
1

2

NASUCA is a non-profit, national association organized in 1979, whose members are designated by the laws of
their respective jurisdictions to represent the interests of utility consumers before state and federal regulators and
in the courts. NASUCA members operate independently from state utility commissions, primarily as advocates for
residential ratepayers, although some members also represent small business ratepayers. Some NASUCA member
offices are separately established advocate organizations while others are divisions of larger state agencies (e.g.,
the state Attorney General’s office). Associate and affiliate NASUCA members also serve utility consumers, but
have not been created by state law or do not have statewide authority.
Petition for Rulemaking Filed Regarding Issues Related to Inmate Calling Services Pleading Cycle Established,
DA 03-4027, CC Docket No. 96-128 (Dec. 31, 2003) (“Wright Petition”). On February 3, 2004, by Order, the
FCC extended the filing dates for initial and reply comments to March 10, 2004, and March 31, 2004,
respectively. In re Implementation of Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Order, CC Docket No. 96-128 (Feb. 3, 2004).

addressing commissions and rates charged at privately and publicly administered prison or
correctional facilities. In the Wright Petition, the Petitioners further request the Commission
establish rules that permit competition among carriers who provide telephone service to these
facilities. NASUCA’s comments on exorbitant inmate phone service rates are submitted herein.
A. SUMMARY STATEMENT
NASUCA urges the Commission to take immediate and strong action to regulate interstate
phone rates paid by the recipients of inmate calls who, while not behind bars, are the last
consumers truly captivated by a monopolistic payphone market. In many states in the United
States, inmates are subject to telephone rates that are unjust and unreasonable. Persons called by
inmates and inmates represent the only remaining population that has been denied the benefits of
competition and technological productivity in the telecommunications industry. The burden of
paying these extraordinarily high rates is primarily borne by low-income consumers and by those
who have a critical need to communicate by telephone. In these comments, NASUCA provides
specific recommendations for FCC action that will ensure families of inmates are not exposed to
an increased risk of service disconnection as a consequence of unjust and unreasonable phone
rates imposed upon inmates.
B. RECOMMENDATIONS
First, NASUCA recommends the Commission find that interstate rates for inmate telephone
service are not just and reasonable as required under Section 201 of the federal
Telecommunications Act of 1996 (“the Act”).3 Second, the Commission should prohibit
commissions paid to prison or correctional facilities, which inflate the cost of interstate calls

3

Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (“1996 Act”). The 1996 Act amended the
Communications Act of 1934. Hereinafter, the Communications Act of 1934, as amended by the 1996 Act, will
be referred as “the Act,” and all references to the Act will be as codified in the United States Code.

from inmates and represent costs that are unrelated to the provision of a telecommunications
service. Third, the Commission should require that administrators of custodial institutions adopt
low-cost interstate calling methods, such as prepaid debit accounts, that are consistent with
specific security needs of the institution. Fourth, the Commission should permit competition
where feasible among service providers offering interstate calling services to prisons and
correctional facilities. Finally, as an alternative to the availability of access to multiple
providers, the Commission should require that administrators of custodial facilities secure the
lowest-cost interstate services, consistent with the needs of the institution and the inmates,
through an RFP or similar process.
II. BACKGROUND
The FCC has previously discussed rates and many of the key issues for inmate telephone
service NASUCA raise in these comments. As described by the FCC, inmate telephone service
is typically structured as follows:
[T]he confinement facility awards a contract to provide calling services by
competitive bidding and grants the winning provider a monopoly on all inmate
calling services. To have a realistic chance of winning a contract, the bidder must
include an amount to cover commissions paid to the inmate facility. In the case of
state prisons, which are often located far from major population centers and where
consequently most of the traffic is toll traffic and not subject to state ceilings for
local calls, the confinement facility monopolies prove sufficiently remunerative to
allow the ICS provider to offer generous commissions. In fact, under most
contracts, the commission is the single largest component affecting the rates for
inmate calling service.**** [T]hese commissions have typically ranged between
roughly 20 percent and 60 percent.4
The Commission has also observed that although correctional institutions use a form of
competitive bidding to select inmate telephone service providers, this amounts to selection of a
4

