Prison Phone Justice

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

COMMENTS OF
MARTHA WRIGHT, ET. AL.,
THE D.C. PRISONERS’ LEGAL SERVICES PROJECT, INC.,
CITIZENS UNITED FOR REHABILITATION OF ERRANTS,
PRISON POLICY INITIATIVE, AND
THE CAMPAIGN FOR PRISON PHONE JUSTICE

Lee G. Petro
Jennifer L. Oberhausen
Jennifer M. Roussil
DRINKER BIDDLE & REATH LLP
1500 K Street N.W.
Suite 1100
Washington, DC 20005-1209
(202) 230-5857

March 25, 2013

SUMMARY
The FCC has the sole authority to regulate interstate telecommunications services. The
Petitioners have been urging the FCC to exercise its authority to ensure that “fair”, “just” and
“reasonable” telephone rates are charged to inmates and their friends and families for more than
12 years. Despite the fact that the Petitioners filed two separate proposals to provide relief to the
affected parties, the FCC has failed to act.
Since 2001, when the U.S. District Court directed the FCC to address this issue “with
dispatch,” Inmate Calling Service providers have benefited from this inaction, and have made
billions of dollars by charging rates that far exceed the cost of providing ICS services. As a
result, inmates, their families, and our larger society, have suffered greatly. During this same
time, the technology involved in providing ICS calls has led to enormous cost-savings for the ICS
providers, but ICS customers have not enjoyed concomitant relief through reduced rates. The
only parties benefiting from these technological developments are the ICS providers and the
state, county and local prisons which divide the spoils of these excess profits through revenuesharing practices.
As demonstrated herein, the lack of FCC oversight to ensure just and reasonable ICS
rates, has caused significant harm to millions of people each year. Despite calls from many
organizations, including the FCC’s Consumer Advisory Committee, the National Association of
Regulatory Utility Commissioners, the American Bar Association, the American Correctional
Association, and U.S. and state legislators, the FCC has failed to act.
The issuance of the Notice of Proposed Rulemaking in this proceeding reflects the FCC’s
opportunity to end the abuses in the ICS industry and provide substantial relief to those who are
directly and adversely affected.

The urgent need for FCC action is clear, and there is no

legitimate question that the FCC has the authority to provide the relief the Petitioners seek.

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TABLE OF CONTENTS
SUMMARY....................................................................................................................................... i
TABLE OF CONTENTS .................................................................................................................. ii
BACKGROUND .............................................................................................................................. 3
DISCUSSION .................................................................................................................................. 5
I.

II.

THE FCC HAS STATUTORY AUTHORITY TO ESTABLISH PETITIONER’S
PROPOSED RATES. ............................................................................................................5
1.

Section 276 Of The Communications Act Requires FCC Action. ................................ 6

2.

Section 201 Of The Communications Act Requires Just And Reasonable
Rates. ............................................................................................................................7

3.

FCC Has Authority to Regulate ICS Calls Using VoIP. .............................................. 12

THE RATES PROPOSED HEREIN RESULTS IN “JUST AND REASONABLE”
RATES REQUIRED UNDER THE COMMUNICATIONS ACT. ........................................ 17
1.

Technological Developments Have Fundamentally Changed How Inmate
Calls Are Handled. ...................................................................................................... 17

2.

Technological Development Is Driving Consolidation Among ICS Providers. .......... 18

3.

Despite Technological Developments And Consolidation There Exists a Wide
Disparity in Rates. ...................................................................................................... 19

4.

ICS Providers Profit-Sharing Is Not A Legitimate Cost. ............................................ 21

5.

ICS Providers Regularly Charge Excessive Ancillary Fees. ....................................... 24

III. The ICS Rates and Ancillary Fees Are Unjust And Unreasonable. ...................................25
IV. The Marginal Location Methodology Is Inapplicable To ICS Rates. .................................27
V.

The FCC Must Mandate A Fresh Look Period for Existing Contracts. ............................. 28

VI. THE BENEFITS ASSOCIATED WITH ADOPTION OF BENCHMARK RATES
FAR OUTWEIGH ANY COGNIZABLE COSTS. ............................................................... 30
1.

Establishment Of A Benchmark ICS Rate Is Economically Efficient. ...................... 32

2.

Lowering of Rates Will Have Positive Impact on Recidivism. .................................. 34

3.

Lowering Rates Will Provide Relief to Millions of Families. .....................................37

CONCLUSION .............................................................................................................................. 39

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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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)
)
)
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WC Docket No. 12-375

COMMENTS
Martha Wright, Dorothy Wade, Annette Wade, Ethel Peoples, Mattie Lucas, Laurie
Nelson, Winston Bliss, Sheila Taylor, Gaffney & Schember, M. Elizabeth Kent, Katharine Goray,
Ulandis Forte, Charles Wade, Earl Peoples, Darrell Nelson, Melvin Taylor, Jackie Lucas, Peter
Bliss, David Hernandez, Lisa Hernandez, Vendella F. Oura, along with The D.C. Prisoners’ Legal
Services Project, Inc., Citizens United for Rehabilitation of Errants, the Prison Policy Initiative,
and The Campaign for Prison Phone Justice (jointly, the “Petitioners”) hereby submit these
Comments in response to the Notice of Proposed Rulemaking, released on December 28, 2012,
in the above-captioned proceeding. 1
In the NPRM, the Federal Communications Commission (“FCC”) granted two longpending petitions for rulemaking, filed in 2003 and 2007 2, which sought to establish just and
reasonable “charges, practices, classifications, and regulations” relating to inmate calling

Rates for Interstate Inmate Calling Services, Notice of Proposed Rulemaking, 27 FCC
Rcd 16,629 (2013)(the “NPRM”). The NPRM was published in the Federal Register on January
22, 2013, and established March 25, 2013 as the deadline for filing Comments in this
proceeding. 78 FED REG 4369 (rel. Jan. 22, 2013).
1

See Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, Petition of Martha Wright et al. for
Rulemaking or, in the Alternative, Petition to Address Referral Issues in Pending Rulemaking,
CC Docket No. 96-128 (filed Nov. 3, 2003) (the “First Wright Petition”); See also
Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Petitioners’ Alternative Rulemaking Proposal, CC Docket No.
96-128, at 4-6 (filed Mar. 1, 2007) (the “Alternative Wright Petition”).
2

1

services (“ICS”). 3 Despite the fact that both the First Wright Petition and the Alternative
Wright Petition were separately released for public comment, and an extensive record was
established for each, the NPRM requested that the record be updated, and specifically required
the ICS providers to submit relevant cost data. 4
As detailed below, the Petitioners urge the FCC to adopt benchmark ICS rates for
interstate calls originating from public, private, state, county, and local correctional and
detention facilities. The Alternative Wright Petition sought the establishment of benchmark
ICS rates of $0.20 per minute for debit calls, and $0.25 per minute for collect calls, with no percall charge. The Alternative Wright Petition demonstrated that these benchmark ICS rates were
just and reasonable, and still would have delivered a fair return to the ICS providers. Despite
this showing, the ICS providers repeatedly rejected the proposed benchmark rates, and the FCC
failed to take action over the intervening 5 years.
During this period, while the Petitioners awaited FCC action, the state of the ICS
industry has changed considerably.

Only four ICS providers now account for nearly all

telephone services provided to inmates, and two ICS providers, and Global Tel*Link
Corporation (GTL)

and Securus Technologies, control more 70% of the market.

The

consolidation of the ICS providers has led to large, centralized ICS systems, whereby all calls
leaving correctional and detention centers are routed first to the ICS providers’ call centers,
where the applicable security safeguards are applied. As discussed below, the consolidation of
the ICS providers, and the centralized application of safety protocols, has led to the substantial
reduction in the costs associated with providing ICS. While the Alternative Wright Petition

47 U.S.C. § 201(b) (2012) (“All charges, practices, classifications, and regulations for and
in connection with such communication service, shall be just and reasonable, and any such
charge, practice, classification, or regulation that is unjust or unreasonable is declared to be
unlawful.”).
3

4

NPRM, 27 FCC Rcd at 16,637.
2

sought to establish per-minute rates of $.20 and $.25 respectively, those rates are no longer just
and reasonable.
Therefore, it is now incumbent upon the FCC to establish a benchmark ICS rate cap at
$0.07 per minute, for debit, pre-paid, and collect calls, with no per-call rate, and
no other ancillary fees or taxes, from all private, public, state, county and local
correctional and detention facilities. Any justification for rates above the proposed $0.07
per minute benchmark ICS rate has evaporated during this long-pending proceeding. Moreover,
this proposed rate will continue to provide the ICS providers a fair profit for their services,
regardless of the size of the institution or the volume of originating calls from any given facility.

BACKGROUND
The individually-named parties to this proceeding are the original plaintiffs in a class
action brought in the United District Court for the District of Columbia against Corrections
Corporation of America in 2000, seeking to set aside exclusive telephone contracts among the
private prisons and certain telephone companies. The matter was subsequently referred to the
FCC in August 2001 to act “with dispatch.” 5 These parties have prosecuted actively this action
through The D.C. Prisoners’ Legal Services Project, Inc., before the FCC since 2001, and await a
determination from the FCC on their proposals.
Citizens United for Rehabilitation of Errants (CURE) is a grassroots criminal justice
reform organization with 18,000 members throughout the country. Approximately 60% of
CURE’s members are incarcerated; many of their members have loved ones who are
incarcerated. CURE has been working since the 1990s to reduce the high cost of calls for

5
Wright v. Corrections Corp. of America, C.A. No. 00-293 (GK), Memorandum Opinion,
slip op. at 15 (D.D.C. Aug. 22, 2001). A copy is provided as Exhibit A.

3

incarcerated persons and their loved ones. Since 2000, CURE has conducted the eTc Campaign
(Equitable Telephone Charges) whose sole purpose is to promote lower prison phone rates. 6
The non-profit, non-partisan Prison Policy Initiative was founded in 2001 to examine
how the American system of incarceration negatively impacts everyone, not just the
incarcerated. In 2012, the organization prepared the report "The Price To Call Home: StateSanctioned Monopolization In The Prison Phone Industry," on how the inmate calling service
industry hurts families and undermines public safety. 7
The Campaign for Prison Phone Justice is a national effort challenging high prison
phone rates, including kickbacks to prisons from ICS providers. The Campaign is advocating
across the country that those entities having authority over the rates should lower them where
they are not reasonable. The Campaign is jointly led by the Media Action Grassroots Network,
Working Narratives, Prison Legal News and diverse civil and human rights organizations. The
campaign is also working with Participant Media as part of the social action campaign for Ava
DuVernay’s film Middle of Nowhere.
The Petitioners represent just a small fraction of the parties seeking ICS reform. As
noted in the NPRM, there is substantial focus in and concern about the “wide disparity among
interstate interexchange ICS rate levels and significant public interest concerns.” 8 However, this
substantial interest is not a recent phenomenon.
The Petitioners, along with many other national, state, and local public interest and
social justice organizations have been urging rate reform for years. Despite these efforts, the
First Wright Petition and the Alternative Wright Petition remained pending before the FCC for
years after the District Court directed the FCC to act “with dispatch.” The NPRM asks the

6

See www.etccampaign.com.

7

www.prisonpolicy.org/phones/report.html (Sept. 11, 2012).

8

NPRM, 27 FCC Rcd at 16,629.
4

parties to refresh the record on many of the points that have been extensively and repeatedly
addressed by the Petitioners and the ICS providers since 2003.
As discussed below, while the statutory obligations of the FCC have not changed over the
intervening years, the “facts on the ground” have changed considerably. Technology has driven
the actual cost of ICS calls to a fraction of what they were when the petitions were filed, thus
eliminating any reasonable explanation for charging exorbitant ICS rates to customers. Since
the parties to the ICS contracts share in the bounty of excessive profits earned under the
agreements, there is no incentive for either party to take into account the interests of the actual
customers. Thus, the need for the FCC’s intervention to establish “just and reasonable” rates is
both real and immediate.
DISCUSSION
I.

THE FCC HAS STATUTORY AUTHORITY TO ESTABLISH PETITIONER’S
PROPOSED RATES.
In the NPRM, the FCC requests comment on the “scope of the Commission’s legal

authority to regulate ICS.” 9

The NPRM focuses both on Sections 276 and 201 of the

Communications Act of 1934, as amended (the “Act”) as possible sources for such authority.
The NPRM also raises issues with respect to the transmission of calls using VoIP technology,
and asks whether the use of VoIP “impacts” the statutory analysis. 10
As discussed below, there is no legitimate question that the Act provides the FCC with
sufficient authority to regulate all ICS rates and practices. Section 276 was written specifically
to apply to inmate telephone service, 11 and Section 201(b) prohibits unjust and unreasonable
rates and practices. 12 These provisions apply to ICS providers regardless of the transmission

9

NPRM, 27 FCC Rcd 16,647.

10

Id.

11

47 U.S.C. § 276 (2012).

12

47 U.S.C. § 201(b) (2012).
5

service being used, and must lead to the FCC’s regulation of ICS rates in the form of a
benchmark of setting maximum allowable per-minute rates.
1.

Section 276 Of The Communications Act Requires FCC Action.

Congress granted the FCC explicit authority to regulate ICS under Section 276 of the Act.
Section 276 directs the FCC to “establish a per call compensation plan to ensure that all
payphone service providers are fairly compensated for each and every intrastate and interstate
call,” 13 and specifically includes “inmate telephone service in correctional institutions” in the
definition of “payphone services.” 14
In implementing this provision, the FCC has held that “fair compensation” to payphone
service providers is not a one-way street. Instead, Section 276 requires that rates “balance the
interests of [payphone service providers] and those parties that will ultimately pay” the required
compensation, so that rates are “fair to both payphone owners and the beneficiaries of these
calls.” 15 The FCC ultimately utilized a “bottom-up” methodology to determine what a “fair”
compensation rate would be in the context of payphone services. This “bottom-up” approach
looked at the separate cost elements involved in a call, and established a rate that survived
judicial review. In upholding the “fair” rate, the U.S. Court of Appeals determined that the
FCC’s approach that involved the examination of the separate cost elements was appropriate. 16
Moreover, federal courts have recognized the FCC’s jurisdiction under Section 276 to
address ICS rates and practices. For example, in referring the Wright case to the FCC under the
doctrine of primary jurisdiction, the district court said, “Congress has given the FCC explicit

13

47 U.S.C. § 276(b)(1)(A) (2012).

14

47 U.S.C. § 276(d) (2012).

See Implementation of the Pay Telephone Reclassification and Compensation
Provisions of the Telecommunications Act of 1996, Third Report and Order, 14 FCC Rcd 2545,
2570-2571, 2579 (1999) aff’d, Am. Pub. Commc'ns Council v. FCC, 215 F.3d 51, 58 (D.C. Cir.
2000).
15

16

Id.
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statutory authority to regulate inmate payphone services in particular.” 17

Another federal

district court has also recognized that “Section 276 directs the FCC to create and administer
regulations concerning the provision of payphone services, including both interstate and
intrastate calls,” and that “Section 276 grants the FCC specific authority to regulate inmate
payphone service.” 18
In fact, at least one of the ICS providers has already conceded the applicability of Section
276 to the instant matter. In particular, T-Netix (now Securus) stated:
As the Commission has consistently held, inmate payphones are governed by
Section 276 just as are public payphones…the Commission may exert federal
authority over the rates applied to inmate phones…[and]…Section 276 would
operate to prohibit any state authority from imposing or permitting site
commissions for inmate services. 19
Finally, the U.S. Supreme Court has affirmed the role of Section 276 in prescribing rates,
and noted the interplay between the authority of Section 276 to establish rates, and the agency’s
authority under Section 201, discussed infra, to address unreasonable rates and practices. 20
Therefore, there can be no doubt that the FCC may use its authority under Section 276 to
examine and to regulate ICS phone rates and practices.
2.

Section 201 Of The Communications Act Requires Just And
Reasonable Rates.

Section 201(b) provides the FCC with the broad legal authority to regulate ICS. 21 Under
Section 201(b), the FCC has general authority to prescribe rules and regulations to prohibit

17
Wright v. Corrections Corp. of America, C.A. No. 00-293 (GK), Memorandum Opinion,
slip op. at 8 (D.D.C. Aug. 22, 2001) (citing 47 U.S.C. § 276(d)).
18

Fair v. Sprint Payphone Svcs., Inc., 148 F. Supp. 2d 622 (D.S.C. 2001).

See Initial Comments of T-Netix, Inc., filed May 24, 2002, pg. 6 (T-Netix merged with
Evercom Systems, Inc. on September 9, 2004).

19

See Global Crossing Telecommunications, Inc. v. Metrophones Telecommunications,
Inc., 550 U.S. 124 (2007)(“[Section 276] nowhere forbids the FCC to rely on §201(b). Rather, by
helping to secure enforcement of the mandated regulations the FCC furthers basic §276
purposes.”).

20

21

47 U.S.C. § 201(b) (2012).
7

unjust and unreasonable interstate charges and practices related to interstate and foreign
communications.
As applied in this proceeding, Section 201(b) provides the FCC with the authority to (i)
prohibit unjust or unreasonable rates, (ii) disallow an additional call set-up charge when
inmates’ calls are disconnected, mandate that ICS providers offer debit calling, and (iii) prohibit
ancillary charges such as those imposed for adding additional funds to a pre-paid ICS account.
Specifically, Section 201(b) of the Act provides that, “[a]ll charges [or] practices . . . for and in
connection with [interstate or foreign communication by wire or radio] . . . shall be just and
reasonable, and any such charge [or] practice . . . that is unjust or unreasonable is hereby
declared to be unlawful.” 22
In addition, Section 201(b) authorizes the FCC to “prescribe such rules and regulations
as may be necessary in the public interest to carry out the provisions of this chapter.” 23 In the
recent Connect America Fund Order, relying on Supreme Court precedent, the FCC confirmed
that its “rulemaking authority under 201(b) explicitly gives the FCC jurisdiction to make rules
governing matters to which the 1996 Act applies. . . .” 24
An ICS telephone call fits squarely within the definition of interstate or foreign
communication by wire or radio, and the FCC may therefore prescribe rules and regulations to
ensure that ICS charges and practices are just and reasonable. The language of Section 201(b) is
expansive, granting the FCC jurisdiction to prohibit all unjust and unreasonable practices in
connection with interstate or foreign communication by wire or radio. Section 201(b) makes no
distinction between services provided at privately- and publicly-administered facilities.
Moreover, federal courts across the nation have determined that the FCC has primary
jurisdiction to resolve this matter. For example, the 7th Circuit explicitly confirmed that a claim
22

Id.

23

Id.

24
Connect America Fund, Report and Order and Further Notice of Proposed Rulemaking,
26 FCC Rcd 17,663 (2011) (citing AT&T v. Iowa Utils. Bd., 525 U.S. 366, 380 (1999)).

8

that ICS providers charge unreasonably high rates falls “squarely within the FCC’s
jurisdiction.” 25

The court further explained that a comparison of ICS rates to the rates of

comparable calls of other persons is within the primary jurisdiction of the regulatory agency. 26
Indeed, as noted above, the District Court for the District of Columbia directed the class
action Petitioners in this case to bring their claims to the FCC in accordance with the doctrine of
primary jurisdiction. In directing the plaintiffs to file their complaints with the FCC, the court
said, “First and foremost, the FCC is statutorily charged with handling all claims contesting the
reasonableness of telephone rates. 47 U.S.C. § 201(b) . . . Consequently, courts routinely refer
rate challenges to the FCC.” 27 The court continued, “Significantly, the FCC, in exercising its
mandate to regulate the reasonableness of rates, is authorized to reject inclusion in Defendants’
cost-basis of the 25-50% commissions received by [ICS providers].

Therefore, insofar as

[Petitioners’] challenge is to the commissions received by [ICS providers] and the impact those
commissions have on increasing rates, the FCC can adequately address those issues by
prohibiting long-distance carriers from considering commission costs in their cost-basis.” 28
Further, the FCC has recognized that the protection of the public “from unfair and
deceptive practices or possible rate gouging” is a “substantial governmental interest.” 29 While
the FCC declined to set benchmark rates in the 1998 Billing Party Preference Order, this was
due to the fact that, at that time, “rates [were] filed with the Commission and must conform to

Arsberry v. Illinois, 244 F.3d 558, 563 (7th Cir. 2001) (“the complaint includes a claim
under the Federal Communications Act…that the phone companies charge unreasonably high
rates and also engage in rate discrimination. These claims are squarely within the FCC's
jurisdiction.”).

25

Id. at 565 (“The plaintiffs are asking us to compare the rates on inmate calls with rates
on comparable calls of other persons; that is what we cannot do but the regulatory agencies
can.”).
26

Wright v. Corrections Corp. of America, C.A. No. 00-293 (GK), Memorandum Opinion,
slip op. at 6-7 (D.D.C. Aug. 22, 2001).

27

28

Id. at 7.

29
Billed Party Preference for InterLATA 0+ Calls, Second Report and Order and Order on
Reconsideration, 13 FCC Rcd 6122, 6137 (1998).

9

the just and reasonable requirements of Section 201 of the Act.” 30 The FCC also believed that
benchmarks might stifle the development of competition. However, in 2013, ICS providers do
not submit their rates to the FCC, 31 resulting in a substantial need for the FCC to step in, and
establish “just and reasonable” ICS rates and practices in this proceeding.
Additionally, the FCC has specific authority to establish a benchmark ICS rate under
Section 205(a) of the Act when addressing unjust or unreasonable rates. 32 The FCC has used
rate comparisons, benchmarks, and other factors to evaluate the justness and reasonableness of
rates in a variety of proceedings, including rulemakings. 33 The authority provided to the FCC
under Section 205(a) does not require a full evidentiary hearing, but rather can be carried out
through a notice and comment rulemaking proceeding. 34
Specifically, the FCC examined this question at length in the Return Represcription and
Enforcement Processes proceeding, where it considered both case law, and the requirements

30

Id., at 6156.