In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Order on Remand and Notice of Proposed Rulemaking, CC Docket No. 96-128,
¶¶10 and 28 (Feb. 21, 2002) (footnotes omitted) (emphasis added), available at
http://www.pulp.tc/FCCInmatePhoneOrder02-39.pdf.

winning monopolist who will pay the most to the state for the market power. This “competitive”
procurement of service does not, however, ensure competitive rates and charges for those who
pay for the service. Instead, the bidding process inflates those rates:
Inmate calling is economically different than other payphone services in two
respects. First, inmates have none of the alternatives available to non-incarcerated
payphone customers. Inmates only have access to payphones, not cell phones, and
inmates lack dial-around capacity. Therefore, neither the inmates who initiate the
call nor the individuals who bear the cost of inmate calls – most often the
inmates’families – have a choice among providers. Second, the competition that
does exist – among ICS providers in the bidding process – does not exert
downward pressure on rates for consumers. Instead, perversely, because the
bidder who charges the highest rates can afford to offer the confinement facilities
the largest location commissions, the competitive bidding process may result in
higher rates.5
The FCC previously urged states to review more closely the rates for calls from inmates, and
particularly singled out the problems associated with the commission element:
[A]ny solution to the problem of high rates for inmates must embrace the states.
States are encouraged to examine the issue of the significant commissions paid by
ICS providers to confinement facilities and the downward pressure that these
commissions have on ICS providers’net compensation and, more important, the
upward pressure they impose on inmate calling rates.6
In the Wright Petition, the Petitioners requested that the Commission address anticompetitive
practices that result in excessive inmate telephone service rates at privately administered
prisons.7 Second, the Petitioners assert that exclusive service agreements do not advance the
public interest because such agreements fail to satisfy Section 201(b) of the Act. Petitioners
further ask the Commission permit multiple long distance carriers to interconnect with prison
telephone systems in a manner that promotes competition and offer alternative calling options.

5

Id., ¶ 12 (emphasis added).

6

Id., ¶ 29 (emphasis added).

7

Wright Petition, at 10.

III. ARGUMENT
A. THE FCC SHOULD BAN COMMISSIONS PAID TO PRISON FACILITIES
BECAUSE THEY DO NOT FURTHER THE FCC’S GOAL OF ENSURING THAT
EVERY AMERICAN HAS ACCESS TO AFFORDABLE TELEPHONE SERVICE
AT JUST AND REASONABLE RATES.
Commissioner Adelstein recently stated that the FCC is “working to make sure that the
federal universal service fund continues to ensure that every American has access to the best
telecommunications services at comparable rates.”8 High commissions paid by telephone
companies to prisons for the right to be the exclusive provider of inmate call services are being
added to the rates and bills for the service. 9 However, in a maze of inconsistent FCC rules and
state regulatory commission rules and decisions, a regulatory gap has left some Americans out of
the promise of affordable telephone service because the FCC has not prevented prison systems
from charging exorbitant rates for interstate calls from prison inmates. This regulatory gap
causes substantial hardship to consumers, is not in the public interest, and is contrary to law.
Under contracts with prison administrators, telephone companies are charging unreasonable
rates for interstate calls placed by prison inmates. These high charges inhibit usage of the
telecommunications network -- communication between inmates and relatives and friends “on
the outside” that would otherwise occur if rates were reasonable. As a consequence, heavy
burdens are imposed on those who receive and pay for collect calls, potentially increasing the
risk of phonelessness, thereby reducing telephone subscription rates -- all contrary to the
universal and affordable service principles of under Section 254(b) of the Act.10

8

9

Remarks of Commissioner Jonathan S. Adelstein, Preserving the Public Interest in a Dynamic
Telecommunications Industry, 2004 Nat’l Governors Winter Meeting (Feb. 22, 2004).

See, e.g., New York State Earns Top Dollar From Collect Calls by Its Inmates, N.Y. Times, Nov. 30, 1999; When
Johnny Calls Home From Prison, Editorial, N.Y. Times, Dec. 6, 1999.
10
47 U.S.C. § 254(b).