In fact, ICS providers have flatly refused to submit their specific cost data to the FCC, or
to meet with the Petitioners’ counsel despite being specifically requested to do in August 2011.
See Letter of Stephanie A. Joyce, Esquire, Counsel to Securus Technologies, dated September
20, 2011 (“The Commission has expressed interest in obtaining updated cost information from
Securus…Securus will provide the Commission with information as to how its costs today differ
from its costs at the time of the Wood Study, expressed as a percentage figure.”). Subsequently,
in response to the FCC’s request for updated cost information, Securus filed an eight sentence
letter, merely stating that its costs had increased 16%, but providing no data in support of that
assertion. See Letter of Stephanie A. Joyce, Esquire, Counsel to Securus Technologies, dated
October 11, 2011. A copy of the “updated cost information” submission is attached as Exhibit B.
31

32

47 U.S.C. § 205(a) (2012).

See, e.g., Access Charge Reform, First Report and Order, 12 FCC Rcd 15,982, paras. 7587 (1997), aff'd Southwestern Bell Tel. Co. v. FCC, 153 F.3d 523 (8th Cir. 1998); See also Access
Charge Reform, Sixth Report and Order, 15 FCC Rcd 12962, paras. 58, 70-75 (2000), aff'd in
pertinent part, Texas Office of Pub. Util. Counsel, 265 F.3d 313 (5th Cir. 2001).
33

Connect America Fund, 26 FCC Rcd at 17,870 (“In AT&T v. FCC, for example, the
Second Circuit made clear that because section 205 does not require a hearing ‘on the record,’
the Administrative Procedure Act (APA) does not require a full evidentiary hearing in section
205 prescription proceedings. 572 F.2d 17, 21-23 (2d Cir. 1978). Moreover, the court found that
the language of section 205(a) itself did not impose greater hearing requirements than the APA
- concluding that AT&T ‘may not complain that it had anything less than a ‘full opportunity’ to
be heard’ after receiving, in the context of the particular proceeding on review, three rounds of
comments. 572 F.2d at 22.”)
34

10

under Section 553 the Administrative Procedure Act. 35 The FCC concluded that the
requirements under Section 205(a) and the APA which:
generally define[s] what administrative procedures are required of federal
agencies, does not require trial-type hearings in ratemakings. Only if an agency's
enabling statute requires that rules ‘be made on the record after opportunity for
an agency's hearing’ does Section 553 mandate trial-type procedures in addition
to, or instead of, notice and comment procedures. 36
Therefore, since Section 205(a) does not require “on the record” proceedings, the FCC need only
follow the standard notice and comment procedures in the instant proceeding.
Moreover, in AT&T Corp. v. Business Telecom, Inc., the FCC based its reasonableness
assessment on comparable rates in a formal complaint case. 37

In that case, AT&T and Sprint

brought a complaint under section 208 of the Act against BTI, alleging that BTI’s access rates
were unjust and unreasonable under section 201(b). 38 The FCC compared BTI’s access rates to
other, comparable rates and found they were substantially higher without justification, thereby
violating section 201(b).
In choosing to use a comparable rate method in determining whether BTI’s rates were
just and reasonable, the FCC recognized that it possesses broad discretion in selecting methods
to evaluate the reasonableness of rates and stated, “[a]s long as the FCC makes a reasonable

Amendment of Parts 65 and 69 of the Commission's Rules to Reform the Interstate Rate
of Return Represcription and Enforcement Processes, Report and Order, 10 FCC Rcd 6788,
6814, (1995) (citing 5 USC § 553).
35

Id. (citing United States v. Florida East Coast Railway Co., 410 U.S. 224 (1973),
Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 US 519
(1978), and AT&T v. FCC, 572 F.2d 17 (2d Cir. 1978)).

36

AT&T Corp v. Business Telecom, Inc., 16 FCC Rcd 12312, 12324 (2001), recon. denied, 16
FCC Rcd 21750 (2001)(“BTI”). See also, Access Charge Reform, Seventh Report and Order and
Further Notice of Proposed Rulemaking, 16 FCC Rcd 9923, 9940-41 (establishing benchmark
based on comparable rates in a rulemaking proceeding)(“Seventh Access Charge Order”);
Beehive Tel. Co., Inc., 13 FCC Rcd 12,275, 12,285-87 (1998) (prescribing rates in a tariff
investigation based on costs and investments of comparable carriers).

37

38

16 FCC Rcd 12,312 (2001).
11

selection from the available alternatives, its selection of rate evaluation methods will be upheld,
even if the court thinks that a different decision would have been more reasonable.” 39
Finally, the FCC has also taken steps to regulate rates when it discovers a wide disparity
between rate of compensation, and the actual cost for providing Video Relay Services. In
declining to use past cost data, the FCC stated “we decline to perpetuate the large discrepancy
between actual costs and provider compensation in the face of substantial evidence that
providers are receiving far more in compensation than it costs them to provide service.” 40
Thus, when the market fails to constrain rates for a given service, the FCC looks to the
rates charged for other services using comparable network functions to assess the
reasonableness of the service rate in question. The FCC has recognized that “services offered
under substantially similar circumstances using similar facilities lead to the expectation of
similar charges.” 41 In this case, the market fails to constrain ICS rates because, as in the CLEC
access charge context, in which the FCC set benchmark rates, the party paying the rate is not the
party choosing the carrier. 42 Therefore, a FCC decision using comparable ICS rates in other
states to establish benchmarks is consistent with its actions in BTI and Beehive.
3.

FCC Has Authority to Regulate ICS Calls Using VoIP.

Finally, the FCC need not resolve the classification of interconnected VoIP service in
order to regulate ICS rates and practices. 43 Instead, the FCC has authority to regulate ICS rates

39

BTI, at 12,325 (citing Southwestern Bell Tel. Co. v. FCC, 168 F.3d 1334 (D.C. Cir. 1999)).

See Telecommunications Relay Services and Speech-to-Speech Services for Individuals
with Hearing and Speech Disabilities, 25 FCC Rcd 8689, 8695 (2010), aff’d Sorenson
Communications, Inc. v. FCC, 659 F.3d 1035 (2011)(“agency ratemaking is far from an exact
science and involves policy determinations in which the agency is acknowledged to have
expertise.”).
40

41

Beehive at 12324.

42

Seventh Access Charge Order, 16 FCC Rcd at 9935.

43

NPRM, 27 FCC Rcd at 16,647.
12

and practices whether ICS is provided solely through the PSTN or involving interconnected
VoIP technologies. 44
First, while the FCC has not yet classified interconnected VoIP as either an information
service or a telecommunications service, 45 the FCC has authority to regulate ICS provided with
VoIP regardless of how the FCC ultimately decides to classify interconnected VoIP. If the FCC
ultimately classifies interconnected VoIP as a telecommunications service, ICS provided through
VoIP technologies explicitly will be subject to FCC jurisdiction and regulation as explained
above, in the same manner as all other telecommunications services under Title II of the Act.
Even if the FCC did not exercise authority to regulate the rates for VoIP-based prison
telephone services under Section 201 of the Act it has ample authority to regulate prison phone
rates under Section 276 of the Act. Section 276(b)(1) provides:
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, except that
emergency calls and telecommunications relay service calls for hearing disabled
individuals shall not be subject to such compensation. 46

The FCC defines interconnected VoIP services as services that (1) enable real-time, twoway voice communications; (2) require a broadband connection from the user’s location; (3)
require IP-compatible customer premises equipment; and (4) permit users to receive calls from
and terminate calls to the PSTN. E911 Requirements for IP-Enabled Service Providers, First
Report and Order and Notice of Proposed Rulemaking, 20 FCC Rcd 10,245, 10,258-58 (2005)
(VoIP 911 Order) (defining “interconnected VoIP service”).

44

See IP-Enabled Services, Notice of Proposed Rulemaking, 19 FCC Rcd 4863, 4910
(2004) (IP-Enabled Services Notice). The FCC has resolved many of the issues raised in the IPEnabled Services Notice and has exercised its ancillary jurisdiction under Title I of the Act to
apply various Title II regulations to VoIP providers. See VoIP 911 Order, 20 FCC Rcd at 10246;
See also Universal Service Contribution Methodology, 21 FCC Rcd 7518, 7538-43 (2006) (2006
Interim Contribution Methodology Order), aff’d in part, vacated in part sub nom. Vonage
Holdings Corp. v. FCC, 489 F.3d 1232, 1244 (D.C. Cir. 2007); See also Implementation of the
Telecommunications Act of 1996: Telecommunications Carriers’ Use of Customer Proprietary
Network Information and Other Customer Information, Report and Order and Further Notice
of Proposed Rulemaking, 22 FCC Rcd 6927, 6954-57 (2007) (CPNI Order); See also IP-Enabled
Services, Report and Order, 22 FCC Rcd 11,275, 11,283-291 (2007) (TRS Order); and See
Telephone Number Requirements for IP-Enabled Services Providers, Report and Order, 22
FCC Rcd 19,531 (2007) (VoIP LNP Order).

45

46

47 U.S.C. § 276(b)(1) (2012).
13

Nothing in this provision suggests that the regulatory authority given to the FCC is limited to
any specific technology or means of providing payphone services or that it matters for purposes
of the provision whether the service provider is considered a “telecommunications carrier” or
some other kind of service provider. Furthermore Section 276(d) specifically includes “inmate
telephone service in correctional institutions” among the categories of service regulated as
“payphone service” under the Act.
Thus, even in the absence of Section 201, the FCC would have authority to regulate the
compensation of providers of both interstate and intrastate “inmate

telephone service in

correctional institutions” to ensure that those providers are “fairly compensated”. While fair
compensation should not be so low as to deny the service provider an opportunity to earn a
reasonable profit such compensation is not “fair” if it is so high as to generate profit in excess of
that required to support the network investment used to provide the service. Thus the rate for
inmate telephone service is not “fair” if it is so low as to cause the service provider to fail and
similarly is not “fair” if it overcompensates the service provider at the expanse of a captive
(literally) customer and members of his family who have no alternative service provider. The
FCC has already found that commissions are not a component of the cost of providing prison
phone services and are more appropriately characterized as additional profit. Since that profit
does not support investment required to provide the inmate telephone services it should not be
recovered through the rates for those services.
Finally, the FCC also has ample authority to regulate ICS rates and practices resulting
from ICS calls handled using VoIP technology under its ancillary jurisdiction.

Ancillary

jurisdiction may be employed at the FCC’s discretion, when Title I of the Act gives the FCC
subject matter jurisdiction over the service to be regulated and the assertion of jurisdiction is
reasonably ancillary to the effective performance of its various responsibilities. 47

Both

See United States v. Southwestern Cable Co., 392 U.S. 157, 177-78 (1968) (Southwestern
Cable)(upholding certain regulations applied to cable television systems before the FCC had an
47

14

predicates for ancillary jurisdiction are satisfied in the context of regulating ICS rates and
practices when provided through VoIP technologies.
As the FCC has previously concluded, interconnected VoIP service falls within the
subject matter jurisdiction granted to the FCC under the Act. 48 Establishing a benchmark ICS
rate, and prohibiting certain practices and ancillary fees connected with the ICS calls that use
interconnected VoIP is reasonably ancillary to the effective performance of the FCC’s
responsibilities under Sections 1, 201, and 276 of the Act. To the extent ICS providers are
replacing traditional ICS call transport with interconnected VoIP transport technology, it is
critical that the same safeguards against unjust and unreasonable rates and practices apply both
to legacy ICS services as well as to interconnected VoIP services. 49
The FCC has previously held that interconnected VoIP cannot be separated into
intrastate and interstate communications, and therefore is subject exclusively to federal
regulation. 50 In the Vonage Order, the FCC clarified that “this FCC, not the state commissions,
has the responsibility and obligation to decide whether certain regulations apply to DigitalVoice
and other IP-enabled services having the same capabilities. For such services, comparable
regulations of other states must likewise yield to important federal objectives.” 51 Therefore, the
FCC has the jurisdiction to regulate ICS calls provided using interconnected VoIP.

express congressional grant of regulatory authority over that medium.). See also United States
v. Midwest Video Corp., 406 U.S. 649, 667-78 (1972) (critical question was whether FCC had
reasonably determined new rules would further the achievement of long established regulatory
goals.).
See VoIP 911 Order, 20 FCC Rcd at 10,261-62 (“[I]nterconnected VoIP services are
covered by the statutory definitions of ‘wire communications’ and/or ‘radio communication’
because they involve transmission of [voice] by aid of wire, cable, or other like connection . . . ‘
and/or transmission by radio . . . ‘ of voice. Therefore, these services come within the scope of
the Commission’s subject matter jurisdiction granted in section 2(a) of the Act.’”).

48

49

See TRS Order, 22 FCC Rcd at 11,288.

Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an Order of
the Minnesota Public Utilities Commission, Memorandum Opinion and Order, 19 FCC Rcd
22,404 (2004).

50

51

19 FCC Rcd at 22,405.
15

Finally, from a policy perspective, ICS provided through traditional telecommunications
and ICS provided through interconnected VoIP must be treated equally under the law. In
practice, the end user customer cannot differentiate between ICS provided over traditional
facilities or interconnected VoIP. Further, the same policies necessitating just and reasonable
ICS rates and practices apply regardless of the technology used. Any precedent in other contexts
tending to show that VoIP services are competitive and that end users are not subject to unjust
rates is inapplicable in the ICS setting. 52
In the ICS context, the users (inmates and their families) do not have the ability to select
between providers, which is true regardless of the actual facilities used to transport calls.
Should the FCC apply regulations only to legacy ICS telecommunications services, providers
would undoubtedly add a VoIP link from correctional facilities to the PSTN in an effort to avoid
any regulations they found to be unfavorable. Therefore, the proposed benchmark ICS rates and
practices must extend to interconnected VoIP ICS providers as well as those ICS providers that
may use traditional telecommunications to deliver services.

In the IP-Enabled Services Notice, the FCC stated, “While several of the regulatory
obligations discussed in previous sections of this Notice may have general applicability to any
entity that seeks to offer voice services, many of the “economic” regulations set forth here have
been written to apply specifically to cases involving a monopoly service provider using its
bottleneck facilities to provide services to a public that is without significant power to negotiate
the rates, terms, and conditions of those services . . . As a threshold matter, therefore, we seek
comment on whether any of these economic regulations are appropriate in the context of IPenabled services, given that customers often can obtain these services from multiple,
intermodal, facilities- and non-facilities-based service providers.” IP-Enabled Services Notice,
19 FCC Rcd at 4912-13. In this proceeding, ICS providers are exactly the type of monopoly
service providers using bottleneck facilities that economic regulations should apply to. The
public is without significant power to negotiate the terms, rates and conditions of ICS, and
therefore economic regulations are appropriate in the context of ICS provided over
interconnected VoIP and traditional telecommunications services.
52

16

II.

THE RATES PROPOSED HEREIN RESULTS IN “JUST AND REASONABLE”
RATES REQUIRED UNDER THE COMMUNICATIONS ACT.
The NPRM sought comment on the per-call and per-minute aspects of the Petitioners’

proposal. 53 The Petitioners previously had proposed establishing the ICS per-minute rates at
$.20 for prepaid and debit calls, and $0.25 for collect calls. As discussed in this section, based
on the technological developments and consolidation of the ICS industry, the Petitioners now
propose that the FCC establish a benchmark ICS per-minute rate for all interstate calls at $0.07,
regardless of the type of call (prepaid, debit, or collect) or the type or size of the institution, with
no separate per-call charge, and no additional or ancillary fees.
Attached hereto as Exhibit C is a Declaration of Coleman Bazelon, a Principal in the
Telecommunications and Media Practice Group at The Brattle Group, Inc., wherein he provides
overwhelming evidence that the relevant costs associated with ICS calls are substantially lower
than the rates being charged to inmates and their families. Moreover, his proposed benchmark
ICS rate will continue to provide an economic incentive for ICS providers to continue to bid
actively for new ICS contracts with state, county and local correctional and detention facilities.
1.

Technological Developments Have Fundamentally Changed How
Inmate Calls Are Handled.

The FCC last considered rules addressing ICS rates and practices was in 2002. Over the
intervening years, the technology used by ICS providers has changed, and the ICS provider
industry has consolidated substantially.

The ICS industry now consists of three to five

companies that are the sole competitors for the ICS contracts offered by state, county and local
correctional and detention facilities. This has both technical and cost-of-service implications.
Specifically, the path of an ICS call originating from a prison or jail has changed
substantially. Each of the major ICS providers now route each call through their centralized

53

NPRM, 27 FCC Rcd at 16,637.
17

calling centers – which are located hundreds, if not thousands, of miles from both the caller and
the person receiving the call. All of the security measures are applied at the centralized location.
For example, attached are diagrams of the ICS call architecture provided by the ICS
providers in recent RFP proposals and FCC filings. Exhibit D includes diagrams from each of
the main ICS providers. As shown there, the only on-premises equipment at each correction
and detention facility is a VoIP router, several workstations for the site’s guards, and the actual
inmate telephone handsets. Once a call is initiated, it is forwarded to a centralized ICS calling
center, where security measures are applied, and the call is then forwarded to the called party.
Moreover, the operated-assisted collect call function has been eliminated, and these services are
now automated and provided by the ICS provider without the intervention of a live operator.
This new ICS calling architecture demonstrates that the incremental cost of adding a new
correctional or detention facility to an ICS provider’s roster of clients is minimal, and almost all
services provided by the ICS providers occur off-site. The only on-site work to be done after a
new ICS contract is signed involves the facility owner selecting from a menu of computerized
security-related options, and installing new telephones (if necessary) and the wiring to connect
the phones to the VoIP router for outgoing calls. Once the call is routed, the ICS provider’s
centralized calling centers handle the rest of the call.
2.

Technological Development Is Driving Consolidation Among ICS
Providers.

Along with technological developments which permit ICS providers to centralize the
calling functions for hundreds or thousands of facilities and take advantage of significant
economies of scale, the ICS industry has rapidly consolidated. For example, GTL purchased four
previously-independent ICS providers in the past three years. 54

In addition, Securus

See www.gtl.net (last visited March 19, 2013) (“Effective October 12, 2011, Global
Tel*Link acquired Conversant Technologies, Inc.; Effective August 1, 2011, Global Tel*Link
acquired Value-Added Communications, Inc.; Effective November 10, 2010, Global Tel*Link
acquired Public Communications Services; Effective June 16th 2010, facilities previously
54

18

Technologies is actually a merger of two previously-independent ICS providers, T-Netix, Inc.
and Evercom Systems, Inc. 55 CenturyLink acquired Embarq Corporation in 2009, which had
been spun off from Sprint Corporation in 2006. 56
Not only have the ICS providers reshuffled and merged, but the two leading ICS
providers, GTL and Securus, have been the subject of acquisitions by private equity funds. GTL
was first purchased by Veritas/Goldman Sachs for $345 million in 2008. Two years later, the
company was sold to American Securities for $1 billion, resulting in a $655 million profit for its
investors in two short years. 57 Securus was purchased by Castle Harlan in 2011 for $450 million
from H.I.G. Capital which purchased and merged T-Netix and Evercom. 58

According to

Standard and Poor’s, the market is now highly consolidated, with Global Tel Link and Securus
controlling more than 70% of the estimated $1.2 billion annual market. 59
3.

Despite Technological Developments And Consolidation There Exists
a Wide Disparity in Rates.

One would expect that the technological developments discussed above, coupled with the
efficiencies brought about by the consolidation of the ICS industry, would have led to the rapid
lowering of ICS rates to inmates and their families as a result of lower costs. In addition, one

serviced by Inmate Telephone Inc. will hereafter be serviced by DSI-ITI, LLC…DSI-ITI, LLC is a
wholly owned subsidiary of Global Tel*Link Corporation.”).
55

See www.securustech.net/history.asp (last visited March 19, 2013).

56

See www.centurylink.com (last visited March 19, 2013).

See The Price To Call Home: State-Sanctioned Monopolization In The Prison Phone
Industry, by Drew Kukorowski, rel. Sept. 11, 2012 (available at www.
prisonpolicy.org/phones/report.html) (last visited March 19, 2013) (citing David Carey, The
Deal Pipeline, American Securities Buys Global Tel*Link from Veritas, (Oct. 31, 2011),
http://www.thedeal.com/content/private-equity/american-securities-buys-global-tellink-fromveritas.php (last visited Sept. 10, 2012); American Securities, http://www.americansecurities.com (last visited Sept. 5, 2012)).

57

See
www.businessweek.com/news/2012-10-04/prison-phones-prove-captive-marketfor-private-equity (last visited March 19, 2013).

58

59

See www.bna.com/fcc-proposes-cap-n17179871636 (last visited March 19, 2013).
19

would expect that these factors would have led to more uniform rates among the correctional
and detention centers served by the same ICS providers.
However, nothing could be further from the truth. As shown in Exhibit E, the ICS rates
being charged to inmates bear no semblance to the actual cost of the ICS service being provided.
Incredibly, the same ICS providers charge widely divergent rates for the same ICS in different
states.
For example, GTL charges a first-minute rate of $3.94 in Ohio for a collect call, but only
charges $0.048 per-minute in New York, with no separate first-minute rate. Of the rates in 29
states to which GTL provides service, the diverse range of the first minute call is astounding. In
Rhode Island, GTL charges $1.30 for the first minute of a collect call, and in Idaho, it charges
$3.80.
The range of per-minute rates is equally divergent. In South Dakota, GTL charges $0.09
per minute for pre-paid and debit calls, but charges $0.69 per minute in Maine. All told, a 15minute call handled by GTL could cost anywhere from $0.72 in New York, to $17.14 in Ohio, and
$17.30 in Georgia and Minnesota.
A similar disparity exists among the rates charged by Securus. In Alaska, the firstminute charge for collect calls is $3.95, whereas Securus merely charges a flat rate of $0.65 in
New Mexico, and $1.00 in Missouri. For pre-paid and debit calls, the disparity is even more
extreme, with no first-minute charges in five of the states it serves, but first-minute charges of
$3.95 in Alaska, and $2.00 in Arizona.
The disparity among the per-minute rates charged by Securus is just as extreme, with
rates between $0.05 to $0.89 for collect, pre-paid and debit calling.

As with the

incomprehensible range of GTL’s calls, a 15-minute call handled by Securus ranges from $0.59
in New Mexico, to $8.00 in Arizona, and $17.30 in Alaska.
Finally, ICS calls handled by CenturyLink offer no respite for inmates either. The firstminute rate charged in Alabama is $3.95 for collect, pre-paid, and debit calls, but in Wisconsin
20

the rate is only $.18. The per-minute rate charges range from 0.10 in New Hampshire to $0.89
in Alabama. As a result, depending on the state in which an inmate is incarcerated, a 15-minute
call could be $2.70 if the inmate is located in New Hampshire or Wisconsin, but it could be
$11.85 in Nevada, or $17.30 in Alabama.
4.

ICS Providers Profit-Sharing Is Not A Legitimate Cost.