The FCC has found that prison rates must conform with Section 201(b) of the Act which
specifically provides that “[a]ll charges, practices, classifications, and regulations for and in
connection with such communication service, shall be just and reasonable.”11 The Commission’s
decision to resolve inmate call service complaints on a case-by-case basis and to require oral
disclosure of payphone rates have not led to a more efficient and less intrusive regulatory process
as the FCC optimistically projected in 1998.12 Excessive inmate phone rates have become
increasingly controversial across the country.
The current practice of private and public correctional facilities charging exorbitant (and
unregulated) rates for collect calls placed to consumers is unreasonable. Families of the
incarcerated carry the burden of paying unreasonably high telephone bills, they risk partial
service blocking or disconnections due to unaffordable charges and consequent high arrearages.
Thus, they become victims of abusive monopolistic practices in a time when the national
telecommunications industry is transitioning to a competitive market. Any competition is not for
the benefit of those who make and who pay for the inmate calls, but rather to maximize revenue
from the telephone companies to the prisons.
It is widely accepted that communication with the outside world while confined is a critical
element in the successful readjustment of an inmate after release. Studies suggest that
rehabilitation and the reintegration of inmates and their families play a significant role in
reducing recidivism.13 High commissions paid to prisons are a disincentive for prisons to
negotiate prices that are in the interest of prisoners and their respective families. Therefore,
11

47 U.S.C. § 201(b). In re Billed Party Preference for InterLATA 0+ Calls, CC Docket No. 92-77, 13 FCC Rcd
6122, ¶ 59 (Jan. 28, 1998).

12

In re Billed Party Preference for InterLATA 0+ Calls, ¶ 59.

although the institution receives a windfall in revenues, commissions cause communications
between families to become unaffordable and, thereby, undermine the overriding purpose to
foster affordable service.
The FCC should require providers of interstate inmate operator services to offer a pre-paid
calling option, for example debit calling cards or debit accounts, with greater discounts utilizing
competitive bidding guidelines and prioritization of factors in evaluating competitive bids.
Inmate operator service providers assert their costs are much higher than other alternative
operator service providers because of a higher percentage of uncollectible accounts. However,
new technology is available for pre-paid service offerings to minimize uncollectible accounts.
Use of optional pre-paid discounts would be a “win-win” situation for inmates and their families
– families are charged lower rates and operator service providers would not have to expend
substantial funds and resources on collection efforts.
In some states, prisons across the country have become profit centers for state treasuries.
Prisons have been induced to accept the highest bid that will bring in the most revenue for the
prison – an incentive that often awards the bid to the most expensive instead of the most
economical competitor. Prison administrators assert that revenues from these commissions
support internal inmate welfare funds and, purportedly, advance the welfare of inmates.
However, investigations into various state funds reveal these funds often offset operation and
administrative costs of prison facilities; are sometimes used to balance a state’s general fund
budget and often do not directly contribute to the welfare of inmates. For example, the Maryland
Justice Policy Institute (“MJPI”) reports that Maryland’s Inmate Welfare Fund is used to pay
primarily expenses associated with personnel and maintenance of the prison facilities in addition
13

CLAIRE A. WALKER, PH. D., EXECUTIVE DIRECTOR, Opportunities and Challenges of Protecting and
Reintegrating Families, Pittsburgh Child Guidance Foundation, Oct. 21, 2003, available at

to costs associated with prison services.14 Regardless of the merits of the uses to which the
commissions are put, it cannot be denied that users of interstate telecommunications services are
being charged for services wholly unrelated to the reasonable cost of the telephone service, often
simply to support the state general fund or operation and administrative costs of prison facilities.
B. THE FCC SHOULD ESTALISH A CONSISTENT POLICY TO REMEDY
ARBITRARY INTERSTATE INMATE TELEPHONE CHARGES
In 2002, the FCC declined to act on the problem of prison commissions unrelated to the cost
of service being charged to and paid by consumers through interstate rates, stating that
any solution to the problem of high rates for inmates must embrace the states.
States are encouraged to examine the issue of the significant commissions paid by
[Inmate Calling Service] ICS providers to confinement facilities and the
downward pressure that these commissions have on ICS providers’net
compensation and, more important, the upward pressure they impose on inmate
calling services.15
The Commission recognized that many inmate calls are not interstate in nature, and that
states might adopt more comprehensive policies to abolish or strictly limit the commissions paid
by recipients of inmate calls through all rates, whether interstate or intrastate. While the District
of Columbia and some states and state regulators indeed have made strides in this area, as
discussed below, other states have not. The result is ratemaking chaos, with recipients of
interstate calls subjected to widely varying charges unrelated to the cost of service or any other
valid ratemaking principle.
In 2000, the Citizens United for the Rehabilitation of Errants (“CURE”) launched the
Equitable Telephone Charges (“eTc”) Campaign to challenge prison telephone policies that

14

15

http://trnf.clpgh.org/pcgf/octspeech.html.
See, Maryland Policy Institute, Inc., FY 2000 – Inmate Welfare Fund Expenditures, http://www.md-justice-policyinst.org/IWFund.htm (last visited Mar. 3, 2004).
In re Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Order on Remand and Notice of Proposed Rulemaking, 17 FCC Rcd 3248,
3260, ¶ 29 CC Docket No. 96-128 (Feb. 21, 2002).

allow commissions paid to prisons and restrict calling options to prisoners.16 CURE conducted a
study that shows that several states have initiated legislative and administrative action that
address exorbitant commissions and rates charged by inmate telephone service providers.17
CURE reports that Connecticut, Indiana, New Mexico, South Dakota, Vermont, and the District
of Columbia have led state legislative initiatives in passing laws to prohibit exorbitant
commissions paid to prison or correctional facilities or to restrict the use of inmate welfare
funds.18 In contrast, many other states have not acted, and in others, like New York and
Virginia, the jurisdiction of the state regulatory commissions to examine the reasonableness of
inmate calling rates has been narrowed so as to prevent any review of the commissions.
Following is a summary of recent legislative initiatives enacted in the District of Columbia
and in several states. The purpose is not to be exhaustive, but to illustrate the arbitrariness of the
current rate structures and to highlight the need for the FCC to adopt a consistent interstate
policy to guide states in this matter.
District of Columbia
The District of Columbia was one of the first jurisdictions to enact legislation barring
commissions on inmate phone call services. In November 2000, the District of Columbia
Council passed Bill 13-632, “Fair Phone Charges For Prisoners Act of 2000”. The Office of the
People’s Counsel for the District of Columbia (“OPC DC”) filed testimony supporting Bill 16632 as being in the public interest of D.C. ratepayers. Bill 16-632 prohibits the imposition of
surcharges and commissions in addition to established rates for local and long distance telephone

16

17

18

See, Equitable Telephone Charges (eTc) Campaign - Update March 2003,
http://www.curenational.org/~etc/new_legislation.htm (last visited Mar. 3, 2004).
Id.
Id.

service and regulates the rates on prisoner calls originating in D.C. and from prisons in other
states that have contracted to house D.C. prisoners.19 As a result, there can be no collection of
prison commissions from D.C. residents who accept interstate calls placed by D.C. prisoners
confined in certain facilities in a number of states.20 On the other hand, Virginia residents
receiving interstate calls from an inmate in the same prison as a D.C. prisoner would pay bills
that include commissions to the prisons.
Maryland
As noted above, in 2000, the MJPI conducted an investigation in Maryland that revealed that
the State of Maryland had been operating under the same telephone contracts since 1989,
although renewed contracts had been either extended or slightly modified. Commissions
amounted to approximately 42 percent of the billed amount of long distance calls and 20 percent
of local and non-long distance toll calls.
New York
The New York State Department of Corrections (“NYSDOCS”) receives a substantial
commission collected through the telephone bills for collect calls received by relatives and
friends of state prison inmates. Often inmates are housed at locations far from their home
communities, making in-person visitation is difficult if not impossible, and thus regular
telephone contact is essential for inmates to maintain their family and community ties.