The ICS providers have long pointed to the commissions paid to state, county and local
governments as the reason for this disparity in rates. These commissions are established by
voluntary contract negotiations between the phone company and the procurement official for
the correctional or detention facilities, and provide either a percentage of the revenue earned by
the ICS provider, or, in some cases, a flat fee.
As shown in Exhibit F, these commissions ranged from 20% to 76.6% in 2012. Overall,
the commissions paid to state correctional and detention facilities for ICS calls have been more
than $100 million per year for at least the last four years. Notably, this figure does not include
the commissions paid to county and local correctional and detention centers. However, we do
know that Los Angeles County, the largest county in the United States, receives a 67.5%
commission, and an annual guarantee of $15 million. See Exhibit G.
Regardless of the amount of the commissions paid to state, county and local
governments, though, the FCC has determined that these payments are actually an
apportionment of the profits earned from providing the ICS calls, 60 and cannot be classified as a
cost for purposes of determining the rate to be charged ICS customers. In particular, the FCC
stated:
[W]e find the cost data deficient because ICSPC treats the commissions paid to
the inmate facilities as costs rather than profits. As noted earlier, these
commissions are location rents that are negotiable by contract with the facility

60

NPRM, 27 FCC Rcd at 16,643.
21

owners and represent an apportionment of profits between the facility owners
and the providers of the inmate payphone service. 61
Several states have also acknowledged that the incorporation of commissions paid to state,
county and local correctional and detention facilities is unreasonable. 62
Thus, it is an unjust and unreasonable practice to require ICS customers to contribute
solely for the purpose of providing excess profits to be divided between the ICS provider and the
corrective agency. This conclusion is confirmed by the FCC’s action in the Connect America
Fund decision, where it determined “excess revenues that are shared in access stimulation
schemes provide additional proof that the LEC’s rates are above cost.” 63

There, the FCC

concluded that “how access revenues are used is not relevant in determining whether switched
access rates are just and reasonable in accordance with Section 201(b).” 64
Moreover, while the rates referenced below are still too high, once the commissions are
eliminated from the cost analysis, the ICS rates charged consumers are substantially lower. The
following eight states do not permit commissions, and their 15 minute call-rates are
substantially lower than those in states that do require commissions:
See Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, Order on Remand, 17 FCC Rcd 3248, 3262 (2002) (“Inmate
Payphone Order”); See also See Arsberry v. Illinois, 244 F.3d 558, 566 (7th Cir. 2001)(Posner,
J.) (noting that the state of Illinois is a monopolist, “exercising as it does an iron control over
access to the inmate market, [that] has rented pieces of the market to different phone
companies” and that these companies will pass on much of the rental fee to their customers)
61

See Evercom Systems Inc., Order Granting In Part, And Denying In Part, Petition For
Reconsideration, Regulatory Commission of Alaska No. U-00-143, 2001 WL 1246903 (April 24,
2001) (“The inclusion of a commission requirement in a bid solicitation for regulated utility
service conflicts with the regulatory objective of ensuring that utility costs are necessarily
incurred and rates are just and reasonable…By allowing commissions to be recovered through
rates, the governing regulatory body acquiesces in this commission-based bid process and
promotes a system where the service provider has an incentive to increase the price of service
regardless of the actual costs incurred.”); See also Investigate Long Distance Charges,
Corrected Order, Georgia Public Service Commission No. 14530-U, 2002 WL 31096880 (March
19, 2002) (“The Commission finds that the rates to be charged for ITS should relate to the costs
incurred in providing the service, and that the commission paid to the GDC is not one of those
costs.”).
62

63

Connect America Fund, 26 FCC Rcd at 17,876-17,877.

64

Id., at 17,876.
22

State
California:
Michigan:
Missouri:
Nebraska:
New Mexico:
New York:
Rhode Island:
South Carolina:

Collect
$6.60
$3.45
$1.75
$1.45
$3.25
$0.72
$5.80
$0.99

Pre-Paid
$6.60
$3.45
$0.75
$1.25
$2.25
$0.72
--$0.75

Debit
--$3.15
$0.75
$1.25
--$0.72
$5.22
$0.75

ICS Provider
GTL
GTL
Securus
GTL
Securus
GTL
GTL
GTL

Contrasted with the states that do require the payment of commissions, and taking into account
the ICS’s centralized calling systems, it should be clear that the commissions do, in fact, lead to a
perverse result, whereby the ICS providers and the state, county and local governments have
every opportunity to share in the excess profits, far beyond a “just and reasonable” rate that
“fairly compensates” the ICS providers.
There is simply no other legitimate explanation for GTL to charge $1.25 for a fifteen
minute debit call in Nebraska, and charge $11.61 for the same call in Delaware. It is equally
unjust and unreasonable that Securus would charge $0.75 for a fifteen-minute pre-paid call in
Missouri, but yet charge $5.10 in North Dakota and $8.00 in Arizona.
In light of the FCC’s determination that the sharing of the revenue earned from ICS calls
is a profit-sharing arrangement, it is clear that the widely-divergent spread among the same
services being provided in neighboring states requires that the FCC exclude commissions from
the costs to be included in determining “fair compensation.”

Stated in another way, the

usurious ICS rates and ancillary fees currently charged by the ICS providers in most states,
which are not being charged in others, conclusively demonstrate that the anti-consumer practice
of dividing the excess revenues cannot be taken into account when determining a “just and
reasonable” ICS rate.65

65

Id.
23

5.

ICS Providers Regularly Charge Excessive Ancillary Fees.

As shown above, the wide disparity in rates between states being served by the same ICS
provider clearly demonstrates that the ICS rates are unjust and unreasonable. However, there
are additional charges that are imposed by ICS Providers in addition to the per-minute and percall charges.
For example, as shown in Exhibit H, GTL charges $9.50 to open a new pre-paid or debit
account. Next, an additional $4.75 charge is added to the account when a party wishes to add
$25.00 to the debit card balance, and a $9.50 charge is added to the account when a party
wishes to add $50.00. If there is a balance at the end the month, GTL charges $2.89 to send a
paper bill to the account holder. Finally, if an inmate is released, and a balance remains in the
account, GTL charges $5.00 for the account holder to receive its refund.
Securus imposes similar excessive charges. As shown in Exhibit H, Securus charges
$7.95 each time an account is funded over the internet or on the telephone. The only way to
avoid this cost is to send a check, which imposes substantial delay and hardship on the
customers. Despite the FCC’s encouragement of mobile wireless communications, Securus
charges a monthly fee of $2.99 to maintain a wireless number on the account. In the event that
the inmate is released, and there is a balance of more than $4.95 in the account, Securus will
issue a refund, but will first extract a $4.95 penalty from the refunded amount. Since the ICS
providers treat these ancillary charges as “cost-recovery”, they do not consider this revenue
when calculating the commissions paid to the correctional and detention facilities. Instead,
these charges – untethered from actual costs – go straight to the ICS providers’ bottom lines.
In addition, the FCC must use its authority to disallow additional set-up charges when
inmates’ calls are disconnected. When a call is disconnected because of an error by the ICS
provider, charging the customer an additional set up fee is unjust and unreasonable. The record
in this proceeding contains hundreds of complaints about the frequent disconnection of calls by
the ICS providers.

In addition, this issue has been the subject of a Pennsylvania PUC
24

proceeding, 66 and is the subject of a pending proceeding before the Massachusetts Department
of Telecommunications, 67 where approximately 80% of the ICS customers who filed complaints
noted frequent early-termination of calls. 68
The failure to offer debit calling is also an unjust and unreasonable practice violating
Section 201. ICS providers have previously asserted that the uncollectible revenue associated
with collect calls drives up costs, and therefore the ICS rates charged to its customers.
Additionally, some inmates are unable to place collect calls to individuals whose phone provider
does not have a billing relationship with the ICS provider.
Debit calling and prepaid accounts eliminate both problems. The failure to offer debit
calling is unreasonable because it drives up the price of ICS calls without any justification, and is
unjust because it inhibits inmates from calling certain individuals served by a LEC that does not
have a billing relationship with the ICS provider, also without justification. Since each of the
ICS providers have demonstrated the capability to provide such services in some states, See
Exhibit E, it is unreasonable that such services are not available to all inmates.
III.

The ICS Rates and Ancillary Fees Are Unjust And Unreasonable.
As noted above, Section 276 provides to the FCC the authority to establish maximum

benchmark ICS rates. Moreover, Section 201(b) requires the FCC to ensure that the rates being
charged the public are “just and reasonable.” Section 201 gives the FCC the power to find and
declare unjust and unreasonable practices to be unlawful.

In turn, Section 205 of the

Jon E. Yount, AC-8297 et. al. v. T-Netix, Inc. and T-Netix Telecommunications, Inc.,
Penn. Public Utility Commission, Docket No. C-20042655, Opinion and Order, p. 12. (“We are
troubled that T-Netix did not regard the inmates as customers, even when their calls were paid
for using the inmates’ prepaid accounts. … While the erroneous disconnections themselves are
difficult for the inmates, the fact that T-Netix has done little or nothing to investigate complaints
or to make refunds, when appropriate, is unacceptable.”).

66

See Massachusetts Department of Telecommunications, Docket No. 11-16 (comments
may be found at www.mass.gov/ocabr/government/oca-agencies/dtc-lp/dtc-11-16.html).

67

See Amendment 1 and Supplement to Petition, at 6-14 at www.mass.gov/
ocabr/docs/dtc/dockets/11-16/amend1supp51810.pdf.

68

25

Communications Act empowers the FCC to take the following steps when confronted with unjust
and unreasonable rates and practices:
the Commission is authorized and empowered to determine and prescribe what
will be the just and reasonable charge or the maximum or minimum, or
maximum and minimum, charge or charges to be thereafter observed, and what
classification, regulation, or practice is or will be just, fair, and reasonable, to be
thereafter followed, and to make an order that the carrier or carriers shall cease
and desist from such violation to the extent that the Commission finds that the
same does or will exist, and shall not thereafter publish, demand, or collect any
charge other than the charge so prescribed, or in excess of the maximum or less
than the minimum so prescribed, as the case may be, and shall adopt the
classification and shall conform to and observe the regulation or practice so
prescribed. 69
In the instant matter, therefore, the FCC has the power and the authority to find that the ICS
rates and practices are unjust and unreasonable, and to prescribe the rate that it deems to be
just, fair, and reasonable. As in BTI and Connect Access Fund, the FCC may look to comparable
ICS rates being charged by ICS providers for similar services in other states, and establish rates
and forbid unreasonable practices without having to engage in a full evidentiary hearing.
The Petitioners have demonstrated without doubt that that rates being charged for
comparable services by the same ICS providers in different states are widely disparate. The
Bazelon Declaration establishes that the actual cost for providing ICS service is so low that a
maximum benchmark ICS rate of $0.07 will still deliver to the ICS providers a fair profit for
their services. 70 Therefore, the FCC must find that, based on the evidence presented herein, that
the benchmark ICS rate of $0.07 per minute, with no set up or other ancillary fees, is just and
reasonable.
In addition, the FCC must find that the ancillary fees imposed on ICS customers are
unjust and unreasonable. Such fees add to the effective price of inmate calls and are not related
to the cost of providing the service. There is no cognizable reason why a party should pay $9.50
to deposit $50, twice as much as the fee to deposit $25. Even if an ICS provider incurs some
69

47 U.S.C. § 205(a) (2012).

70

Bazelon Declaration, pg. 17.
26

cost for the funding of the account, it is impossible to believe that the costs double when $50 is
added, rather than $25.

Further, there is also no legitimate reason why it should cost a

customer $5.00 to close an account, or $3.00 to receive a bill in the mail. Simply put, these
charges are far beyond what the costs that ICS providers could reasonably incur for providing
the service, and they must be found to be unjust and unreasonable.
IV.

The Marginal Location Methodology Is Inapplicable To ICS Rates.
The FCC also sought comment on the “Wood Study” filed by the ICS providers, which

proposed to use the marginal location methodology to establish ICS rates. 71 The ICS providers
submitted the Wood Study in an effort to utilize a marginal location methodology developed to
establish commercial payphone rates in 1999. 72
The Petitioners have previously addressed, at length, the inapplicability of the marginal
location methodology contained in the Wood study. In particular, the Petitioners’ Ex Parte
submission on November 5, 2009, contained a detailed discussion of why the marginal location
methodology is irrelevant in the ICS context, demonstrating that the purported goal of
“promoting widespread deployment” does not apply since there is already active competition to
provide ICS services. 73
In fact, the FCC has already concluded that the marginal location methodology does not
apply in the prison context. As the FCC explained in the Inmate Payphone Order:
In the [Methodology Order], the Commission, . . . to promote widespread
payphone deployment, concluded that it should set a payphone compensation
rate that would be large enough “to ensure that the current number of payphones
is maintained.” To accomplish this goal, the Commission adopted a methodology
that permitted a significant contribution to common costs. That policy has little

71

NPRM, 27 FCC Rcd at 16,638.

Id. (citing Implementation of Pay Telephone Reclassification and Compensation
Provisions Of The Telecommunications Act of 1996, 14 FCC Rcd 2545 (1999)).

72

73

Ex Parte Submission, November 5, 2009, pg. 4.
27

or no application in the prison context because . . . prison payphones are already
profitable. 74
Thus, there is no apparent reason why the FCC is seeking comment on a price-setting approach
whose application to the ICS context has already been completely repudiated by both the FCC
and the Petitioners. 75 However, nothing in the intervening 10 years since the Inmate Payphone
Order has changed the fact that ICS providers are competing on a high level for each and every
ICS contract, which delivers an exclusive right to serve a high-volume market with no
competitive alternatives, thus eviscerating the justification for utilizing the marginal location
methodology.
V.

The FCC Must Mandate A Fresh Look Period for Existing Contracts.
As originally proposed in the Alternative Wright Petition, the implementation of the new

maximum benchmark ICS rate must be applied to all new ICS contracts.

Moreover, the

Petitioners have proposed that there be a one-year phase-in period for the new ICS rate on
existing contracts. Finally, the Petitioners have proposed that the FCC prohibit ICS providers
and correctional and detention facilities from attempting to avoid the application of the new ICS
rate by simply renewing existing contracts. In the NPRM, the FCC has requested comment on
this proposal, and sought information on the length of contracts, and their ability to be
amended. 76
The Petitioners have demonstrated that contracts between ICS providers and
correctional and detention facilities are regularly updated and amended.

As noted in the

Petitioner’s ex parte submission on June 28, 2012, the Florida DOC contract with Securus was

Inmate Payphone Order, 17 FCC Rcd at 3256 (2002) (quoting Methodology Order, 14
FCC Rcd at 2571).

74

75

See also Bazelon Declaration, pgs. 26-27.

76

NPRM, 27 FCC Rcd at 16,646.
28

amended on four separate occasions, each time changing the ICS rates. 77

Previously, the

Petitioners referenced the ICS agreement with the Indiana DOC that had been amended as well.
Thus, the record has been established that the parties to ICS agreements regularly
amend ICS contracts to revise terms, and change their obligations. Should the FCC adopt the
proposed ICS rate, it must apply the one-year fresh look proposal to existing contracts to
require the integration of the proposed ICS rate (or a lower rate) without further negotiation.
As noted in the Alternative Wright Petition, the FCC has confirmed that it has
“undoubted power to regulate the contractual or other arrangements between common carriers
and other entities, even those entities that are generally not subject to Commission
regulation.” 78 In addition, the FCC has concluded that similar fresh-look mandates “do not
constitute a regulatory taking” since the proposed maximum ICS rate will provide the
“opportunity for adequate cost recovery.” 79

Finally, the FCC has invalidated exclusivity

provisions in cellular service resale agreements, 80 and the U.S. Court of Appeals has confirmed
that the FCC “has the power to…modify…private contracts when necessary to serve the public
interest.” 81
Therefore, there is ample precedent for the adoption of the fresh-look proposal. To
ensure that the parties to ICS contracts do not circumvent or otherwise attempt to nullify the
pro-consumer benefits the maximum benchmark ICS rate, the proposed one-year transition
process can and must be implemented upon the adoption of the proposed ICS rates.
Letter of Lee G. Petro, dated June 28, 2012, pg. 3 (responding to Securus allegation that
contracts are not renegotiated “unless they are close to expiry.”).
77

See Alternative Wright Petition, pg. 29 (citing Promotion of Competitive Networks in
Local Telecommunications Markets, 15 FCC Rcd 22,983, 22,300, nt. 85 (2000)). See also Local
Competition Order, 11 FCC Rcd 15,499, 16,044-45 (1996).
78

Connect America Fund, 26 FCC Rcd at 17,998. See also Connolly v. Pension Ben.
Guaranty Corp., 475 U.S. 211, 224-25 (1986); FPC v. Hope Natural Gas Co., 320 U.S. 591, 605
(1944).
79

See TRAC Communications, Inc. v. Detroit Cellular Telephone Co., 4 FCC Rcd 3769
(CCB 1989), aff’d, 5 FCC Rcd 4647 (1990).
80

81

See Western Union Telegraph Co. v. FCC, 815 F.2d 1495, 1501 (D.C. Cir. 1987).
29

VI.

THE BENEFITS ASSOCIATED WITH ADOPTION OF BENCHMARK RATES
FAR OUTWEIGH ANY COGNIZABLE COSTS.
The NPRM requested a cost-benefit analysis supporting the proposed benchmark ICS

rates. In particular, the NPRM stated that the FCC is attempting “to determine whether the
proposals above will provide public benefits that outweigh their costs, and we seek to maximize
the net benefits to the public form any proposals that we adopt.” 82 The Petitioners provide
below a discussion of the enormous benefits that arise from setting the proposed benchmark ICS
rate of $0.07 per minute.
As a preliminary matter, though, no cost-benefit analysis, based on any provision of the
Communications Act, could override the absolute command of Section 201(b) that:
all charges, practices…in connection with…communication service shall be just
and reasonable, and any…charge, practice…that is unjust or unreasonable is
hereby declared to be unlawful. 83
Moreover, any cost-benefit analysis based on non-Communications Act factors would be ultra
vires. For that reason, courts have rejected FCC attempts to balance carriers’ obligations under
Section 201(b) against factors outside the FCC’s jurisdiction. For example, in MCI. v. FCC, the
court rejected, as ultra vires, the FCC’s attempt to “offset” damages from lower rates paid by
MCI for some LEC access services, against MCI own damages from excessive LEC rates for other
access services. Instead, the court held that such an offset would amount to adjudicating LEC
claims against MCI for undercharges, over which the FCC has no jurisdiction. 84
The FCC has also rejected a similar cost-benefit approach in addressing traffic pumping
in the Connect America Fund Order. There, it correctly held, in response to claims that access
stimulation facilitated broadband deployment in rural areas, that “how…revenues are used is

82

NPRM, 27 FCC at 16,646

83

47 U.S.C. 201(b) (2012).

84

59 F.3d 1407, 1418-19 (D.C. Cir. 1995), cert. denied, 517 U.S. 1219 (1996).
30

not relevant in determining whether…rates are just and reasonable in accordance with Section
201(b). 85
The only Communications Act provisions that might provide a basis for declining to
apply Section 201(b) in the ICS context would be the forbearance provisions of Section 10 of the
Act. 86 The ICS providers, however, could not possible demonstrate that the application of
Section 201(b) to ICS calls is not necessary to ensure that ICS rates and practices are just and
reasonable, or that such enforcement is not necessary for the protection of consumers. 87 Any
attempt to excuse ICS providers from the application of Section 201(b) thus would amount to an
end-run around the conditions placed on forbearance relief and would violate the Act for that
reason as well.
Finally, claims that the requested relief would amount to FCC regulation of state and
local correctional facilities cannot be considered “costs” of applying Section 201(b) to ICS rates
and practices.

As the D.C. Circuit explained in affirming the FCC regulation of carriers’

payments to entities not regulated by the FCC:
[N]o canon of administrative law requires us to view the regulatory scope of
agency actions in terms of their practical or even foreseeable effects. Otherwise,
we would have to conclude, for example, that the Environmental Protection
Agency regulates the automobile industry when it requires states and localities to
comply with national ambient air quality standards, or that the Department of
Commerce regulates foreign manufacturers when it collects tariffs on foreign
made goods. 88
As such, while the adoption of a benchmark ICS rate may impose some costs on parties outside
the jurisdiction of the FCC, the FCC may not rely on these purported costs to avoid its statutory
obligations under the Act. Even assuming, however, that the FCC could or should consider non85

Connect America Fund, 26 FCC Rcd at 17,876.

86

47 U.S.C. § 160 (2012).

87

47 U.S.C. §§160(a)(1), 160(a)(2) (2012).

Cable & Wireless P.L.C. v. FCC, 166 F.3d 1224, 1230 (D.C. Cir. 1999); See also National
Cable & Telecommunications Association v. FCC, 567 F.3d 659 (D.C. Cir. 2009)(“We decline to
put issues relating to their cable service outside the Commission's authority simply because
those issues also matter to their landlords.”).
88

31

Communications factors in determining how to enforce Section 201(b) in the ICS context, all
relevant factors overwhelmingly support Petitioners’ request for relief.
1.

Establishment Of A Benchmark ICS Rate Is Economically Efficient.

First, the adoption of a benchmark ICS rate will lead to additional efficiencies in the ICS
industry. Specifically, the FCC has previously found that the adoption of price caps provide a
powerful incentive for service providers to become more efficient. For example, when the FCC
adopted price caps to apply to local exchange carriers’ interstate access charges, the FCC stated
that price caps would:
harness the profit-making incentives common to all businesses to produce a set
of outcomes that advance the public interest goals of just, reasonable, and
nondiscriminatory rates, as well as a communications system that offers
innovative, high quality services. 89
The price cap regime was imposed because of a concern that traditional rate-of return regulation
did not result in sufficient incentives to improve efficiency. Indeed, the FCC’s previous reviews
of rate-of-return regulation over many years led it to conclude that, under certain
circumstances, rate-of return regulated firms have an incentive to raise rather than lower their
costs by increasing investment in the asset base on which the regulated return is calculated well
beyond the efficient level. 90
Subsequently,

in affirming the decision of the FCC to apply certain accounting

procedures in connection with the price-cap regime, U.S. Court of Appeals stated that:
Price cap regulation is intended to provide better incentives to the carriers than
rate of return regulation, because the carriers have an opportunity to earn greater
profits if they succeed in reducing costs and becoming more efficient. 91

See Policy and Rules Concerning Rates for Dominant Carriers, Second Report and
Order, 5 FCC Rcd 6786 (1990), aff'd, Nat'l Rural Telecom Ass'n v. FCC, 988 F.2d 174 (D.C. Cir.
1993).