19

In August 1997, President Clinton signed the National Capital Revitalization and Self-Government
Improvement Act (“Revitalization Act”). The Revitalization Act mandated that by October 1, 2001, any person
convicted of a felony in Washington, D.C. be imprisoned by the Federal Bureau of Prisons (“FBOP”) or at an
institution contracted for by Federal Bureau of Prisoners (“FBOP”). The Revitalization Act also mandated
closure of Lorton Correctional Facility by the end of December 2001. Thousands of D.C. prisoners were
transferred to facilities operated by the Corrections Corporation of America (“CCA”) across the country
including Arizona, Montana, Florida, and North Dakota.

According to a NYSDOCS Press Release issued July 31, 2003, “[i]nmates completed nearly 7
million collect-only calls between September 2001 and August 2002, the base year used when
computing the rate change plan. Those calls totaled more than 124 million minutes, generating
gross revenues exceeding $39 million. The Department’s commission rate is 57.5 percent on
those revenues.”21 A NYSDOCS press release on inmate telephone issues, also dated July 31,
2003, indicates that under contracts for inmate telephone services, the state received commission
revenues totaling $109 million during the period April 1, 1996, through March 31, 2001.22
Commissions impose a heavy burden on the lower income recipients of calls from inmates
who accept the calls. Because of the high rates and charges, some call recipients are compelled
to refuse or severely limit the length of their calls. According to a NYSDOCS Press Release,
“[a]ttempted calls that are not completed add in excess of 2 million phone uses per month.”23
The large number of incomplete calls to the call recipient suggests that basic telecommunications
policies to foster affordable and wide usage of the telecommunications network are being
frustrated. The extraction of revenues for the state from relatives of inmates, many of whom are
poor, has the effect of a very regressive state tax on interstate communications of prisoners with
those who can afford it least.

20

21

OPC DC has no information on how effectively prison administrators -- including those from CCA -- are
enforcing Bill 13-632 to ensure that calls from D.C. prison inmates are not embedded with excessive
surcharges.
Prison system implementing new inmate collect call phone rates; Reducing costs for the 83 percent of inmates
furthest from home, DOCS Press Release, July 31, 2003, available at
http://www.docs.state.ny.us/PressRel/phones.html.

22

Inmate pay phone access fosters family ties, enhances security for all, DOCS Press Release, July 31, 2003,
available at http://www.docs.state.ny.us/PressRel/phoneinfo.pdf.

23

Id., at 1.

Despite requests from inmate relative groups, clergy, and others, on October 30, 2003, the
New York PSC issued an order saying it would not examine the reasonableness of the 57.5
percent portion of the rate that is paid to the state.24 As a result, those who pay for interstate calls
from New York state inmates are burdened with rates including heavy commissions to the New
York State Division of Correctional Services that exceed the charges for the telecom service.25
In contrast, those who receive and pay for interstate calls from inmates in other states that have
abolished commissions are not required to pay these state-imposed surcharges on interstate
service.
Virginia
In 2001, the Virginia Legislature directed the State Corporations Commission (“SCC”) to
conduct a study of the inmate telephone service in that state. The SCC report recommended
abolition of commissions and recommended options other than collect calls.26 The SCC had
issued orders beginning an investigation of rates, establishing temporary rates and directing the
provider of inmate telephone service to file cost data to support its rates.27 Subsequently, the
Virginia Supreme Court, in an unpublished order, with two justices dissenting, ruled the SCC

24

See, Case 03-C-1058, Ordinary Tariff Filing of MCI WorldCom Communications to Change Maximum Security
Rate Plan for New York State Department of Corrections from a Mileage-Sensitive Structure for IntraLATA and
InterLATA to a Flat Rate Structure, Order Approving Jurisdictional Portion of Rate, petitions for rehearing
pending, available at http://www.pulp.tc/Inmatephone03c1058order103003.pdf. Separately itemized charges for
commissions to the New York State Division of Correctional Services exceed the charges for the telecom service.

25

See, MCI Worldcom "Maximum Security Rate Plan" tariff for New York, issued Nov. 7, 2003 (NASUCA
Attachment A).

26

Rates Charged to Recipients of Inmate Long Distance Calls, Report of Virginia SCC to Legislature and Governor,
House Document 57 (2001), available at http://www.pulp.tc/SCCReporttoLegislature.pdf.