89

Id., at nt. 30. (citing the Averch-Johnson Effect, Behavior of the Firm Under Regulatory
Constraint, American Economic Review, December 1962, pp. 1052-1069.).

90

91

Bell Atlantic Telephone Co. v. FCC, 79 F.3d 1195, 1198 (D.C. Cir. 1996).
32

As the Commission recently noted in the Connect America Fund, there can be a “race to the top”
manifested by a practice of increasing investment in plant and equipment on which a regulated
return may be earned. 92
A “race to the top” of sorts characterizes the prison phone industry as well, and the
solution to this problem is to impose the proposed maximum benchmark ICS rate. The price
terms for prison phone calls are determined not by the telephone consumers who make or
receive the calls but instead by a third party (the prison administrator) who does not bear the
cost of the call. In addition, the transactional process under which these services are purchased
often involves bidding where the objective of the bid is not to determine which provider can
supply the required services at the lowest price, but rather which provider will pay the highest
commission to the prison administration in exchange for the exclusive right to provide prison
services. 93
This process leads inevitably to a “race to the top” in bids for commissions that must
ultimately be paid for by those who make and receive calls. The imposition of these higher
prices, well in excess of the underlying costs, needlessly suppresses demand for prison phone
calls with the consequent effects that have been demonstrated in the Bazelon Declaration.
Where the Commission was faced with a race to the top problem in the regulation of LEC
access charge rates it decided to impose price cap regulation to better align LEC incentives with
those that would obtain in a competitive market.

Here the Commission should impose a

maximum benchmark ICS rate for prison phone calls to create an efficiency incentive in the
prison phone industry which is lacking today because of the nature of the procurement process
used to acquire these services.

Connect America Fund, Sixth Order On Reconsideration And Memorandum Opinion
And Order, FCC No. 13-16, ¶ 2 (rel. Feb. 27, 2013).

92

93

NPRM, 27 FCC Rcd at 16,632 (citing Inmate Payphone Order, 17 FCC Rcd at 3276).
33

A maximum benchmark ICS rate will result in substantially reduced charges for prison
phone calling as well as a continuing incentive to improve efficiency in the delivery of these
services. Importantly, the imposition of a cap is in no way intended to render the provision of
prison phone services unprofitable. To the contrary, as in the case of the LEC price cap regime,
the imposition of the rate cap gives the service provider the opportunity to capture the gains
achieved through greater efficiency and to become more profitable as those efficiencies are
realized.
In light of the well-established precedent to support the adoption of a maximum
benchmark per-minute ICS rate, and the FCC finding that a benchmark rate leads to economic
efficiencies in other contexts, any cost-benefit analysis with respect to the ICS industry must
find that the proposed benchmark ICS rate proposed herein will lead to beneficial results. 94
2.

Lowering of Rates Will Have Positive Impact on Recidivism.

The adoption of a benchmark ICS rate that is just and reasonable will significantly
reduce the cost of ICS calls for its customers. The impact will not only be felt in the pocketbook
of the inmate and family members, but society will greatly benefit through the reduction of
recidivism rates and the corresponding reduction in correctional costs.
Currently, there are more than 1.6 million people incarcerated in the United States.
Among those that are incarcerated, 52% of the state inmates have at least one child, and 63% in
federal prison have at least one child. At least 50% of the incarcerated are located more than
100 miles from home, and 10% are located more than 500 miles from home. While 700,000
inmates were released in 2012, at least 40% will likely return to prison within three years.
The positive impact of staying in contact with family members and friends has been
extensively documented, and there should be no question at this point that society benefits from

94

See Bazelon Declaration, pg. 26-27.
34

a reduction in recidivism, beyond the cost savings. 95 As noted by The Vera Institute of Justice in
its comments filed on March 14, 2013:
By promoting better outcomes for incarcerated parents, visitation can help
reduce the negative effects of imprisonment and the stigma experienced by
children of having an incarcerated parent. Maintaining relationships with their
incarcerated parents can reduce children’s risks of homelessness and of
involvement in the child welfare system. 96
In addition, Congress has found that “inmates who are connected to their children and families
are more likely to avoid negative incidents have reduced sentences” and that “released prisoners
cite family support as the most important factor in helping them stay out of prison.” 97
A similar point was presented by the National Association of Regulatory Utility
Commissioners (“NARUC”), which passed a resolution asking the FCC to act on the Alternative
Petition, in 2012. 98 The General Counsel for NARUC followed up with an ex parte submission
on December 28, 2012, urging the FCC to act and noting:
Excessive interstate rates mainly affect prisoners’ family members – who have no
other option but to pay the rates. Phone calls are the primary means of
communication for many prisoners/families, because many prisoners are
functionally illiterate and many are held in distant facilities, which makes inperson visitation difficult. Research indicates that family contact during
incarceration leads to greater post-release success for prisoners, and thus less
recidivism. High phone rates that economically limit family contact frustrate that
positive outcome. 99

Damian J. Martinez and Johnna Christian, The Familial Relationships of Former
Prisoners: Examining the Link Between Residence and Informal Support Mechanisms, Journal
of Contemporary Ethnography 38, no. 2 (2009): 201-24; Creasie Finney Hairston, Prisoners
and Their Families: Parenting Issues During Incarceration” (paper presented at From Prison
to Home: The Effect of Incarceration and Reentry on Children, Families and Communities, a
conference hosted by the U.S. Department of Health and Human Services and Urban Institute,
Washington DC, January 30-31, 2002); Rebecca Naser and Christy Visher, Family Members’
Experiences with Incarceration and Reentry” Western Criminology Review 7, no. 2 (2006).
95

Comments of The Vera Institute of Justice, filed March 14, 2013, pg. 2 (citing
Christopher Wildeman and Bruce Western, “Incarceration in Fragile Families,” Future of
Children, 20(2) (2010): 168).
96

97

Second Chance Act of 2007, Pub. L. No. 110-199, § 3(7), 122 Stat. 657, 659 (2007).

98

See Exhibit I.

99
See Letter from James Bradford Ramsey, General Counsel for NARUC, dated December
28, 2012, CC Dkt. No. 96-128.

35

Finally, the American Correctional Association, which presumably represents prisons and other
correctional interests, adopted a resolution in 2001, and reaffirmed it twice, stating that it is
“sound correctional management that adult/juvenile offenders should have access to a range of
reasonably priced telecommunications services” and that the “rates and surcharges that are
commensurate with those charged to the general public for like services.” 100
From a cost perspective, the United States spends more than $60 billion dollars each
year on prison costs. On average, each prisoner in a state prison costs more than $31,000 a
year. As discussed in the Bazelon Declaration, if recidivism can be reduced by just 1%, the cost
savings would be more than $250 million per year, and a study by the Pew Center estimates that
there would be a cost savings of $653 million in one year if recidivism were to be reduced by
10%. 101
Thus, the benefits arising from encouraging contact between family members and
inmates are substantial, and there is every reason to believe that the adoption of the benchmark
ICS rate proposed herein will go a long way towards encouraging such contacts. For example, as
noted in the Bazelon Declaration, when New York eliminated its commissions, the costs of ICS
calls went down, and the volume of calls increased to such a degree that automatic reductions
built into the ICS contract were triggered:
The Department of Correctional Services’ one-year contract extension with
Global Tel Link, Inc., which runs from April 1, 2007 through March 31, 2008,
triggered a second rate reduction if call volume increased by at least 18 percent in
the first six months of the contract. Call volume, as measured in completed calls,
increased by 35 percent during that period (April 1 through Sept. 30) as
compared to the prior six months (Oct. 1, 2006 through March 31, 2007), while
the number of call minutes jumped by 36 percent. 102

100

See Exhibit J.

101

See Bazelon Declaration, pg. 24.

See www.doccs.ny.gov/PressRel/2007/phoneratereduction.html (last visited March 23,
2013)(“Inmates’ families and loved ones have saved more than $10.5 million based on the
volume of calls since the lower rates went into effect. The cost of a 20-minute phone call - the
average length of a call from an inmate – has dropped to $2.68, from $6.20 prior to April 1.).
102

36

There is no question, therefore, that lower rates will encourage contact between inmates and
their families and friends, which will lead to bottom-line savings for states, counties, and local
governments through lower recidivism rates.
3.

Lowering Rates Will Provide Relief to Millions of Families.

The record in this docket has been supplemented by tens of thousands of personal stories
relating to the impact of the egregious ICS rates that are currently being charged, and requesting
immediate action by the FCC. 103
It is impossible to understate the importance of these stories portrayed through personal
testimonies. The facts presented in the following quotes, along with the thousands submitted
into the record, must be incorporated into any cost/benefit analysis:
As a military wife who has been through multiple deployments with my husband,
I know the value and importance of communication when your loved one is away.
How that is all that you have, and how much it means. With phone rates at such
an incredibly higher cost for inmates families and friends it affects the morale of
the inmate and the mental stability and health of their family when they cannot
communicate more than maybe 1-2 calls a month or they have to choose between
groceries and bills for a phone call. That is simply not right. Personally I talk to
my friend whom is in a TDCJ unit, and it costs me over $10 for 15 minutes.
Besides his dad, I am all that he has on the outside looking out for him. He has
told me over and over again just how much phone calls help him to stay positive,
productive and out of trouble. Letter from Amanda Callahan, WC Docket No. 12375 (filed Jan. 15, 2013).
The only thing that helps me make it through my day until my husband is able to
come home is the phone calls I receive from him after he eats dinner and that’s
when I get my kiss goodnight. With him in Nevada, we live in Colorado I can’t go
see him every weekend; I can only afford to see my husband every four months.
He has also stated that the phone calls are one of the only thing that keeps him
calm. Letter from Colette Croteau, WC Docket No. 12-375 (filed Jan. 22, 2013).
With no internet/email access, limited postal delivery and the many other
restrictions placed on prisoners, their families and even attorneys, telephones are
a vital part of both prison and society. Allowing prison telephone fees to remain
as high as they are, with no end in sight to the proposed increases, this matter is
certainly against public policy, and I would ask, on behalf of myself, my family
Almost three years ago, Senators Diane Feinstein and Patrick Leahy also urged the FCC
to make a “swift examination” of this issue. In June 2010, the Chairman of the FCC stated that
the FCC would “address the questions raised in this proceeding as quickly and equitably as
possible.” See Exhibit K.
103

37

and friends, and the millions of others affected by this issue to consider
promulgating rules which would curtail these abuses. Letter from Dale
Shackelford, WC Docket No. 12-375 (filed March 4, 2013).
My personal experience is, my wife has a disability, she's blind, she's on a care
taker program with a fix income. I cannot call her because the phone calls cost
$9.20 for 15 minutes. I have a 19 year old son in college living on his own
requesting advice but I can't afford to call him; both are in Detroit MI. This State
[Pennsylvania] prison employment system only allows a small percentage of
inmates to make 42¢ everyone else 19¢. Jobs are unavailable for almost half of
the population do to the overcrowding. Letter from Gregory Thomas, WC
Docket No. 12-375 (filed March 4, 2013).
My recent experience with the inmate phone system has me horrified that the
excessive cost precludes most inmates from contact with their family at a time
these ties need to be maintained. The thought that the correction system is
receiving financial gain at inmates expense is troubling also. I was fortunate to be
able to afford to pay for calls, but the phrase "highway robbery" came to mind
each time I made a payment. Today, as I closed an account, I was told there was a
$5.00 fee to do so. This account with Offender Connect [Securus] had already
charged $25 to get $20.25 credit toward calls, so after paying a $4.75 service fee
to get service I had to pay $5 to close the account. Practices like these should not
be acceptable. Do not let the incarcerated be extorted in this manner any longer.
Letter from Linda Humphrey, WC Docket No. 12-375 (filed Feb. 12, 2013)
Recently in the past year I have been hospitalized several times. I nor my wife
can write very well and have to have someone else do it for us. So we are forced
to use the phone system. I have only been able to talk to my wife once in three
months due to the cost of these calls. She not able to even send me money like I
need it. These phone calls are making our bonds stronger yet there is only so
much we can in a 15 minute span that has to last for 2 to 3 months before we can
afford to do it again. This is a very serious hardship on me and my family that
just keeps getting harder to endure. Letter from George Fierras, WC Docket No.
12-375 (filed Aug. 10, 2012)
Our son, at Mac Dougall Correctional Institute in Suffield, CT has been
incarcerated since 1997. His collect calls originally cost us about $20 for 15
minutes. In 2008 Global Tel Link offered a pre-paid contract which reduced the
cost to $12.97 for 15 min. Of course, that required us to pay up front. We try to
maintain a minimum balance of $25 (2 calls) which means that most of the time
we have $100 or more of our Social Security Retirement tied up in that account.
Letter from Tom and Dora Pickles, WC Docket No. 12-375 (filed Aug. 6, 2012).
Going for so long without talking to my family has made it extremely tough to
maintain any type of strong bond with them. Not to mention, there have been
two deaths in my family, and my father’s house burned down, all of which I
learned from the news, and had to endure weeks of unanswered letters until I
finally received a visit. Yes, it is my fault I am in prison, but in how
many ways will I be made to pay for my crime? Letter of T.L. Terry, WC
Docket No. 12-375 (filed Aug. 3, 2013)(emphasis added).

38

These personal testimonies represent just a fraction of the tens of thousands of additional
personal stories and signatories to petitions urging the FCC to act on reforming the ICS rates.
Thus, while there may be costs associated with the adoption of the proposed benchmark
ICS rate, it is clear that the benefits associated with the adoption of a benchmark ICS rate are
enormous. Not only will the persons that actually use ICS to remain in contact with their family
and friends experience lower rates, the correctional agencies will save more in reduced
recidivism costs in the long run than they will lose in reduced commission payments in the short
run. In light of its statutory obligations to prohibit unjust and unreasonable rates and practices,
the FCC must adopt the benchmark ICS rates and practices proposed herein.

CONCLUSION
There is no question that reform is needed, nor is there any question that the FCC has
the requisite authority to provide the relief requested herein. The evidence supporting the need
for a maximum per-minute benchmark ICS rate is overwhelming, and the ICS providers only
justification for the exorbitant rates is that they need higher rates to properly divide up the
spoils with the authorities seeking ICS services. However, this is not a legitimate justification
for imposing rates that bear no semblance to the cost of providing the service and thus, violate
Section 201(b) of the Communications Act.
As such, the Petitioners respectfully request that the FCC adopt a benchmark ICS rate of
$0.07 per minute, with no separate set-up or per-call charge, and eliminate the usurious
ancillary charges and practices such as “re-loading” and penalties to receive a refund. Further,
to the extent that the ICS provider drops a call, the ICS customer must not endure reconnection
fees. The record in this proceeding demonstrates that ICS customers are truly held “captive” to
the ICS providers, and are forced to pay additional fees at every turn.

39

The FCC is the only agency that can provide respite from this extraordinary situation.
The Communications Act provides the FCC with the requisite statutory authority, and the record
in this proceeding demonstrates the urgent need for relief. ICS customers literally cannot afford
to endure more delay.

Therefore, the Petitioners respectfully request immediate action

consistent with the evidence offered.

Respectfully submitted,

By:

Lee G. Petro
Jennifer L. Oberhausen
Jennifer M. Roussil i
DRINKER BIDDLE & REATH LLP
1500 K Street N.W.
Suite 1100
Washington, DC 20005-1209
(202) 230-5857

March 25, 2013

Admitted in Maryland only. District of Columbia Bar application pending; practice
supervised by partners of the firm who are active D.C. Bar members pursuant to D.C. Bar Rule
49(c)(8).
i

40

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

In the Matter of:
Rates For Interstate Inmate
Calling Services

}
}
}
}
}
}

WC Docket No. 12-375

COMMENTS OF
MARTHA WRIGHT, ET. AL.,
THE D.C. PRISONERS’ LEGAL SERVICES PROJECT, INC.,
CITIZENS UNITED FOR REHABILITATION OF ERRANTS,
PRISON POLICY INITIATIVE, AND
THE CAMPAIGN FOR PRISON PHONE JUSTICE

EXHIBITS A-K

Lee G. Petro
Jennifer L. Oberhausen
Jennifer M. Roussil
DRINKER BIDDLE & REATH LLP
1500 K Street N.W.
Suite 1100
Washington, DC 20005-1209
(202) 230-5857

March 25, 2013

EXHIBIT A

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

MARTHA WRIGHT,

et ale

Plaintiffs,
Civil Action

v.

No.

00-293

(GK)

CORRECTIONS CORPORATION OF
AMERICA; et al.,

FILED

Defendants.

AUG 2 2 2001
NANCY MAYEA WHITIINGTON.ClERK
U S DISTRICT COUAT

o R D E R
This matter is before the Court on the Motions
Complaint

Plaintiffs'
~efendant

Corrections

by

Defendant

Corporation

consideration of the motions,
~earing

of

telephone
America

to Dismiss

companies

and
Upon

("CCA").

the Motions

oppositions,

held on August 9, 200:, and the entire record

herei~,

the reasons stated in the accompanying Memorandum Opinion,

, for

it is

hereby
ORDERED,

that the Motions to Dismiss the Ccr..p laint u:lcier the

doctrine of Primary Jurisdict:on are granted;

i~

is further

ORDERED, that this case is dismissed without prejudice; it is
:urther
ORDERED,

that parties are directed to file

pleadings with the FCC to

ens~re

that the

the appropriate

issues raised in this

lawsuit are presented to the FCC,
/

.

I.

.)'V,

I

' .~ !

G~~f t~~

~, %f Dr'lavj
Date

Gladys Ke ssl r
United States Dis~rict Judge

COPIES TO:

Marie-Ann Sennet~
D.C. Prisoners' Legal Services Project
1400 20 t !'l Street, NW
Suite 117
Washington, D.C. 2003£
Frank R. Volpe
Sidley & Austin
1722 Eye Street, NW
Washington, D.C. 20006

I

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17

UNITED STATES D!STRICr COURT
FOR THE

D~STRI~

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.

- - -- _. ----------MARTHA

WRIG~,

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Pl.aintif:s,
Civil Act-ion

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CORRECTIONS
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EXHIBIT B

Arent Fox LLP / Washington, DC / New York, NY / Los Angeles, CA

October 11, 2011

Stephanie A. Joyce

VIA ECFS

Attorney
202.857.6081 DIRECT
202.857.6395 FAX
joyce.stephanie@arentfox.com

Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
Re:

CC Docket No. 96-128, Alternative Rulemaking Proposal of Martha Wright, et al.

Dear Ms. Dortch:
Securus Technologies, Inc. (“Securus”) files this letter to provide the Commission with
the updated cost information offered in its previous letter dated September 20, 2011.
Securus has reviewed its overall cost of service for providing inmate telecommunications
service. Securus used whole-year data that was available after the submission of the industry
cost study (the “Wood Study”) in 2008. The data reviewed is specific to Securus and does not
represent the costs of any other company that was involved in the Wood Study.
Securus estimates that its overall per-call costs have increased approximately 16.3%. Its
overall per-minute costs have increased approximately 16.5%.
Please do not hesitate to contact me with any additional questions or concerns:
202.857.6081. Thank you for your consideration.
Sincerely,
s/Stephanie A. Joyce
Counsel for Securus Technologies, Inc.
cc:

Chairman Julius Genachowski (via electronic mail)
Commissioner Michael Copps (via electronic mail)
Commissioner Robert McDowell (via electronic mail)
Commissioner Mignon Clyburn (via electronic mail)
Sharon Gillett, Chief, Wireline Competition Bureau (via electronic mail)
Austin Schlick, General Counsel (via electronic mail)
Zachary Katz, Legal Advisor to Chairman Genachowski (via electronic mail)

SMART IN YOUR WORLD®

1050 Connecticut Avenue, NW
Washington, DC 20036-5339
T 202.857.6000 F 202.857.6395

1675 Broadway
New York, NY 10019-5820
T 212.484.3900 F 212.484.3990

555 West Fifth Street, 48th Floor
Los Angeles, CA 90013-1065
T 213.629.7400 F 213.629.7401

Marlene H. Dortch
October 11, 2011
Page 2

Margaret McCarthy, Policy Advisor to Commissioner Copps (via electronic mail)
Christine Kurth, Legal Advisor to Commissioner McDowell (via electronic mail)
Angela Kronenberg, Legal Advisor to Commissioner Clyburn (via electronic mail)
Albert Lewis, Chief, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)
Marcus Maher, Legal Advisor to Chief of the Wireline Competition Bureau (via
electronic mail)
Pamela Arluk, Assistant Chief, Pricing Policy Division, Wireline Competition Bureau
(via electronic mail)
Lynne Hewitt Engledow, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)
Michelle Berlove, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)
Jennifer Prime, Acting Legal Advisor, Office of the Bureau Chief, Wireline
Competition Bureau (via electronic mail)

Arent Fox LLP / Washington, DC / New York, NY / Los Angeles, CA

September 20, 2011

Stephanie A. Joyce

VIA ECFS

Attorney
202.857.6081 DIRECT
202.857.6395 FAX
joyce.stephanie@arentfox.com

Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
Re:

CC Docket No. 96-128, Alternative Rulemaking Proposal of Martha Wright, et al.