27

Commonwealth ex rel. Jones v. MCI, Case No. VA PUC 990157 (Sept. 26, 2000), available at
http://www.pulp.tc/SCCOrder09262000.pdf.

lacked any jurisdiction to review the inmate rates.28 As a result, those who pay for interstate
calls from inmates in Virginia facilities must pay rates and bills that include substantial
commissions to the state that have not been subjected to scrutiny of the state utility regulator.
Indiana
In 2002, the Indiana Legislature passed a law, Ind. Code 5-22-23-1, et seq., that places
restrictions on inmate alternative operator service (“AOS”) contracts and on the use of inmate
AOS commission revenue by prisons located in counties with populations of 75,000 or more.
Indiana’s legislative approach is a compromise that has not drawn much opposition from local
government officials in contrast to a total ban on commissions that would have substantially
reduced revenue for local (i.e., city or county) correctional facilities.
As can be seen, the states and the District of Columbia have taken a variety of approaches to
the issue. The key point, however, is that regardless of the actions among the states with respect
to local and intrastate calling charges under their jurisdiction, the FCC has an independent
statutory duty to set reasonable interstate rates. That duty cannot be abdicated or subdelegated to
the states.29 After attempting light regulation, and after some states have failed to act, it is now
incumbent upon the FCC to use its authority to establish just and reasonable rates for interstate
inmate telephone services and thereby fulfill its statutory responsibilities.
C. THE COMMISSION SHOULD PROHIBIT THE CONTAMINATION OF
REGULATED TELECOMMUNICATIONS RATES WITH COSTS OF ANCILLARY
SERVICES AND COMMISSIONS
The Act does not exempt interstate inmate telephone service from the Commission’s
oversight and regulation. The FCC has full jurisdiction over all interstate charges for telephone

28

29

Commonwealth ex rel. Jones v. MCI, (Record Nos. 021262 and 021247 S.C.C. Case No. PUC990157) (Order)
Feb. 28, 2003), available at http://www.pulp.tc/SupCo_Opinion_PUC199900157.pdf.
United States Telecom Association v. FCC, __ F.3d __ , slip op. at 12–18 (D.C. Cir. No. 00-1012, Mar. 2, 2004).

service, which includes any elements paid as commissions by exclusive providers of inmate
calling service. Prisons are not public utilities and have no independent right to furnish a public
utility service to those on the outside who are called by the inmates. Telephone companies with
who prisons contract should fully comply with the Commission’s pricing standards.
In previous FCC decisions, commissions have been deemed justified based on the presumed
“legitimate” security costs embedded in the pricing of telephone rates passed on by
interexchange carriers. However, technological advances have greatly reduced these costs and
have allowed the introduction of low-cost calling methods that can incorporate any security and
monitoring features desired by custodial institutions. Today, commissions paid to many
institutions under telecommunications contracts have been negotiated without proper incentives
to keep end user rates low, a primary reason for increased telephone charges for phone calls
between inmates and their families.
Currently, interstate phone bills paid by inmates, inmates’families, their friends, and other
called parties are contaminated by the inclusion of non-regulated non-telecommunications
costs.30 A telephone within a prison, used to furnish interstate service in connection with outside
calls, must be considered as an extension of the telephone company’s general system and subject
to Commission jurisdiction and regulation; otherwise the public will be subjected to a variety of
rates concocted for extraneous purposes other than the provision of telecommunication services,
and the rates and charges for interstate calls from inmates will in essence be completely
unregulated in some states. Partial regulation of inmate phone calls, as has occurred in New
York and Virginia, is tantamount to no regulation at all.

30

“[C]ompanies now routinely pay prison systems millions in annual fees, which they call commissions, for the
exclusive right to operate the phones. Firms also offer signing bonuses and upfront advances.” Phone Firms
Wrestle for Prisoners’Business in Hot Growth Market; Big Companies Dangle Cash, Add Anti-Fraud Devices
to Entice jail Officials, WALL ST. J., Feb. 15, 1995.

Inmate phone rates typically recover commissions and security costs without any ability of
prison administrators, customers, or regulators to identify the true cost of each component. This
lack of transparency is one of the means by which prison telephone rates are inflated and avoid
scrutiny. Accordingly, NASUCA recommends the Commission require that any security cost,
commission, (to the extent not absolutely prohibited) or other non-telecommunications cost be
stated separately on bills and in underlying contracts between carriers and custodial institutions.
Under these conditions, the Commission would be able to determine whether regulated interstate
telecommunications rates are just and reasonable.
The Commission should not allow interstate rates for customers who enjoy absolutely no
protection from market forces to be shielded from the Commission’s view. This contamination
also undermines the consumer’s and the custodial institution’s ability to seek efficient and
reasonable rates. As an intermediate measure, a requirement that telecommunications rates be
unbundled from non-telecommunications services in inmate calling contracts would counter the
perverse incentives of institutions to select the highest priced carrier instead of the lowest priced
carrier. Persons who need to communicate by telephone with inmates face unreasonably high
rates for a service that is priced as low as two or three cents per minute in the free market.
By removing any consideration of the commission and the security costs from the
telecommunications rates offered by carriers, institutions could seek the low-cost provider and
pass on those savings to inmates. Although NASUCA urges a ban on commissions altogether,
simply unbundling commissions from the underlying telecommunications rate will provide more
transparency, and provide both the carrier and institution with an incentive to propose and accept
lower rates that reflect the existing competitive market.

However, as illustrated by New York, which approved rates that collect a
“nonjurisdictional” 57.5 percent unbundled commission to the prison system,31 a flat ban on
these unconscionable commissions is really necessary to remove all traces of these perverse
incentives.
IV. CONCLUSION
For the reasons set forth herein, NASUCA urges that the Commission make the following
determinations, either through a rulemaking proceeding or by Order:
1. Declare inmate interstate phone rates to be unjust and unreasonable to the extent that such
rates are in excess of the reasonable costs of providing appropriate telecommunications
service to inmates and their called parties. The affidavit of Douglas Dawson (Wright
Petition, Attachment A) provides the record substantial evidence upon which the
Commission may rely in determining the reasonable costs of such services.
2. Prohibit the inclusion of contract commissions in the billing of inmate interstate
telephone services, whether in the form of a rate component or billing line item;
3. Allow affected custodial institutions and telecommunications carriers up to 180 days to
reform their contracts and rates in accordance with the Commission’s determinations;
4. Encourage custodial institutions to develop modern calling methods, such as prepaid
debit accounts with direct dialing, in order to decrease the overall costs of inmate
interstate calls;
5. Encourage custodial institutions to engage in competitive bidding methods or allow
inmate access to multiple competitors in order to secure competitively priced interstate
telephone services; and
6. Encourage custodial institutions to consider the procurement of appropriate security
measures by lower cost software and hardware solutions as opposed to monthly recurring
interstate telecommunications rates.

31

See Case 03-C-1058, Ordinary Tariff Filing of MCI WorldCom Communications to Change Maximum Security
Rate Plan for New York State Department of Corrections from a Mileage-Sensitive Structure for IntraLATA and
InterLATA to a Flat Rate Structure,"Order Approving Jurisdictional Portion of Rate," petition for rehearing
pending, http://www.pulp.tc/Inmatephone03c1058order103003.pdf.

Respectfully submitted,

Signed by
David C. Bergmann
Chair, NASUCA Telecommunications Committee
Assistant Consumers’Counsel
Ohio Consumers’Counsel
10 West Broad Street, Suite 1800
Columbus, Ohio 43215-3485
(614) 466-8574
bergmann@occ.state.oh.us
Elizabeth A. Noël
People’s Counsel
Office of the People’s Counsel
D.C. Bar No. 288965
Joy M. Ragsdale
Assistant People’s Counsel
D.C. Bar No. 472458
Office of the People’s Counsel
For the District of Columbia
1133 15th Street, N.W., Suite 500
Washington, D.C. 20005-2710
(202) 727-3071
Gerald A. Norlander, Esq.
Executive Director
Public Utility Law Project
90 State Street, Suite 601
Albany, NY 12207
(518) 449-3375
NASUCA
8300 Colesville Road, Suite 101
Silver Spring, MD 20910
Phone (301) 589-6313
Fax (301) 589-6380

Dated: March 10, 2004