Dear Ms. Dortch:
Securus Technologies, Inc. (“Securus”) files this letter to inform the Commission that it
will provide updated cost information in this proceeding.
On August 15, 2008, seven providers of inmate telecommunications services, including
Securus, submitted a study performed by economist Don Wood after having analyzed those
providers’ cost information. CC Docket No. 96-128, Inmate Calling Services Interstate Call
Cost Study, Wood & Wood (Aug. 15, 2008) (“Wood Study”). The providers each submitted
their cost data to Mr. Wood separately under seal, and did not share that data with each other.
The study employed the “marginal cost location” methodology that the Commission has
used in this docket when reviewing the costs associated with providing public payphones. Wood
Study at 4 n.9. That is, the study included only the costs associated with payphone service
provided in correctional facilities where no site commissions are imposed. Without
consideration of the cost of site commissions that are secured either by public contract or state
statute, the Wood Study concluded that, collectively and on average, the providers experienced
the following costs of providing interstate toll calls:
Debit Calls
Fixed Per-Call Cost

$1.56

Time-Sensitive Transmission Costs

$0.06

SMART IN YOUR WORLD®

1050 Connecticut Avenue, NW
Washington, DC 20036-5339
T 202.857.6000 F 202.857.6395

1675 Broadway
New York, NY 10019-5820
T 212.484.3900 F 212.484.3990

555 West Fifth Street, 48th Floor
Los Angeles, CA 90013-1065
T 213.629.7400 F 213.629.7401

Marlene H. Dortch
September 20, 2011
Page 2

Collect Calls
Fixed Per-Call Cost

$2.49

Time-Sensitive Transmission Costs

$0.07

Wood Study at 4.
The Commission has expressed interest in obtaining updated cost information from
Securus. To that end, Securus is reviewing its overall cost of service. Securus will provide the
Commission with information as to how its costs today differ from its costs at the time of the
Wood Study, expressed as a percentage figure. Securus estimates that it can provide this updated
information in approximately three weeks.
Please do not hesitate to contact me with any additional questions or concerns:
202.857.6081. Thank you for your consideration.
Sincerely,
s/Stephanie A. Joyce
Counsel for Securus Technologies, Inc.
cc:

Chairman Julius Genachowski (via electronic mail)
Commissioner Michael Copps (via electronic mail)
Commissioner Robert McDowell (via electronic mail)
Commissioner Mignon Clyburn (via electronic mail)
Sharon Gillett, Chief, Wireline Competition Bureau (via electronic mail)
Austin Schlick, General Counsel (via electronic mail)
Zachary Katz, Legal Advisor to Chairman Genachowski (via electronic mail)
Margaret McCarthy, Policy Advisor to Commissioner Copps (via electronic mail)
Christine Kurth, Legal Advisor to Commissioner McDowell (via electronic mail)
Angela Kronenberg, Legal Advisor to Commissioner Clyburn (via electronic mail)
Albert Lewis, Chief, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)
Marcus Maher, Legal Advisor to Chief of the Wireline Competition Bureau (via
electronic mail)
Pamela Arluk, Assistant Chief, Pricing Policy Division, Wireline Competition Bureau
(via electronic mail)
Lynne Hewitt Engledow, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)

Marlene H. Dortch
September 20, 2011
Page 3

Michelle Berlove, Pricing Policy Division, Wireline Competition Bureau (via
electronic mail)
Jennifer Prime, Acting Legal Advisor, Office of the Bureau Chief, Wireline
Competition Bureau (via electronic mail)

EXHIBIT C

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

In the Matter of
Rates for Interstate Inmate
Calling Services

)
)
)
)

WC Docket No. 12-375

DECLARATION OF COLEMAN BAZELON
Coleman Bazelon, being duly sworn, declares as follows:
I.
1.

EXPERIENCE AND QUALIFICATIONS
My name is Coleman Bazelon. I am a Principal in the Washington, D.C. office of The

Brattle Group, Inc. (“Brattle”). Brattle is an economic consulting firm providing expertise in a
range of economic, litigation, and regulatory matters. More specifically, I am part of the
Telecommunications and Media practice.
2.

I have expertise in regulation and strategy in the wireless, wireline, and video industry

sectors. Much of my practice involves valuation of complex telecommunications assets. I have
consulted and testified on behalf of clients in numerous telecommunications matters, ranging
from wireless license auctions, spectrum management, and competition policy, to patent
infringement, wireless reselling, and broadband deployment. I also frequently advise regulatory
and legislative bodies, including the U.S. Federal Communications Commission (“FCC”) and the
U.S. Congress.
3.

Prior to joining Brattle, I served as a Vice President with Analysis Group, an economic

and strategy consulting firm. I have also served as a Principal Analyst in the Microeconomic and
Financial Studies Division of the Congressional Budget Office (“CBO”) where I researched
reforms of radio spectrum management, estimated the budgetary and private sector impacts of
spectrum-related legislative proposals, and advised on auction design and privatization issues for
all research at the CBO.
1

4.

I received my Ph.D. and M.S. in Agricultural and Resource Economics from the

University of California at Berkeley. I also hold a Diploma in Economics from the London
School of Economics and Political Science and a B.A. from Wesleyan University. My curricula
vitae is attached as Attachment A.

II.
5.

OVERVIEW
This is a case about “fair,”1 “just and reasonable”2 rates for collect and debit calls made

from prisons in the United States.3 I have been asked to provide economic analysis of what a
just and reasonable rate would be. To do so I perform three broad analyses in this Declaration.
First, I update the analysis of Douglas A. Dawson previously submitted to the FCC in support of
regulated prison calling rates of $0.15 to $0.20 per minute for debit calls and $0.20 to $0.25 per
minute for collect calls.4 Given continuing downward cost trends and developments in the
national telecommunications network since the last Dawson Declaration, I find that a fixed rate
no greater than $0.07 per minute for both debit and collect calls—and probably less than that
amount—would meet the “just and reasonable” standard set forth in the Telecommunications Act
1

“(b)(1) 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.”
47 U.S.C. 276(b).

2

“(b) All charges, practices, classifications, and regulations for and in connection with such communication
service, shall be just and reasonable, and any such charge, practice, classification, or regulation that is
unjust or unreasonable is hereby declared to be unlawful…” 47 U.S.C. § 201(b). See also Federal
Communications Commission, “Notice of Proposed Rulemaking,” In the Matter of Rates for Interstate
Inmate Calling Services, WC Docket No. 12-375 (Adopted: December 24, 2012), Section III “Ensuring
ICS Rates are Just and Reasonable.” (Hereinafter “Inmate Calling NPRM 2012”.)

3

Prisoners make calls from federal, state and local facilities. The FCC has jurisdiction over interstate calling,
regardless of the type of institution the call is coming from.

4

“Affidavit of Douglas A. Dawson,” Federal Communications Commission, In the Matter of: Martha Wright,
Dorothy Wade, Annette Wade, Ethel Peoples, Mattie Lucas, Laurie Nelson, Winston Bliss, Sheila Taylor,
Gaffney & Schember, M. Elizabeth Kent, Katharine Goray, Ulandis Forte, Charles Wade, Earl Peoples,
Darrell Nelson, Melvin Taylor, Jackie Lucas, Peter Bliss, David Hernandez, Lisa Hernandez, and Vandella
F. Oura, Petition for Rulemaking or, in the Alternative, Petition to Address Referral Issues in Pending
Rulemaking (October 29, 2003), ¶ 43 (Hereinafter “Dawson 2003”); see also “Declaration of Douglas A.
Dawson in Support of Petitioners’ Alternative Proposal,” Federal Communications Commission, In the
Matter of 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, DA 03-4027 (February 16, 2007), ¶¶ 38,
41 and 43. (Hereinafter “Dawson 2007”.)

2

of 1996. Second, I address some of the costs and benefits of implementing a national maximum
rate for debit and collect calls and conclude that benefits likely far outweigh the costs. Third, I
discuss the Marginal Location Methodology used in public payphone rate setting and explain its
inapplicability to the prison payphone marketplace.
6.

Before delving into these analyses, it is helpful to discuss some of the economic and

policy drivers that created the current prison payphone marketplace. Prior to 1984, AT&T was
the only provider of prison payphone services as it was the only provider of operator assisted (the
only kind then) collect calling services.5 At that time, rates for prison services were similar to
rates for other like services provided outside the prison setting.6 The breakup of AT&T in 1984
and subsequent introduction of competition in providing prison payphone services coincided
with a rapid increase in the U.S. prison population.7 Along with a growing population, prisoners
were being incarcerated further from their homes, increasing the reliance on phone calls to stay
connected with family and friends.8 Prisons began to impose additional penal requirements, such
as call monitoring and recording, on prisoner phone services, which along with the growing
prison population and increased importance of calling created a differentiated product—prison
payphone services.9
7.

Normally,

the

introduction

of

competition

into

a

previously

monopolized

telecommunications service would be expected to benefit the users of that service. In fact, the
main thrust of the Telecommunications Act of 1996 was to introduce market forces in the
telecommunications sector, thereby replacing regulators with competition in allocating resources

5

Steven J. Jackson, “Ex-Communication: Competition and Collusion in the U.S. Prison Telephone Industry,”
Critical Studies in Media Communications, Vol. 22, No 4 (October 2005), p. 268. (Hereinafter “Jackson
2005”.)

6

Jackson 2005, p. 268.

7

Justice Policy Institute, “The Punishing Decade: Prison and Jail Estimates at the Millennium,” (May 2000), p.
1, available at: http://www.justicepolicy.org/images/upload/00-05_rep_punishingdecade_ac.pdf (last
accessed March 21, 2013).

8

Jackson 2005, pp. 266-267.

9

Ben Iddings, “The Big Disconnect: Will Anyone Answer the Call to Lower Excessive Prisoner Telephone
Rates?,” North Carolina Journal of Law & Technology, Vol. 8, Issue 1 (Fall 2006), p. 173. See also,
Jackson 2005, p. 267.

3

and promoting efficient provision of services.10 The prison payphone market, however, has
some unique characteristics—market failures—that the thoughtful observer would realize
undermines this usual presumption of competition. Specifically, given that penal institutions
allow only one carrier to operate, that one carrier is a monopoly provider within a given prison.11
Competition between alternative service providers, then, occurs at the level of obtaining the
(usually multi-year) monopoly right to serve the prisoners in a given institution. Unsurprisingly,
once a service provider is accepted, its incentives are to maximize the amount of profit it can
extract from an institution where it has a contract. This is essentially equivalent to maximizing
revenue, because incremental costs are small and stable. The service provider then shares those
profits with the prison as an incentive to be chosen as the monopoly provider. Since the prison
or prison system also selects the carrier, competition for the carrier is essentially competition for
the provider that can create the most profit from a given prison or prison system.12
8.

Before prison payphones became their own market segment with competitors vying to

win contracts, AT&T provided the service, but priced it as part of the then much larger collect
calling market. At the time, regulation of collect calling tariffs did not break out the prison
market as a separately tariffed market.13

Consequently, AT&T did not set rates so as to

maximize the profits it could earn from the prison payphone market. Only when the prison
payphone industry became its own market and competition for exclusive contracts was
introduced was there the incentive and ability to price services so as to extract monopoly profits.

10

As the FCC describes, “The Telecommunications Act of 1996 is the first major overhaul of
telecommunications law in almost 62 years. The goal of this new law is to let anyone enter any
communications business–to let any communications business compete in any market against any other.”
See “Telecommunications Act of 1996,” available at http://transition.fcc.gov/telecom.html (last accessed
January 13, 2013).

11

One solution, offered by the original Wright Petition, would be to introduce competition in providing phone
services in the prison. As discussed below, this approach alone will not assure competitive prices. See,
Petitioners for Rulemaking by Martha Wright, et al., “Petitioners’ Alternative Rulemaking Proposal,”
Federal Communications Commission, In the Matter of 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, DA 03-4027 (March 1, 2007), p. 4. (Hereinafter “Wright 2007”.)

12

Although such a procurement structure is used when assigning a monopoly franchise the point here is to
overcome the extraction of monopoly profits from prisoners and their families in the first place.

13

Jackson 2005, p. 268.

4

9.

Given this market failure of the prison payphone market—that individual prisoners face

no competitive choices—competition is not sufficient to police prices. One approach suggested
in the original Wright Petition would be to provide an open access platform so that multiple
providers could offer services to individual prisoners.14 This would allow choice of service
providers and create incentives for service providers to offer attractive service offerings to
prisoners in an attempt to win their business. Such competition would likely discipline prices to
some extent. The problem is that the open platform only narrows the point of monopoly power;
it does not in itself eliminate it. The cost of the open platform and the continuing scope for
commissions to be built into the rates it charges could still create an incentive to extract some
excess profits or revenues from the prison payphone market. An open platform approach would
still require regulatory intervention to set the prices for the bottleneck access platform.
Consequently, it is more straightforward to simply regulate the rates charged prisoners.
10.

In regulating prison payphone rates, a simple benchmark rate—which sets a maximum

allowed rate, but not a minimum or required rate, for all service providers—is appropriate. As
explained in greater detail below, technical innovations in the provision of prison phone services
imply that variation in costs at different facilities has largely been eliminated. Consequently,
facility specific rates are unneeded and the costs of adjudicating such facility-specific rates
would greatly outweigh any potential benefits of recognizing small variations in the costs of
providing services to individual facilities.
11.

Just and reasonable rates are ones that at a minimum do not allow for excessive profits.

Market failures occur when market forces do not create efficient competition, implying that
market forces are not able to fulfill the mandate contained in the Communications Act of 1934,
as amended, for “just and reasonable” rates.

Because market forces do not spur efficient

competition in the prison payphone market, regulated maximum rates are an appropriate remedy
for this specific market failure. As noted above, those rates should be set no greater than $0.07
per minute for debit and collect calls, and possibly lower. Details of the analysis supporting
these rates are provided in the next section. Following that is an analysis of costs and benefits of

14

Wright 2007, p. 5-6. See also, Dawson 2003, ¶¶ 3-5.

5

regulating prison payphone rates, followed by a discussion of the inapplicability of the Marginal
Location Methodology.

III.
12.

COSTS OF PROVIDING PRISON PAYPHONE SERVICES
The prices paid by prisoners and those they call can be broken down into four separate

cost components:
1.
2.
3.
4.

Cost of the call
Added billing and collection costs associated with collect calling
Excess profit for carrier
Commission for prison

The last two components, excess profits for the service providers and the prisons’ commissions,
are not legitimate costs under a just and reasonable standard.15 Those cost components would be
competed away but for the market failures associated with the prison calling market. Therefore,
to identify a “just and reasonable” rate, the analysis below focuses on the first two cost
components.
DAWSON DECLARATION ANALYSIS
13.

In his 2007 Declaration, Mr. Dawson concludes that a “reasonable inmate long distance

calling rate[]” would be “$0.15 to $0.20 per minute for debit calling and $0.20 to $0.25 per
minute for collect calling….”16 These per minute rates are suggested “with no per-call charge.”17
In this subsection I will explain his basis for concluding in 2007 those rates were reasonable.
The next subsection will update his analysis.
14.

Mr. Dawson starts by referencing his analysis of costs from his 2003 Testimony.18 In

that earlier analysis, he notes that analysis of the Inmate Calling Service Providers Coalition
(“Coalition”) shows underlying costs, including reasonable service provider profits but excluding
15

See Pay Telephone Reclassification and Compensation Provisions of the Telecommunications Act of 1996,
Order on Remand, 17 FCC Rcd 3248, 3262 (2002).

16

Dawson 2007, ¶ 43.

17

Dawson 2007, ¶ 33 and 42.

18

Dawson 2007, ¶ 25.

6

commissions, of $0.126 per minute for a local call.19 Substituting long distance transportation
and termination costs of $0.027 per minute for estimated local transportation and termination
costs of $0.020 per minute raised the cost of long distance inmate calling to $0.133 per minute.20
In his 2007 Declaration, he updates the long distance transportation and termination cost to
$0.0125 per minute, reducing the total cost of a long distance inmate call to $0.121 per minute.21
Mr. Dawson observed that this estimated cost includes about $0.06 per minute of costs
associated with billing and uncollectable revenue, suggesting that the cost of debit calls—which
do not have added billing or collections costs—is about $0.06 per minute.22
15.

Mr. Dawson then compares those debit and collect calling costs to other inmate service

rates and to commercial debit and collect calling rates. In his 2007 analysis, he notes that the
Federal Bureau of Prisons Inmate Telephone System charged $0.23 per minute, but only $0.17 of
that amount was attributable to providing the debit phone service, with the remaining $0.06
profit of the system used to fund prisoner services.23 The profit is analogous to commissions
charged in state systems and, therefore, is not considered a cost of providing the service. Mr.
Dawson then notes that this $0.17 per minute prison debit rate is reasonable when compared to
the rates charged net of commissions by several state systems, including Vermont ($0.135 per
minute for a 20 minute call), Maryland ($0.12 per minute) and Missouri ($0.10 per minute).24 It
is worth noting that these rates from the 2007 analysis of $0.10 to $0.135 per minute were
provided by private companies and included an allowance for profits in them.
16.

Mr. Dawson then analyzed comparable commercial debit calling rates. He noted that to

perform an apples-to-apples comparison “a comparable rate for prison debit calling would be the
price for commercial pre-paid calling cards plus the added cost of the prison telephone system,
19

Dawson 2003, ¶ 72.

20

Dawson 2003, ¶ 72.

21

Dawson 2007, ¶ 26. Note that Mr. Dawson appears to have made an arithmetic error in this calculation.
Reducing per minute long distance costs from $0.027 to $0.0125 is a net reduction of $0.0145. $0.133 $0.0145 = $0.1185, not $0.121 as Mr. Dawson reported. Both of the these rates, however, round to twelve
cents, so this error does not have any material impact on any of his analyses or conclusions.

22

“($0.121 total cost less the cost of billing and uncollectibles).” See Dawson 2007, ¶ 26.

23

Dawson 2007, ¶ 30.

24

Dawson 2007, ¶ 32.

7

expressed on a usage basis.”25 He noted that AT&T offered a rate of $0.05 per minute, with
other lower rates available.26 His earlier 2003 analysis indicated that the added cost of a prison
payphone system would be between $0.044 and $0.059 per minute, but in his 2007 analysis
noted that costs have likely come down since then.27 He also noted that an earlier MCI analysis
suggested underlying costs of $0.066 per minute.28

Taking prison phone system costs

conservatively as $0.07 per minute, Mr. Dawson estimated total costs of debit calls as $0.12 per
minute.29 Mr. Dawson concluded that the prison calling rates reported above and the commercial
debit call rates adjusted for the cost of the prison phone system both support the debit rate he
proffered of $0.15 to $0.20 per minute as reasonable.30
17.

To derive his estimate of the cost of collect calling, Mr. Dawson estimated the added

costs associated with collect calls that are not included in his estimates for debit calls. These
additional costs include the cost of billing the calls and of bad debt in collecting payment.31 He
reported a Coalition estimate of $0.029 per minute for billing and $0.034 per minute for
uncollectables, but noted that the uncollectables estimate is based on much higher prison phone
rates than he was advocating and, therefore, the uncollectables would be less if the amount
charged was less.32 He concluded that $0.05 per minute was a reasonable total incremental cost
of collect calls over debit calls from prison.33 Consequently, his suggested rate of $0.20 to $0.25
per minute for collect calls from prisons is supported as the debit rate of $0.15 to $0.20 per
minute plus the $0.05 per minute added costs associated with collect calls.

25

Dawson 2007, ¶ 34.

26

Dawson 2007, ¶ 36.

27

Dawson 2007, ¶ 37.

28

Dawson 2007, ¶ 38.

29

“(the $0.05 AT&T calling card rate plus $0.07 for the prison phone system).” See Dawson 2007, ¶ 38.

30

Dawson 2007, ¶ 38.

31

Dawson 2007, ¶ 40.

32

Dawson 2007, ¶¶ 40-41.

33

Dawson 2007, ¶¶ 40-41.

8

UPDATED DAWSON ANALYSIS
18.

In this subsection I will update the Dawson analysis, taking account of developments in

the telecommunications sector in the intervening years. I begin by examining commercial rates
for debit and collect calling, recognizing the need to add prison specific costs. Then I examine
some of the lower actual prison rates. Combining the results of both of these analyses, I estimate
that a reasonable regulated rate is no higher than $0.07 per minute for both prison debit and
collect calls and possibly lower.
19.

Pre-paid domestic phone calls—so called calling card calls—are very inexpensive. Rates

are easily found as low as $0.01 per minute with a $0.49 connection charge.34 AT&T offers prepaid interstate calling as low as $0.04 per minute with no connection charge.35 Many other cards
can be found with per minute rates under $0.02.36 Given that these commercial rates are retail
rates sold to individuals, any wholesale contract offering calling services to an entire prison or
prison system would be able to implement volume discounts, suggesting lower commercially
offered rates. Such a rate would have to be lower than AT&T’s rate offered to individual
customers of $0.04 per minute. Taken together, a reasonable estimate of commercial pre-paid
calling rates is easily no greater than $0.03 per minute and likely much lower than that amount.
20.

The underlying costs to deliver prison phone service, as expressed in some contracts and

RFPs, seem consistent with these commercial rates. One estimate of the base rate per minute
with no per call connection charges from a Michigan contract is less than $0.04 per minute.37
34

35

See,
for
example,
PennyTalk,
“Explore
our
Low
Rates”
available
at:
http://www.pennytalk.com/rates/?CallingFrom=US&CallingTo=US (last accessed March 22, 2013).
PennyTalk also charges $0.99 per month account service charge.
1,000 minutes for $40.00. See AT&T, “Product Selection,” available at:

https://att.ecustomersupport.com/ATTLDExternalWeb/loadProductsForDisplay.do?ProductLineID=2
accessed March 21, 2013). Some intrastate rates may be higher.
36

(last

See domestic rates found at Callingcards.com, “International Calling Cards,” available at

http://callingcards.com/shopping/rate_table1.asp?GUID=70704D38391E14409F45EFABDF358E70
(last
accessed March 22, 2013). Some of these rates include other small costs such as 3 minute rounding or
payphone specific connection charges.
37

“The firm fixed price for performing services” is $0.0393 per minute for interstate collect calls and $0.0343
per minute for interstate debit calls. See “Notice of Contract No. 071B1300298 between The State of
Michigan and Public Communications Services, Inc” (March 18, 2011) p. 94. (Hereinafter “Michigan
Contract”.)

9

Another example that is consistent with underlying phone service costs of about $0.03 per
minute is Talk Telio’s bid in Missouri of total price to inmates of $0.05 per minute with no setup fee.38
21.

As noted above, Mr. Dawson’s 2003 analysis suggested prison phone system costs

between $0.044 and $0.059 per minute. His estimate of these costs consists of depreciation,
maintenance and administrative and sales expenses, spread out over a prison with 1,743
prisoners39 who call 1.0 hour (for the $0.059 estimate) or 1.5 hrs (for the $0.044 estimate) per
week.40 About one-quarter of those prison phone system costs were for hardware, the vast
majority of that for the switching equipment.41 Although all costs associated with providing
prison phone systems have likely come down in the last decade, these hardware costs have
certainly come down in the interim for at least two reasons. First, telephone switches are like
computers, and their price decreases with the cost of computing power—the so-called Moore’s
Law effect. For example, the ongoing debates about inter carrier compensation around “bill and
keep”—where the per minute cost of completing a call (including the cost of switching) has
fallen so much that carriers would generally no longer compensate each other for completing
calls—suggest that costs such as switching have fallen dramatically over the past decade.
22.

Second, and perhaps more significantly, modern prison payphone systems use centralized

switches, spreading the cost of switching, call recording and other fixed costs over more users.42

38

Letter to Marlene H. Dortch, Secretary, Federal Communications Commission, from Lee G. Petro, Drinker
Biddle & Reath, LLP, February 15, 2012, p. 2 and Exhibit A, p. 11. (Hereinafter “Petro Letter”.)

39

1,743 prisoners per prison is the average of three privately owned prisons Mr. Dawson uses in his original
analysis. See Dawson 2003, ¶ 57.

40

Dawson 2003, ¶¶ 68-71. This example also demonstrates how quickly fixed costs call as they are spread out
over more usages. In this example, a 50% increase in usage reduced the per-minute cost by 25%.

41

$69,000 in annual hardware costs/$249,000 in total system costs = 28%. See Dawson 2003, ¶ 68, and
footnote 48.

42

“Today there is very little capital investment made by prison telephone provider at each prison. All of the
brains of the prison calling network are housed now at large centralized locations. Today a prison calling
system consists primarily of telephones, an Ethernet pipe to the outside world and some sort of small data
router. Everything else is done at the centralized hubs in the network.” See “Affidavit of Douglas A.
Dawson,” Before the Commonwealth of Massachusetts, Department of Telecommunications and Cable,
No. D.T.C. 11-16, Petition of Recipients of Collect Calls from Prisoners at Correctional Institutions in
Massachusetts Seeking Relief from the Unjust and Unreasonable Cost of Such Calls, ¶ 24. (Hereinafter

10

Larger, centralized switches are cheaper per unit of functionality than smaller switching
equipment that would be installed at a prison facility to serve just that facility. (The per ‘switch’
costs are lower for a properly utilized larger switch.) Sharing these costs over many prisons
spreads these fixed costs over more users, reducing the contribution of these fixed systems costs
to the per minute cost of a call, irrespective of the number of prisoners at the facilities.43
23.

Although I do not have an estimate of just how much lower these system costs are today

compared with the estimates Mr. Dawson made in 2003, they have come down significantly.
Mr. Dawson suggests the reduction is at least half of what they were, suggesting a total prison
specific cost structure, including switching and other capital costs and overhead, of no more than
$0.03 per minute.44 Of course, the base $0.03 per minute commercial debit rate already has
switching and other costs embedded. Here we are interested in the added costs associated with
providing prison phone service, not the total costs. Only a fraction of the revised Dawson cost
estimate of $0.03 per minute represents the costs associated with a prison pay phone system that
are incremental to the cost of providing commercial debit calling. For example, the commercial
debit calling rate already accounts for switching costs. Consequently, a per minute cost of $0.02
for the specific prison phone related costs would seem conservative.
24.

Mr. Dawson estimated the difference between debit and collect calls as about $0.05.45

This cost differential is driven by the added billing and collections cost of collect calls that do
not exist for debit calls.46 This differential has likely come down in the intervening years.
Industry players have responded to bad debt, for example by limiting the amount of debt that can
be accumulated. Furthermore, 3rd party payment processors also help manage payment risk,
presumably leading to lower bad debt for prison phone service providers.

“Dawson 2012”.) See also Notice of Award, State of Missouri Office of Administration Division of
Purchasing and Materials Management (June 28, 2011) Securus RFP, pp. 12-16.
43

Dawson 2012, ¶ 22.

44

Dawson 2012, ¶ 27.

45

Dawson 2007, ¶ 41.

46

Dawson 2007, ¶ 40.

11

25.

More recent experience over the past few years confirms that the difference between

debit and collect calls has, in fact, come down. Several jurisdictions do not charge differential
rates for collect and debit calls.47 Although the underlying economic cost difference may be
greater than zero, it is unlikely to be very large if many jurisdictions do not build this cost
difference into their rates. In other cases the difference between collect and debit calls is very
small. For example, it was just $0.02 per minute in a 2011 Michigan contract,48 $0.01 per
minute in Global Tel*Link’s 2008 RFP response in Wisconsin,49 and $0.005 per minute for a 20
minute call in PCS’s 2008 RFP response in Wisconsin50 and as the base rate difference in the
contract awarded in Michigan in 2011.51 The differential is higher in other jurisdictions with
significantly higher overall rates, but it is very unlikely that underlying costs vary as much in
these states as the cost differential implies. It is more likely that the higher price differentials are
an artifact of price discrimination rather than underlying cost differentials.52

This view is

supported by Mr. Dawson, who said, “Generally it seems like prison telephone providers will
charge as much for calls as they can get away with in each jurisdiction.”53 Consequently, I
conservatively take the cost difference between collect and debit calls as no more than $0.02 per
minute, especially since there are several prison payphone contracts that reflect a differential of
this size or smaller.
47

See, New Jersey and Texas rates as reported in Government Accountability Office, “Bureau of Prisons,
Improved Evaluations and Increased Coordination Could Improve Cell Phone Detection,” GAO-11-893
(September 2011), p. 13. (Hereinafter “GAO 2011”.)

48

Michigan Contract, Exhibit 2, “Summary of the per Minute Rates.”

49

“Global Tel*Link’s State of Wisconsin Department of Corrections, Request for Proposal SM-1752, Inmate
Telephone Services, Volume II – Cost and Revenue Proposal” (October 16, 2008), p. 3.

50

PCS RFP Response, State of Wisconsin, Department of Corrections, RFP Number SM-1752, Inmate
Telephone Services, p. E-2.

51

“The firm fixed price for performing services” is $0.0393 per minute for interstate collect calls and $0.0343
per minute for interstate debit calls. Michigan Contract, p. 94.

52

If demand for collect services is more inelastic than the demand for debit services, then a profit maximizing
strategy is to charge relatively more for the inelastic collect services than for the relatively more elastic
debit services. This is as an example of Ramsey pricing. See, F. P. Ramsey, “A Contribution to the
Theory of Taxation,” The Economic Journal, Vol. 37, No. 145 (March, 1927), pp. 47-61. Given that a
prisoner who has the option (and means) to place a debit call always has the option to place a collect call,
but the reverse is not necessarily true, implies that demand for debit calls is likely more elastic than the
demand for collect calls.

53

Dawson 2012, ¶ 16.

12

26.

Taken together, the above analysis suggests that a reasonable rate for a debit call would

be no greater than $0.05 per minute54 and no more than $0.07 per minute for collect calls.55 I
proffer $0.07 per minute for both debit and collect calls, with no set up or per call fixed fees,
as a just and reasonable benchmark rate for inmate calling services. This rate is clearly
economic for a commercial provider to offer—it is greater than commercial rates adjusted for
prison specific costs and, as noted below, it is greater than the rate already charged in some
states—and provides a buffer of additional revenue to continue to fund modest commissions. In
fact, this is a conservative estimate and the analysis above could justify even lower rates. The
section below on the costs and benefits of reform discusses this issue in more detail.
27.

The suggested rate of $0.07 per minute with no per-call fees will cover the costs of the

calls and it is unnecessary to create a 2-part tariff approach with a fixed per-call component plus
a variable per-minute component. There are very few cost components that change with the
number of call initiations and that do not vary with the length of the call. The infrastructure
components such as handsets and transport are not impacted by the number of calls, but are
driven by the total number of call-minutes. The capacity of a switch is determined by the total
number of simultaneous calls it must handle, but once installed this very small cost component of
a call does not vary. Billing costs, where it takes the same effort to bill a one-minute call as it
does to bill a ten-minute call, is roughly fixed per call, but represents only a small part of a call’s
costs.
28.

Only if the new lower rates induced the average length of a call to drop significantly,

which is counterintuitive, would the elimination of the per-call fee and recovering all costs based
on a per-minute charge potentially cause concerns. (The concern is only ‘potential’ because it
would only arise if there were significant per call costs.) Lower prison calling prices would be
expected to increase the demand for calls made from prisons. Increased demand could be
expressed as more calls and/or longer calls. Only if the additional calls induced by lower prices
were much shorter than current call lengths would they bring down the average length of calls.
Given that the average length of existing calls would be expected to increase at lower prices, it
54

The $0.03 per minute cost of the call based on commercial rates plus $0.02 per minute added cost of the
prison phone system components.

55

The $0.05 per minute cost of debit calling plus $0.02 per minute cost differential for collect calls.

13

seems very unlikely that the net effect of lower prices would be shorter average call length.
There is only limited evidence of what happens when prison calling rates are dramatically
reduced, but New York provides one relevant experience. In 2007, New York reduced the price
of prison calls by 57.5% and saw a 35% increase in the number of call and a 36% increase in the
total call volume.56 In this example, lower prices increased the length of calls as well as the
number of calls. Consequently, there is very little reason to believe there will be any concerns
with recovering all costs—regardless of how much are generated on a per-call basis versus on a
per-minute basis—through a per-minute charge alone.
29.

Per minute calling rates have other advantages. Foremost, they are simple to understand.

This reduces confusion over actual or expected call costs by prisoners and those they call. An
additional advantage of flat per minute calling rates is that they eliminate billing issues
associated with dropped calls. Reinitiating a dropped call will no longer incur inappropriate
excess call initiation fees.
30.

Now I turn to other calling rates as a validation of the rates calculated above. First I

examine actual prison calling rates. I follow Mr. Dawson’s convention of estimating net calling
rates after removing the portion of charges that go to commissions to penal institutions. These
commissions are not related to the provision of phone service and, as argued more extensively in
the next section of this Declaration, should not be an explicit component of a regulated prisoner
phone rate.
31.

Since prisoner calling rates are often priced as what is referred to as two-part tariffs, to

make rates from different states comparable, it is helpful to express them on a per minute basis.
However, to do so, it is necessary to assume an average length of a prison call. Throughout my
analysis I use 15 minutes per call. This is well within the range of currently observed call
lengths. For instance, in 2010 in California, the average length of all inmate calls was 12.3
minutes, or 12.1 minutes for interstate calls alone.57 In July 2000 the average length of an inmate
56

See New York State, “Department of Corrections and Community Supervision,” (December 13, 2007)
available at: http://www.doccs.ny.gov/PressRel/2007/phoneratereduction.html (last accessed March 21,
2013).

57

California Telephone Agency. Inmate Ward Telephone System/Managed Access System Services,
“Attachment 1.” Received from Lee Petro via email, March 8, 2013.

14

call in New York was 18 minutes for an interstate call and 17.5 minutes for an intrastate call.58
15 minutes is also the convention for average call length used by the Petitioners in this matter.59
However, the results reported below are not very sensitive to call length, and my conclusions
would not change if a little bit longer or shorter call length were used.
32.

Table 1, below, is based on the collect call rates reported by Prison Legal News based on

their own research.60 For the states with data available, I calculated the total cost of a 15 minute
call (including both set-up and per minute fees), deducted the estimated commissions, and then
divided by 15 to express the costs on a per minute basis. This amount represents the fees that are
collected by the underlying service provider and are comparable to the $0.07 per minute rate for
collect calls calculated above. The underlying costs of providing prison phone service may vary
somewhat state by state, but nothing that would support the variation reported in Table 1.

58

MCI Telecommunications. “Check Summary: Report 8/99-7/00,” September 18, 2000. Received from Lee
Petro via email, March 8, 2013.
59

Petitioners Comments, p.18.

60

See Appendix A.

15

Table 1: Interstate Collect Call Rates Less Commission for State Prisons, 2012

State
New Mexico
New York
Oklahoma
South Carolina
Florida
North Carolina
Nebraska
Connecticut
Montana
Louisiana
Missouri
Massachusetts
Wisconsin
Indiana
Vermont
Illinois
Colorado
New Jersey
Kentucky
Maryland
Michigan

15 minute Call
Less Commission
($/Minute)

State
(Continued)

15 minute Call
Less Commission
($/Minute)

0.04
0.05
0.05
0.07
0.09
0.10
0.10
0.10
0.10
0.11
0.12
0.12
0.13
0.14
0.15
0.17
0.18
0.19
0.20
0.22
0.23

North Dakota
Wyoming
Texas
Arizona
West Virginia
Kansas
Utah
Maine
Nevada
Mississippi
Virginia
Rhode Island
Arkansas
South Dakota
Pennsylvania*
Tennessee
Georgia
Delaware
Minnesota
Idaho
Alaska

0.24
0.25
0.26
0.26
0.30
0.30
0.33
0.36
0.36
0.38
0.38
0.39
0.39
0.41
0.41
0.43
0.46
0.46
0.47
0.99
1.07

Source: The Brattle Group Analysis. See Appendix A.
Notes:
*Pennsylvania figure calculated with commission data that may be incomplete. Refer to
Appendix A.
Commission data for Alabama, Hawaii, Washington and Iowa were not available.
Commission data for California, New Hampshire, Ohio and Oregon were available, but
there was not enough information to calculate these figures. Refer to Appendix A for state
specific footnotes.

33.

As the table above indicates, the New Mexico rate, based on a 15 minute call, is only

$0.04 per minute and lower than the $0.07 per minute suggested above as an upper bound on
prison calling rates. In New York, where the state abolished commissions and made a concerted

16

effort to lower prison calling rates,61 and Oklahoma the per-minute cost of a collect call is only
$0.05 per minute. These examples suggest that it is commercially viable to provide prison phone
service for only $0.05 per minute. South Carolina charges an average of $0.07 per minute—right
in line with the estimated costs provided above. Florida, North Carolina, Nebraska, Connecticut
and Montana all have average rates less commissions based on 15 minute calls of $0.10 or less.
All of these rates are commercially provided and demonstrate that it is possible, absent
commissions, to provide prison phone service for far less than the rates currently charged in most
states today.
34.

The reasonableness of the above analysis is also supported by bids of service providers to

provide prison calling services in many states. For example, in its 2008 bid in Wisconsin,
service provider GTL offered a rate of $0.089 per minute with no connection fee for debit calling
and a rate of $0.099 per minute with no connection fee for collect calling.62 In a Missouri bid
from 2011 that it narrowly lost, Talk Telio offered a flat rate of $0.05 per minute for both debit
and collect calls with no per call fees.63 And, of course, the effective realized rates in New
Mexico, New York, Oklahoma and South Carolina indicate that $0.07 per minute is feasible. As
these examples demonstrate, $0.07 per minute for both debit and collect calls is greater than
several commercially offered rates.
35.

Taking all of the above information together, I proffer $0.07 per minute for both debit

and collect calls, with no set up or per call fixed fees, as a just and reasonable rate for inmate
calling services. This rate is clearly economic—it is greater than commercial rates adjusted for
prison specific costs and, as noted below, it is greater than the rate already charged in some
states—and provides a buffer of additional revenue to continue to fund modest commissions. It
will not, however, allow for excessive profits for service providers or penal institutions. The
section below on the costs and benefits of reform discusses this issue in more detail.
61

New York eliminated commissions (sometimes referred to as ‘kickbacks’) in 2007.
http://www.salon.com/2012/10/01/prisoners_crippling_phone_bills/ (last visited March 22, 2013).

See,

62

“Global Tel*Link’s State of Wisconsin Department of Corrections, Request for Proposal SM-1752, Inmate
Telephone Services, Volume II – Cost and Revenue Proposal” (October 16, 2008), p. 3.

63

Petro Letter, p. 2 and Exhibit A. It is worth noting that Talk Telio received the maximum points allowable
for scoring the price component of their bid, but price accounted for less than half the total points used to
evaluate the bid. Nevertheless, Talk Telio only narrowly lost the bid to Securus.

17

IV.
36.

COSTS AND BENEFITS OF REFORMING PRISON PAYPHONE RATES
The market failures of the prison payphone market—that prisoners’ lack of choice in a

service provider results in no mechanism to moderate rates—means that the prices charged are
almost certainly not efficient and social welfare could be improved with alternative rates. This
section will evaluate the costs and benefits of setting a maximum benchmark rate for prison
phone calls. As explained below, the benefits of the proposed benchmark maximum calling rate
likely greatly exceed the associated costs.
37.

As an initial matter, it is worth observing that from an economic perspective, reducing

prison phone rates would be expected to improve welfare. Absent competitive pressures, the
current price of most prison calling is far above the costs of providing the call. Consequently,
the price does not properly signal the costs of the resources used when making a phone call from
a prison.64 If the prison phone market was a well-working market, the higher price would
suggest that the resources employed to produce the good in question are more valuable than for
an alternative lower priced good.65 Only if the prices of goods and services were related to their
64

The benefits of prison phone calls, discussed below, are also not reflected in the price of calls, further
distorting economic efficiency.

65

Economic efficiency is achieved because activities in an economy are coordinated through these price
signals, rather than through central coordination or administration. “Fundamentally, in a system where the
knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate
actions of different people in the same way as subjective values help the individual to coordinate the parts
of his plan. It is worth contemplating for a moment a very simple and commonplace instance of the action
of the price system to see what precisely it accomplishes. Assume that somewhere in the world a new
opportunity for the use of some raw material, say tin, has arisen, or that one of the sources of supply of tin
has been eliminated. It does not matter for our purpose-and it is very significant that it does not matter—
which of these two causes has made tin more scarce. All that the users of tin need to know is that some of
the tin they used to consume is now more profitably employed elsewhere, and that in consequence they
must economize tin. There is no need for the great majority of them even to know where the more urgent
need has arisen, or in favor of what other needs they ought to husband the supply. If only some of them
know directly of the new demand, and switch resources over to it, and if the people who are aware of the
new gap thus created in turn fill it from still other sources, the effect will rapidly spread throughout the
whole economic system and influence not only all the uses of tin, but also those of its substitutes and the
substitutes of these substitutes, the supply of all the things made of tin, and their substitutes, and so on; and
all this without the great majority of those instrumental in bringing about these substitutions knowing
anything at all about the original cause of these changes. The whole acts as one market, not because any
of its members survey the whole field, but because their limited individual fields of vision sufficiently
overlap so that through many intermediaries the relevant information is communicated to all. The mere
fact that there is one price for any commodity-or rather that local prices are connected in a manner
determined by the cost of transport, etc.-brings about the solution which (it is just conceptually possible)
might have been arrived at by one single mind possessing all the information which is in fact dispersed

18

costs—broadly defined to include all costs, including competitive profits and any non-market
externalities—then they would send the right signals that encourage resources to be used
efficiently.
38.

The problem with inefficient prices, such as those in the prison phone market, is that they

waste resources—what economists call a dead weight loss. A phone call that is priced greater
than it would be if it was provided in a competitive market sends the signal that these calls use
more resources than they in fact do. This creates a situation where some consumers (prisoners
and their families) value the services more than they cost to produce, but are unable to purchase
them. This creates unrealized gains from trade. When prisoners and their families pay a price
that covers the costs of the call, both they and the providers of the call can be made better off, at
least in theory.66 The reason economists argue for efficient prices is that through the elimination
of the dead weight loss, the gain to the benefitting party exceeds the loss to the losing party.67
Because the excessive prices charged for prison calls imply a dead weight loss, a regulated rate
that reduces that dead weight loss would be expected to improve total welfare.68
THE COSTS OF THE CURRENT SYSTEM/THE BENEFITS OF REFORM
39.

The costs of the current system and, consequently, the benefits from reforming it, are

two-fold. First, any reduction in costs of calls from prisons would directly benefit prisoners and
those they call in the form of lower phone bills. Second, to the extent the savings in these
expenses lead to additional phone calling (more and/or longer calls), the prisoners and their
families will certainly benefit, but so will society overall through the positive externality of the
reduced recidivism that results from keeping prisoners connected to their families and
communities.

among all the people involved in the process.” F. A. Hayek, “The Use of Knowledge in Society,” The
American Economic Review, Vol. XXXV, No. 4 (September 1945), p. 526.
66

In practice, the reforms proposed here would also result in a transfer from prisons and service providers to
prisoners and their families, separate from creating a net benefit to society.

67

At least in theory the winner could compensate the loser and still be better off. This meets the so called
Pareto Efficiency criteria.

68

An reduction in rates that does not overshoot the efficient level is expected to improve welfare.

19

40.

Costs of Prison Calls. As the analysis of Section III, above, indicates, the cost of

providing prison phone services is certainly less than $0.07 per minute. Yet, most prisoners pay
more—often much more—than this amount. Table 2, below, reports the per-minute rates for a
15-minute collect call from a Prison Legal News survey. There are at least 6 states where the
cost of a 15 minute interstate collect call, inclusive of commissions, is more than $1 per minute.
A call in an additional 15 states is more than $0.50 per minute and in another 11 states the cost is
more than $0.25 per minute. Together, of the states surveyed by Prison Legal News, at least 32
states charged $0.25 per minute or more for a 15-minute interstate collect call.

20

Table 2: Collect Call Rates for State Prisons, 2012
State
New Mexico*
New York
South Carolina
Nebraska
Missouri
Montana
Florida
Massachusetts
Oregon
Wisconsin
New Hampshire
Oklahoma
North Carolina
Michigan
Vermont
Indiana
Connecticut
New Jersey
Colorado
Louisiana
Rhode Island
Illinois
North Dakota
Texas

15 minute Call
($/Minute)
0.04
0.05
0.07
0.10
0.12
0.14
0.14
0.16
0.16
0.18
0.18
0.20
0.23
0.23
0.23
0.24
0.32
0.33
0.35
0.36
0.39
0.39
0.40
0.43

State
(Continued)
Kentucky
California
Maryland
Kansas
West Virginia
Arizona
Virginia
South Dakota
Utah
Arkansas
Pennsylvania
Washington
Wyoming
Delaware
Nevada
Tennessee
Maine
Mississippi
Idaho
Ohio
Georgia
Minnesota
Alabama
Alaska

15 minute Call
($/Minute)
0.43
0.44
0.47
0.51
0.56
0.56
0.59
0.64
0.65
0.71
0.73
0.73
0.74
0.77
0.79
0.85
0.89
0.97
1.10
1.14
1.15
1.15
1.15
1.15

Source: The Brattle Group Analysis. See Appendix A.
Notes:
*The calling rate for New Mexico is listed as a flat rate of $.65 for a 20 minute call.
Assuming the rate for a 15 minute call would be the same or less, I used the flat rate of
$.65 rate for the calculation. Thus .04 dollars per minute can be seen as an upper limit.
Collect call rates were not available for Hawaii or Iowa.

41.

More recent evidence of rates from prisons suggests charges remain well above costs.

Phone bill evidence from Virginia suggests collect calls to Washington, DC are billed at a $2.50

21

per-call fee plus $0.20 per minute.69 Another phone bill with charges from Florida to Alabama
suggests per-call charges of $3.50 plus $0.89 per minute.70
42.

As the analysis above indicates, prisons in most states charge significantly more to

prisoners to make phone calls than the underlying cost of those calls. Any maximum allowed
rate pegged to a benchmark that reduces these charges will directly benefit prisoners and those
they call.
43.

Economic benefits of lower rates. From a purely economic perspective, the first order

effect of lower rates for calls that would have been placed at higher rates is simply a transfer
from service providers and the penal institutions they contract with, to prisoners, their families
and others they call. The additional calls that will be made if rates are lower (but do not happen
with today’s higher rates) provide a net benefit to society. This net benefit arises through the
elimination of the distortion in the use of resources that were referred to above as a dead weight
loss. Part of this efficiency benefit will go to consumers of prison phone services and part will
go to the service providers and, possibly, the institutions they serve.
44.

The net economic benefit to consumers of prison phone services is the difference they

would have been willing to pay for the additional calls made, less the new cost of those calls.
This willingness to pay is distributed between the old rate paid (because additional calls could
have been purchased at that rate prior to the rate reduction) and the new rate. The amount of
additional calling will depend on how responsive calling volumes are to a change in its price—
what economists call the elasticity of demand—for prison phone services. The elasticity of
demand for prison phone services is expected to be inelastic—that is, the amount of calls made is
not very responsive to prices. This inelastic demand is expected because prisoners have fewer
69

Securus Account Statement, dated 9/26/2012. Received from Deborah Golden via email, February 5, 2013.
The bill includes a 3 minute call billed at $3.10 and a 10 minute call billed at $4.50. This implies a pricing
structure where the Call Cost = $2.50 plus $0.20 times the number of minutes of the call. Examination of
other charges on the same bill confirms this pricing structure.
70

Global Tel Link. Billing Summary for Southern Poverty Law Center, October 31, 2012. Received from Lee
Petro via email, February 4, 2013. The bill includes a 1 minute call billed at $4.84 and a 2 minute call billed at
$5.73. This implies a pricing structure where the Call Cost = $3.95 plus $0.89 times the number of minutes of
the call. This rate structure is consistent with another invoice from GTL dated September 29, 2012. Global Tel
Link, Billing Summary for Account Number 2023191000, September 29, 2012. Received from Deborah
Golden via email February 5, 2013.

22

alternatives to making phone calls. They mostly cannot see people in person and do not have
access to e-mail. In New York, when prices fell by 57.5%, total usage increased by 36%,
suggesting an elasticity of demand of -0.63.71
45.

When rates are reduced and demand is inelastic, there will be less revenue generated

from prison calling services.

To the extent the reduced revenue forces a reduction in

commissions, prisons will lose revenues. Service providers will also lose through reduced
revenues from services. But lower prices will induce an increase in the amount of prison calls
made, leading to a partial offset for service providers, and possibly prisons. The above elasticity
estimate suggests that a 10% reduction in price will lead to a 6.3% increase in call volumes.
46.

Social benefits of lower rates. There are at least 2 social externalities associated with

prison calling. The first is through the benefits of reduced recidivism from greater contact
between prisoners and their family and community. The second is more effective prisoner
management, including reduced use of contraband cell phones in prisons.

Although exact

pecuniary levels of these added benefits from lower calling rates are not quantified here, they are
nonetheless real.
47.

Prisoners making phone calls to their family and community have a well-documented

social externality—namely, that better family and community contacts reduce recidivism rates.
Many studies find that maintaining family and community contacts is an important predictor of
recidivism.72 Furthermore, the GAO found that “BOP extends telephone privileges to inmates
and asserts that telephone privileges help inmates maintain family and community ties and
facilitate the reintegration of inmates into society upon release from prison.”73
48.

This social benefit of reductions in recidivism rates is difficult to quantify accurately, but

it must be large. In 2011, the average U.S. state and federal prison population was 1.6 million

71

http://www.doccs.ny.gov/PressRel/2007/phoneratereduction.html.

72

See the discussion in Jackson 2005, pp. 272-273.

73

GAO 2011, p. 6.

23

inmates and 688,384 were released in that year.74 According to one study, in 2010 each prisoner
in a state institution cost taxpayers an average of $31,286.75

A conservative estimate of

recidivism rates would suggest 40% of prisoners return to prison within 3 years.76 With almost
700,000 prisoners released each year, these numbers suggest 280,000 will return to prison within
3 years. Consequently, a reduction of just 1% in the number of reincarcerated prisoners would
imply 2,800 prisoners not returning to prison and annual savings of almost $90 million.77
Reductions in the next year’s ‘class’ of returning prisoners generate additional savings of about
the same amount. If the average prisoner serves 3 years,78 then a 1% reduction in recidivism
would save more than $250 million per year, year after year.79
49.

Yet another benefit of lower prison calling rates relates to inmate management issues.

Contraband cell phones are a threat to prisons, both in facilitating additional criminal activity and
threatening institutional safety.80 Any substitution away from cell phones to prison provided
calling services brings more prisoner communications under monitoring and reduces these
threats. Making prison calling more cost competitive with cellular rates will inevitably create
some substitution in usage toward the calling services provided by the institution.

74

E. Ann Carson & William J. Sabol, “Prisoners in 2011,” U.S. Department of Justice, Office of Justice
Programs, Bureau of Justice Statistics, Bulletin (December 2012), p. 1, available at:
http://bjs.ojp.usdoj.gov/content/pub/pdf/p11.pdf.

75

Christian Henrichson & Ruth Delaney, “The Price of Prisons, What Incarceration Costs Taxpayers,” VERA
Institute
of
Justice
(July
20,
2012),
p.
10,
available
at:
http://www.vera.org/sites/default/files/resources/downloads/Price_of_Prisons_updated_version_072512.pd
f.

76

“When excluding California, whose size skews the national picture, recidivism rates between 1994 and 2007
have consistently remained around 40 percent.” The PEW Center on the States, “State of Recidivism, The
Revolving
Door
of
America’s
Prisons”
(April
2011),
p.
2,
available
at:
http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/sentencing_and_corrections/State_Re
cidivism_Revolving_Door_America_Prisons%20.pdf. Including California would have made the rate
higher. Furthermore, the Department of Justice estimated a 3-year recidivism rate of prisoners released in
1994 of 67.5%. U.S. Department of Justice, Office of Justice Programs, “Recidivism of Prisoners
Released in 1994,” Bureau of Justice Statistics Special Report (June 2002), p. 1, available at:
http://bjs.ojp.usdoj.gov/content/pub/pdf/rpr94.pdf.

77

1% * 280,000 = 2,800 prisoners * $31,286 per prisoner = $87,600,800.

78

http://www.nytimes.com/2012/06/06/us/average-prison-stay-grew-36-percent-in-two-decades.html?_r=0.

79

$87,600,800 * 3 = $262,802,400.

80

GAO 2011, p. 19.

24

50.

Although the exact values of these externalities—lower recidivism and better prisoner

management—are not estimated here, they do provide further justification for lowering prison
calling rates. In fact, they provide an argument for subsidizing prisoner calling rates. The
efficient level of rates based on market costs does not account for these other positive
externalities. If the added benefits arising from lower rates were actually considered during the
rate-setting process, rates would be set lower than the rate suggested by the analysis in the
previous section.
THE COSTS OF REFORM/BENEFITS OF THE CURRENT SYSTEM
51.

The only beneficiaries of the current high rates are the current service providers and the

penal institutions that receive commissions from the service providers they contract with.
However, any lost revenues to service providers result in a direct benefit to prisoners and those
they call. The impact on the service providers may also be offset from any increased volume of
calls placed.81
52.

A significant portion of the rates charged in many states go to the penal institutions in the

form of commissions. Prison Legal News estimated that total commissions nationwide were
more than $100 million in 2012.82 As the FCC has previously found, these commissions are not
economic costs of providing prison calling services.83 Rather, they are more akin to a tax. As
noted above, some of the revenues from commissions ultimately paid by prisoners and their
families currently may be put to good uses, but because they distort the calling market, they
come with added costs. A more straightforward funding source for these prisoner benefits, such
as from general tax revenues, would distort economic resources less than taxing prison phone
calls as a source of revenue.
53.

Since the proposed benchmark maximum rate of $0.07 per minute is still above

reasonable estimates of costs, including a competitive profit, there could still be some room for
81

How much the increase in calling volumes offsets service provider losses will depend on how the elasticity
of demand for calling services (to determine the amount of increase in inmate calling) and on what
happens with commissions.

82

Human Rights Defense Center, “Comment in the Matter of Rates for Inmate Calling Services, WC Docket
No. 12-375,” (March 25, 2013), Exhibit C.

83

Inmate Calling NPRM 2012, ¶ 37.

25

small commissions. In fact, with a fixed maximum rate, the competition for contracts would
induce efficient provision of prison phone service.84 If commissions are still allowed, then it is
likely that service providers would still compete on the basis of commissions in trying to secure
the contracts for given facilities. The amount of money available to offer in commissions would
be the difference between the benchmark maximum rate and the costs of providing service. The
firms that could offer the highest commissions would be the ones that could provide the
underlying service at least cost, for a given set level of service quality.85 In the absence of
commissions, competition for contracts would focus on other areas, such as providing better
service to prisoners.
THE NET BENEFITS OF A BENCHMARK MAXIMUM RATE
54.

It is well beyond the scope of the current analysis to provide a full accounting of the net

benefits of regulating prison phone rates by establishing a maximum benchmark. Nevertheless,
those net benefits are expected to be positive. Through the elimination of a dead weight loss we
expect the gains to prisoners and those they call to exceed the loss in revenues to service
providers and prisons. Some of benefits will be in the form of transfers from service providers
and prisons to prisoners and those they call. The transfer of provider profits to the consumers of
prison phone services should be seen a good thing from the social perspective, largely because it
is only excess profits that would be transferred while those receiving the monetary benefits tend
to be low income and can disproportionately benefit from the increased income.
55.

A secondary concern is the loss in commissions to prisons. But it is very likely that

through reduced recidivism rates prisons systems will not lose any money from reduced phone
rates and associated commissions. As noted above, one estimate of the commissions earned by
prisons is about $100 million per year. A less-than-one percent reduction in recidivism would
offset that lost revenue in lower prisoner costs. We do not know what the reduced recidivism
rates would be from lower calling rates, but a 1% reduction does not seem an aggressive

84

As with any regulated price, the quality of the service must be specified or lower quality service could result
from cost cutting measures.

85

The winning bidder would be expected to earn above competitive profits by the difference between how
efficiently it could provide the service and the next most efficient provider.

26

estimate.86 Although the savings from reduced recidivism may not exactly match the lost
commission revenues at each facility or in every budget line, the prison system in the U.S. would
save enough to offset the lost commission revenues.

V.
56.

INAPPLICABILITY OF MARGINAL LOCATION METHODOLOGY TO
THE PRISON PHONE MARKET
Marginal Location Methodology—as adopted by the FCC for calculating public

payphone rates87—is not applicable to the prison payphone marketplace. The reasons used to
justify this methodology in the public payphone market do not hold today for prison phone
calling. Applying such a methodology here would be unnecessarily complicated and would over
compensate most prison phone service providers.
57.

The idea behind the Marginal Location Methodology is to estimate a rate where the

marginal location just breaks even. As the FCC said in its 1999 Order, “A marginal payphone
location is a location where the payphone operator is able to just recoup its costs, including
earning a normal rate of return on the asset, but is unable to make payments to the location
owner.”88 It is the average call volume at that marginal location that would be used along with
cost analysis to set the appropriate rate. Applying this methodology to prison phone systems
would be to set a benchmark rate for all prisons based on the call volume at a marginal prison
that just barely breaks even without paying commissions (if commissions are taken as analogous
to payments to the location owner.)
58.

This methodology has been criticized when applied to payphones.89

Among other

defects, it guarantees overpayments at most (non marginal) locations. In the case of prison
calling services, costs are less facility specific than for payphones. The centralized nature of
86

If the impact of better family and community ties induced by lower calling rates was actually less than 1% it
seems unlikely that multiple studies would have identified the importance of this predictor of recidivism.

87

See, Federal Communications Commission, “Third Report and Order, and Order on Reconsideration of the
Second Report and Order,” In the Matter of Implementation of the Pay Telephone Reclassification and
Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128 (Adopted:
January 28, 1999). (Hereinafter “1999 Payphone Order”.)

88

1999 Payphone Order, ¶ 139.

89

There was some dissent in the applicability of this methodology to payphones. 1999 Payphone Order, ¶ 140.

27

providing prison calling services implies that costs are shared over multiple facilities.
Consequently, this methodology is less relevant for prison calling rates than for payphone rates.
59.

The Marginal Location Methodology is also inapplicable because it is a cost-based

methodology. The justification for regulating prison calling rates is that the market fails to set
just and reasonable rates. Cost-based rate regulation is a second-best attempt to approximate the
outcome of a competitive market. As the analysis above indicates, most of the components of
providing prison phone services can be priced in reference to competitively determined service
components. Consequently, there is no need to apply a regulated cost of service approach to
determining a just and reasonable rate. In fact, if a cost-based methodology produces a rate
significantly higher than the $0.07 per minute proposed here, it must be in error because it would
imply paying more for a service, or component of service, that could be purchased more
inexpensively in the competitive marketplace, thereby undermining the rationale for using costbased regulation in the first place.

Respectfully submitted,

By:
Coleman Bazelon
THE BRATTLE GROUP, INC.
1850 M Street, NW
Suite 1200
Washington, DC 20036
March 25, 2013

28

Appendix A: Underlying Data for Interstate Collect Call Calculations
Interstate Collect
Call Base Rate

State
Alabama
Alaska
Arizona
Arkansas
California
Colorado
Connecticut
Delaware
Florida
Georgia
Hawaii
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah

[1]
[2]

[3]

[4]
[5]
[6]
[7]

[8]
[9]

[10]

[11]
[12]
[13]
[14]
[15]
[16]
[17]
[18]
[19]
[20]
[21]
[22]
[23]

$3.95
$3.95
$2.40
$3.95
$0.00
$3.00
$0.00
$1.71
$1.20
$3.95
Missing
$3.80
$2.50
$0.00
Missing
$1.70
$2.00
$2.15
$3.00
$2.85
$0.86
$0.00
$3.95
$3.30
$1.00
$0.24
$0.70
$3.00
$1.20
$0.00
$0.65
$0.00
$3.40
$2.40
$3.94
$3.00
$0.00
$3.50
$1.30
$0.99
$3.15
$3.54
$0.00
$3.00

29

Interstate Collect
Call Minute Rate
$0.89
$0.89
$0.40
$0.45
$0.44
$0.15
$0.32
$0.66
$0.06
$0.89
Missing
$0.85
$0.23
$0.24
Missing
$0.40
$0.30
$0.22
$0.69
$0.30
$0.10
$0.23
$0.89
$0.75
$0.05
$0.12
$0.05
$0.59
$0.10
$0.33
$0.00
$0.05
$0.00
$0.24
$0.88
$0.00
$0.16
$0.50
$0.30
$0.00
$0.43
$0.62
$0.43
$0.45

Commissions
Missing
7.0%
53.7%
45.0%
Missing
49.0%
68.8%
40.0%
35.0%
60.0%
Missing
10.6%
56.0%
43.5%
Missing
41.3%
54.0%
70.0%
60.0%
54.0%
22.5%
0.0%
59.0%
60.5%
0.0%
25.0%
0.0%
54.2%
Missing
41.0%
0.0%
0.0%
58.0%
40.0%
Missing
76.6%
Missing
44.4%
0.0%
0.0%
35.5%
50.1%
40.0%
50.0%

Interstate Collect
Call Base Rate

State
Vermont
Virginia
Washington
West Virginia
Wisconsin
Wyoming

[24]
[25]
[26]

Interstate Collect
Call Minute Rate

$1.25
$2.40
$3.50
$0.85
$0.00
$2.80

Commissions

$0.15
$0.43
$0.50
$0.50
$0.18
$0.55

37.0%
35.0%
Missing
46.0%
30.0%
65.5%

Source: Prison Legal News, 2013.
Notes: Compiled by Prison Legal News.
No commissions, but California Technology Agency receives an $800,000
[1]
annual fee from GTL.
FY2012 commission amount is for 10 months of the FY.
[2]
[3]

FY2009 commission amount is only for January through June 2009.

[4]

No commission percentage; the commission is $2.25 per debit call, $2.00
per pre-paid collect call and $1.75 per collect call. Community Work
Centers have a 20% commission.
FY2012 commission amount is through April 2012.

[5]

[7]

Not called “commissions,” but the Iowa DOC receives payments from its
ICS provider.
FY2012 commission amount is through May 2012.

[8]

Uses a calendar year, not fiscal; 2012 amount is through November 2012.

[9]

[10]

Rates per email from MD DOC; no per-minute charge for first minute of
collect interstate calls. ICS contract changed to GTL in March 2013,
resulting in reduced rates.
Collect rate is per call to GTL on 3/8/13.

[11]

Commission is $27,000/month + 20%, starting September 2012.

[12]

All flat rates are for 20-minute calls.

[13]

FY2012 commission amount is through October 2012.

[14]

$.30 for the first minute for collect interstate calls, then $.24/min. thereafter.

[15]

[17]
[18]

Ohio DOC receives a flat/fixed annual commission of $15 million. Collect
rate is per call to GTL on 3/8/13.
Commission is a flat rate of $2.30 per call, which equates to 76% based on a
flat rate cost of $3.00 per call.
$750,000/quarter plus 50% commission if profit is over $1.5 million.
FY2012 commission data is incomplete.

[19]

All flat rates are for 15-minute calls.

[20]

[22]

33-38% on collect calls (varies by distance); $1.00 commission per debit
call (all distances).
Actual rates are $3.53525 + .61755/min. collect and $3.181735
+.555795/min. debit.
FY2012 ended on August 31; commission amount is as of August 5, 2012.

[23]

Rates are per call to VAC on 3/8/13.

[24]

FY2012 commission amount is for 11 months.

[25]

FY2012 commission amount is through September 2012.

[26]

FY2012 commission amount is from January through August 2012.

[6]

[16]

[21]

30

Attachment A

 

COLEMAN BAZELON 

 

Principal 

Office: Washington, DC  Phone: +1.202.955.5050 Email: Coleman.Bazelon@brattle.com 

Dr. Coleman Bazelon is a principal in the Washington, DC office of The Brattle Group. He is an expert in 
regulation  and  strategy  in  the  wireless,  wireline,  and  video  sectors.  He  has  consulted  and  testified  on 
behalf  of  clients  in  numerous  telecommunications  matters,  ranging  from  wireless  license  auctions, 
spectrum  management,  and  competition  policy,  to  patent  infringement,  wireless  reselling,  and 
broadband deployment. 
 
Dr.  Bazelon  frequently  advises  regulatory  and  legislative  bodies,  including  the  U.S.  Federal 
Communications Commission and the U.S. Congress. He also has expertise in the federal government’s 
use of discount rates for policy and regulatory analysis, intellectual property valuation, economic impact 
analysis, and antitrust and damages analysis. 
 
Throughout  his  career,  Dr.  Bazelon  has  had  extensive  experience  with  spectrum  license  auctions.  He 
advises  on  and  evaluates  numerous  auction  designs  and  regularly  serves  as  an  auction  advisor  for 
bidders in spectrum license auctions. 
 
Prior to joining Brattle, Dr. Bazelon was a vice president with Analysis Group, an economic and strategy 
consulting  firm.  During  that  time,  he  expanded  the  firm’s  telecommunications  practice  area.  He  also 
served as a principal analyst in the  Microeconomic  and Financial Studies Division of the Congressional 
Budget Office where he researched reforms of radio spectrum management; estimated the budgetary 
and private sector impacts of spectrum‐related legislative proposals; and advised on auction design and 
privatization issues for all research at the CBO. 
 
Dr. Bazelon received his Ph.D. and M.S. in Agricultural and Resource Economics from the University of 
California at Berkeley. He also holds a Diploma in Economics from the London School of Economics and 
Political Science and a B.A. from Wesleyan University. 
 
 

COLEMAN BAZELON 
Principal 

 

2 

SELECTED CONSULTING PROJECTS 
Litigation 
 Assessed commercial viability of full text searching of books business model. 
 Assessed Domestic Industry requirement in ITC 337 case. 
 Estimated value of satellite assets in bankruptcy. 
 Estimated damages from denial of pole attachments. 
 Provided written testimony evaluating the performance of a numbering resource administrator. 
 Provided written testimony on the ability to estimate damages for a class of satellite phone users. 
 Provided written testimony on the economic value of Rights‐of‐Ways in Massachusetts. 
 Estimated damages for a broadcast tower permit revocation. 
 Provided oral testimony on the proprietary nature of specific information contained in a statewide 
public safety network bid. 
 Provided written testimony on economic value associated with items provided in a labor neutrality 
agreement. 
 Estimated damages associated with USF and other telephone taxes paid by a calling card reseller. 
 Assessed the damages associated with the infringement of patents related to VoIP technology and 
the likely impact of a permanent injunction. 
 Estimated recoverable data costs for two pesticides. 
 Estimated cost of delay in granting local cable franchise. 
 Analyzed the economic underpinnings of an exclusivity clause of a mobile phone affiliation 
agreement. 
 Assessed commonality issues of physicians for class certification of RICO action against a set of 
health insurance companies. 
 Estimated “Loss of Use” damages for a severed fibre optic cable. 
 Provided written testimony estimating the value of a surety bond in a contract dispute involving 
toll free phone numbers used in an enhanced service application. 
 Assessed damages associated with infringement of patents used to provide Voice over Internet 
Protocol (VoIP). 
 Assessed basis for guidance of a large telecommunications firm in a 10‐b securities litigation.  
 Valued digital television radio spectrum in St. Louis in the pre‐litigation phase of a breach of 
contract dispute. 
 Estimated damages in a breach of contract case involving the sale of a fibre optic network. 
 Researched the basis for generally optimistic forecasts of broadband deployment in the later 
1990s and early 2000s in an anti‐trust litigation.  
 Researched the basis for generally optimistic beliefs about the telecommunications sector .in the 
late 1990s in a 10‐b securities litigation. 

 

 

 

 

 

 

 

 

               

        www.brattle.com 

COLEMAN BAZELON 
Principal 

 

3 

 Assessed the market for Competitive Local Exchange Carriers in an SEC fraud case. 
 Assessed a bankruptcy sale proposal for a national tier 1 broadband backbone provider. 
 Examined the business case asserted for a small wireless reseller in a breach of contract litigation. 
 Assessed damages associated with infringement of patents used in DNA fingerprinting 
applications. 
 Assessed changes in contributions to the Cable Royalty Fund on behalf of Sports Claimants in a 
Copyright Arbitration Royalty Panel (CARP) proceeding. 
 Assessed the capital adequacy of the U.S. branch of a foreign bank. 
 

Regulatory Proceedings 
 Estimated economic impact of LNP on RLECs. 
 Assessed relevance of U.S. UNE‐L experience for New Zealand benchmarking proceeding. 
 Authored analysis of harm from revoking LightSquared’s ATC authorization . 
 Estimated value of pairing Upper 700 MHz A Block with public safety. 
 Estimated impact of increased regulatory uncertainty on spectrum value. 
 Estimated value of government provision of GPS service to private industry. 
 Coauthored analysis of feasibility of reallocating broadcast television through the use of incentive 

auctions. 
 Analyzed impact on spectrum value of pairing AWS III spectrum. 
 Coauthored analysis of the merits of licensed versus unlicensed allocation of the TV White Spaces. 
 Estimated the value of TV White Spaces. 
 Provided written testimony on the economic harm of using proprietary information in retention 

marketing. 
 Provided written testimony on the economics of pole attachment rates. 
 Estimated the value of the PCS H‐Block spectrum band. 
 Estimated the economic impact of ITC Exclusion Order on cell phone handsets. 
 Authored several reports on the 700 MHz auction rules. 
 Analyzed the relationship between the size of cable systems and the economics of the 

programming market. 
 Presented analysis on pricing differentials in overlapping cable markets. 
 Assessed proposed regulation of mobile phone roaming rates. 
 Analyzed impact of local franchise requirements on competition in the video marketplace. 
 Developed and assessed Indian spectrum management proposals. 
 Analyzed economic ramifications of à la carte cable channel pricing on consumers and the cable 

and television programming industries. 

 

 

 

 

 

 

 

 

               

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Principal 

 

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 Examined the relative merits of licensed versus unlicensed radio spectrum and the effects of 

“underlay” licenses on existing commercial licensees. 
 Examined federalism issues related to mobile telephony regulation. 
 Examined and refuted arguments suggesting that the California Telecommunications Consumer 

Bill of Rights was an appropriate response to market failures. 
 Assessed the impact on consumers of California’s Telecommunications Consumer Bill of Rights 

proposal. 
 Provided written testimony refuting analysis purporting to show a positive relationship between 

UNE‐P and telecom network investment. 
 Provided written testimony examining the effects of unbundling regulations on capital spending in 

the telecommunications sector. 
 Estimated the adjustment to the TELRIC pricing formula to account for irreversible investment in 

the local telephone network. 
 Examined the impact of irreversible investments in the local telephone network on the TELRIC 

pricing methodology. 
 Assessed the degree of market overlap of two food service firms for purposes of merger review. 
 Provided written testimony that assessed the validity of an analysis of the costs of a DTV tuner 

mandate. 
 Provided written testimony of a forecast of toll free number demand for the toll free number 

administrator, SMS/800, in a rate case proceeding. 

 
Other 
 Assessed business case and value of HF license holder. 
 Analyzed likely auction outcomes for TV broadcaster participating in incentive auction. 
 Assessed value of commercial mobile spectrum bands. 
 Analyzed economic impacts of the commercial casino industry. 
 Evaluated impact of digitization on copyright industries. 
 Analyzed economic and employment effects of Dutch gas hub. 
 Advised bidder in Indian 3G spectrum license auction. 
 Estimated economic and employment effects of network neutrality regulation. 
 Analyzed relative costs of wireless and wireline deployments in rural areas. 
 Analyzed potential harms from Internet gambling. 
 Estimated economic value of reallocating TV spectrum for wireless broadband. 
 Estimated economic and employment effects of electric power transmission construction in 

support of new wind generation facilities. 
 Estimated economic and employment effects of broadband stimulus grant applications. 

 

 

 

 

 

 

 

 

               

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Principal 

 

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 Estimated employment effects of an ATC‐mobile satellite network deployment. 
 Analyzed the impact of reducing international mobile phone roaming charges. 
 Developed an auction platform for an electricity procurement auction. 
 Analyzed the economic impacts of reduced mobile phone taxes in Africa and the Middle East. 
 Evaluated the impact of reducing ethanol requirements on gasoline prices. 
 Analyzed FRAND licensing requirements for intellectual property in the DTV standard. 
 Advised bidder in Canadian AWS spectrum license auction. 
 Advised bidder in FCC 700 MHz spectrum license auction. 
 Evaluated a business plan for proposed dam removals. 
 Assessed a business plan involving the WiMAX market. 
 Estimated the value of a portfolio of spectrum licenses. 

 Assessed the budgetary impacts of legislation to license TV white spaces. 
 Analyzed the economics of the military’s build versus buy decision for broadband satellite 
communications capacity. 
 Advised bidder in FCC AWS spectrum license auction. 
 Provided framework to estimate impact of the effect of designation of TV white spaces as 
unlicensed on 700 MHz auction receipts. 
 Analyzed Universal Service Fund expenditures. 
 Analyzed cable franchising requirements. 
 Valued proposals to re‐band the Upper 700 MHz Band of radio spectrum. 
 Analyzed proposed accelerated digital television transition impacts on society and the federal 
budget. 
 Coauthored a report on the value of a portfolio of patents used to provide Voice over Internet 
Protocol (VoIP). 
 Coauthored a report to the U.S. Chamber of Commerce on the economic effects of 
telecommunications deregulation. 
 Assessed the business cases for IRU swaps of a large international fibre optic network owner. 
 Examined the effects of unbundling regulations on broadband penetration internationally. 
 
PUBLICATIONS 

Articles and Book Chapters 
John Jarosz, Robin Heider, Coleman Bazelon, Christine Bieri and Peter Hess, “Patent Auctions: How Far 
Have We Come?” les Nouvelles, March 2010, pp. 11‐30. 
“Too Many Goals: Problems with the 700 MHz Auction,” Information Economics and Policy, June 2009, 
pp. 115‐127. 

 

 

 

 

 

 

 

 

               

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Principal 

 

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“Licensed  or  Unlicensed:  The  Economic  Considerations  in  Incremental  Spectrum  Allocations,”  IEEE 
Communications Magazine, March 2009, pp. 110‐116. 
Michael H. Rothkopf and Coleman Bazelon, “Interlicense Competition: Spectrum Deregulation Without 
Confiscation or Giveaways,” in OBTAINING THE BEST FROM REGULATION AND COMPETITION, Michael A. Crew and 
Menahem Spiegel, eds., Kluwer Academic Publishers (2005), pp. 135‐159. 
“Next Generation Frequency Coordinator,” Telecommunications Policy 27 (2003), pp. 517‐525. 
Coleman Bazelon and Kent Smetters, “Discounting in the Long Term,” Loyola of Los Angeles Law Review, 
Vol. 35, Issue 1, November 2002. 
Coleman  Bazelon  and  Kent  Smetters,  “Discounting  Inside  the  Washington  DC  Beltway,”  Journal  of 
Economic Perspectives, Fall 1999. 
“The Movement of Markets,” Wesleyan Economic Journal, Spring 1986. 
“Is the Psychogenic Theory of History Scientific?” Journal of Psychohistory, Fall 1985. 
 

White Papers, Reports, Studies, and Reviews 
Robert A. Rogowsky, Pallavi Seth, and Coleman D. Bazelon, "An Economic View Of ITC 337 Cases and the 
Public Interest," Law360, November 21, 2012. 
Coleman  Bazelon  and  Giulia  McHenry,  “Spectrum  Value,”  Telecommunications  Policy  Research 
Conference, 2012. 
Robert A.  Rogowsky, Pallavi Seth, and  Coleman D.  Bazelon, "An Economic View Of  The  ITC's Domestic 
Industry," Law360, June 18, 2012. 
Coleman  Bazelon  and  Greg  Duncan,  “The  Status  of  UNE‐L  in  the  United  States,”  Prepared  for  the 
Commerce Commission of New Zealand, April 12, 2012. 
“Implications  of  Regulatory  Inefficiency  for  Innovative  Wireless  Investments,”  Sponsored  by 
LightSquared, March 15, 2012. 
Coleman  Bazelon,  Kevin  Neels  and  Pallavi  Seth,  “Beyond  the  Casino  Floor:  Economic  Impacts  of  the 
Commercial Casino Industry,” sponsored by the American Gaming Association, 2012. 
Coleman  Bazelon,  Charles  Jackson  and  Giulia  McHenry,  “An  Engineering  and  Economic  Analysis  of  the 
Prospects  of  Reallocating  Radio  Spectrum  from  the  Broadcast  Band  through  the  Use  of  Voluntary 
Incentive Auctions,” Telecommunications Policy Research Conference, 2011. 
“Cost of Regulatory Risk for Wireless Spectrum Values,” sponsored by LightSquared, August 23, 2011. 
“Expected Receipts from Proposed Spectrum Auctions,” sponsored by the Wireless Broadband Coalition, 
July 28, 2011. 
“GPS Interference: Implicit Subsidy to the GPS Industry and Cost to LightSquared of Accommodation,” 
sponsored by LightSquared, June 22, 2011. 
Lisa Cameron and Coleman Bazelon, “The Impact of Digitization on Business Models in Copyright‐Driven 
Industries: A Review of the Economic Issues,” National Research Council (NRC) Committee on the Impact 
of Copyright Policy on Innovation in the Digital Era, June 7, 2011. 
“The Economic Basis of Spectrum Value: Pairing AWS‐3 with the 1755 MHz Band is More Valuable than 
Pairing it with Frequencies from the 1690 MHz Band,” sponsored by T‐Mobile and CTIA, April 11, 2011. 

 

 

 

 

 

 

 

 

               

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Principal 

 

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“Economists Letter to Obama Regarding Incentive Auctions,” April 6, 2011. 
“The Indian 3G and BWA Auctions,” Telecommunications Policy Research Conference, 2010. 
“Economic  Impact  of  the  Dutch  Gas  Hub  Strategy  on  the  Netherlands,”  by  Dan  Harris,  Coleman  D. 
Bazelon, Brad Humphreys, and Penelope Dickson, Netherlands Ministry of Economic Affairs, Agriculture 
and Innovation, September 2010. 
“The  Employment  and  Economic  Impacts  of  Network  Neutrality  Regulation:  An  Empirical  Analysis,” 
sponsored by Mobile Future, 2010. 
“The Benefits of Wireless Broadband for Rural Deployments,” sponsored by Qualcomm, Inc, 2010. 
Malcolm  K.  Sparrow,  Coleman  Bazelon  and  Charles  Jackson,  “Can  Internet  Gambling  Be  Effectively 
Regulated? Managing the Risks,” sponsored by Wired Safety, 2009. 
“The  Need  for  Additional  Spectrum  for  Wireless  Broadband:  The  Economic  Benefits  and  Costs  of 
Reallocations,” sponsored by Consumer Electronics Association, 2009. 
Coleman Bazelon and William Zarakas, “Measuring Concentration in Radio Spectrum License Holdings,” 
Telecommunications Policy Research Conference, 2009. 
“Licensed  or  Unlicensed:  The  Economic  Considerations  in  Incremental  Spectrum  Allocations,”  in  New 
Frontiers in Dynamic Spectrum Access Networks, 2008, DySPAN 2008. 
“Overreaching:  The  Policy  Failures  of  the  700  MHz  Auction,”  Telecommunications  Policy  Research 
Conference, 2008. 
“Cream Skimming,” Telecommunications Policy Research Conference, 2007. 
Thomas  W.  Hazlett  and  Coleman  Bazelon,  “Market  Allocation  for  Radio  Spectrum,”  prepared  for  the 
International Telecommunications Union Workshop on Market Mechanisms for Spectrum Management, 
Geneva, Switzerland, January, 2007. 
“Licensed  or  Unlicensed:  The  Economics  of  Incremental  Spectrum  Allocations,”  Telecommunications 
Policy Research Conference, 2006. 
“Analysis of an Accelerated Digital Television Transition,” sponsored by Intel Corporation, 2005. 
Thomas W. Hazlett and Coleman Bazelon, “Regulated Unbundling of Telecommunications Networks: A 
Stepping  Stone  to  Facilities‐Based  Competition?”  Telecommunications  Policy  Research  Conference, 
2005. 
Thomas  W.  Hazlett,  Coleman  Bazelon,  John  Rutledge,  and  Deborah  Allen  Hewitt,  Sending  the  Right 
Signals: Promoting Competition Through Telecommunications Reform: A Report to the U.S. Chamber of 
Commerce, September 22, 2004. 
Thomas  W.  Hazlett,  Arthur  M.  Havenner,  and  Coleman  Bazelon,  “Regulation  and  Investment  in  Local 
Telecommunications Networks,” Working Paper, January 2004. 
Michael H. Rothkopf and Coleman Bazelon, “Interlicense Competition: Spectrum Deregulation Without 
Confiscation or Giveaways,” New America Foundation, Spectrum Series Working Paper #8, August, 2003. 
“Review of Discounting and Intergenerational Equity,” by Paul Portney and John Weyant, Resources for 
the Future (1999), in the Society of Government Economists Newsletter, Volume 34, No. 10, November 
2002. 
“Completing the Transition to Digital Television,” Congressional Budget Office, September 1999.* 

 

 

 

 

 

 

 

 

               

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Principal 

 

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“Two  Approaches  for  Increasing  Spectrum  Fees,”  Congressional  Budget  Office,  November  1998 
(Coauthored with David Moore*). 
“Where  Do  We  Go  From  Here?  The  FCC  Auctions  and  the  Future  of  Radio  Spectrum  Management,” 
Congressional Budget Office, April 1997 (Coauthored with Perry Beider and David Moore*).  
* CBO publications do not cite authors’ names. 
 

Federal Communications Commission Filings 
“Unlicensed Use of the TV White Spaces: Wasteful and Harmful,” FCC Filling, with Charles L. Jackson and 
Dorothy  Robyn,  Ex  Parte  Comments,  ET  Docket  No.  04‐186,  ET  Docket  No.  02‐380,  August  20,  2008 
(benefits of licensed over unlicensed allocation of the TV White Spaces). 
“Comments of Charles L. Jackson, Dorothy Robyn and Coleman Bazelon,” Comments, WC Docket No. 06‐
150, PS Docket No. 06‐229, June 20, 2008 (value of TV White Spaces). 
“Comments of Coleman Bazelon,” Comments, WC Docket No. 06‐150, PS Docket No. 06‐229, WT Docket 
No. 96‐86, June 20, 2008 (700 MHz D Block). 
“Declaration of Coleman Bazelon,” Reply Comments, WC Docket No. 07‐245, April 22, 2008 (economics 
of pole attachment rates). 
“Why  the  Exclusive  Use  of  Large  Licenses  in  the  Upper  or  Lower  700  MHz  Bands  Would  Reduce  the 
Efficiency of the 700 MHz Auction,” Comments, WT Docket No. 06‐150, April 20, 2007. 
“Principles  for  Choosing  700  MHz  Block  License  Sizes,”  Ex  Parte  Comments,  WT  Docket  No.  06‐150, 
March 6, 2007. 
“The Economics of License Sizes in the FCC’s 700 MHz Band Auction,” Ex Parte Comments, WT Docket 
No. 06‐150, January 2007. 
“Declaration  of  Thomas  W.  Hazlett,  Ph.D.,  Prof.  Arthur  M.  Havenner,  and  Coleman  Bazelon,  Ph.D.,” 
Comments, WC Docket No. 03‐173, December 16, 2003. 
“Declaration  of  Thomas  W.  Hazlett,  Ph.D.,  Arthur  M.  Havenner,  Ph.D.,  and  Coleman  Bazelon,  Ph.D.,” 
Comments, WC Docket No. 03‐157, September 2, 2003. 
“Spectrum  Deregulation  Without  Confiscation  or  Giveaways,”  with  Michael  Rothkopf,  Comment,  ET 
Docket No. 02‐135, January 9, 2003. 
Thomas  W.  Hazlett,  Coleman  Bazelon  and  Arthur  Havenner,  “Forecast  of  Toll  Free  Number  Demand: 
2002‐2004,” Attachment A, SMS/800 Transmittal No. 22, F.C.C. Tariff No. 1, November 15, 2002. 
“Comments  of  Coleman  D.  Bazelon  and  T.  Christopher  Borek  Relating  to  Arthur  D.  Little,  Inc.’s 
Assessment  of  the  Impact  of  DTV  on  the  Cost  of  Consumer  Television  Receivers,”  Ex  Parte  Comments 
MM Docket 00‐39, August 1, 2002. 
“Use Administrative Law Judges to Adjudicate Interference Disputes Between Licensees,” Comment, ET 
Docket No. 02‐135, July 8, 2002. 
 

REVIEWER 
 American Journal of Agricultural Economics 
 Congressional Budget Office Reports 

 

 

 

 

 

 

 

 

               

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Principal 

 

9 

 Telecommunications Policy 
 Telecommunications Policy Research Conference Program Committee 
 
SEMINARS AND PRESENTATIONS 
Mobile  Impact  on  Economic  Growth  and  Job  Creation,  Consumer  Electronics  Show,  LIT  Program 
Innovation Policy Summit, Las Vegas, NV, January 8, 2013. 
Incentive Auctions: What Broadcasters Need to Know, Crossfire Media Webinar, December 19, 2012. 
Spectrum  Value,  40th  Annual  Telecommunications  Policy  Research  Conference  (TPRC),  Arlington,  VA, 
September 22, 2012. 
FCBA  Seminar:  Getting  from  Here  to  There:  The  Road  Ahead  for  Spectrum  Auctions,  Washington,  DC, 
June 6, 2012. 
Incentive Auctions, 39th Annual Telecommunications Policy Research Conference (TPRC), Arlington, VA, 
September 24, 2011. 
Competition  in  the  Wireless  Environment:  How  to  Get  More  Handsets  or  More  Networks,  Broadband 
Breakfast Club, Washington, DC, February 15, 2011. 
Introducing TV White Spaces, Spectrum Bridge webinar, October 28, 2010. 
The Indian 3G and BWA Auctions, 38th Annual Telecommunications Policy Research Conference (TPRC), 
Arlington, VA, October 2, 2010. 
How Smart Public Policies Can Drive the Mobile Broadband Transformation, Information Technology and 
Innovation  Foundation’s  The  Emerging  Mobile  Broadband  Economy  and  its  New  Business  Models, 
Washington, DC, September 14, 2010. 
Community  Broadband‐A  Blessing  or  Curse?,  K&L  Gates  LLP  Municipal  Broadband  Webcast,  July  29, 
2010. 
Towards  A  Sustainable  Spectrum  Policy:  Rethinking  Federal  Spectrum,  Public  Knowledge,  Washington, 
DC, June 3, 2010. 
Unraveling  Net  Neutrality:  Should  the  FCC  Regulate  Broadband,  Independence  Institute,  Denver,  CO, 
May 26, 2010. 
CQ‐Roll Call Policy Breakfast on the Future of Wireless Broadband, Washington, DC, May 20, 2010. 
Congressional  Staff  Briefings  on  “The  Need  for  Additional  Spectrum  for  Wireless  Broadband:  The 
Economic Benefit and Costs of Reallocations,” Washington, DC, December 8, 2009. 
The  Progress  and  Freedom  Foundation’s  “Let’s  Make  a  Deal:  Broadcasters,  Mobile  Broadband,  and  a 
Market in Spectrum,” Washington, DC, December 1, 2009. 
FCBA’s Intellectual Property Practice Committee Brown Bag Lunch, Washington, DC, November 30, 2009. 
FCC Broadband Spectrum Workshop, Washington, DC, September 17, 2009. 
Measuring  Concentration  in  Radio  Spectrum  License  Holdings,  37th  Annual  Telecommunications  Policy 
Research Conference (TPRC), Arlington, VA, September 26, 2009. 
Broadband Stimulus Plan, 2009 FLATOA‐FCBA Conference, Tampa, FL, June 26, 2009. 

 

 

 

 

 

 

 

 

               

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Principal 

 

10 

Leveraging the Broadband Stimulus and Licensed Spectrum, Webinar, April 29, 2009. 
Keynote Address, Enterprise Wireless08, Scottsdale, AZ, November 6, 2008. 
Licensed  or  Unlicensed:  The  Economic  Considerations  in  Incremental  Spectrum  Allocations,  DySPAN, 
Chicago, IL, October 16, 2008. 
Overreaching:  The  Policy  Failures  of  the  700  MHz  Auction,  36th  Annual  Telecommunications  Policy 
Research Conference (TPRC), Arlington, VA, September 27, 2008. 
Cream  Skimming,  35th  Annual  Telecommunications  Policy  Research  Conference  (TPRC),  Arlington,  VA, 
September 29, 2007. 
Auction  Revenues  are  not  the  Only  Revenues  that  Should  Drive  Spectrum  Policy,  Law  Seminars 
International: Spectrum Management, Washington, DC, September 17, 2007. 
Market  Allocation  for  Radio  Spectrum,  International  Telecommunications  Union  Workshop  on  Market 
Mechanisms for Spectrum Management, Geneva, Switzerland, January 2007. 
Licensed vs. Unlicensed Spectrum: A New Economic Model for Determining the Trade‐offs, 34th Annual 
Telecommunications Policy Research Conference (TPRC), Arlington, VA, September 30, 2006. 
Decoding  the  Future  of  IP‐TV,  Northern  California  Chapter  of  the  Federal  Communications  Bar 
Association, San Francisco, February 2006. 
Accelerating  the  Digital  Television  Transition,  COMPTEL  Executive  Business  &  Policy  Summit, 
Washington, DC, December 2005. 
Regulated  Unbundling  of  Telecommunications  Networks:  A  Stepping  Stone  to  Facilities  Based 
Competition? Telecommunications Policy Research Conference, Arlington, VA, September 2005. 
Sending the Right Signals: Promoting Competition Through Telecommunications Reform: A Report to the 
U.S. Chamber of Commerce, presentation of report to the US Chamber of Commerce, October 6, 2004. 
Telecommunications  Reform,  presentation  to  the  U.S.  Chamber  of  Commerce’s  Technology  Policy 
Committee, April 29, 2004. 
Interlicense  Competition,  Telecommunications  Policy  Research  Conference,  Arlington,  VA,  September 
2003. 
Marketing & Legal Strategies: Hope, Hype & Crash Landings, WCAI 2003, Washington, DC, July 10, 2003. 
Spectrum  Policy  Task  Force  Interference  Recommendations,  Manhattan  Institute  Conference, 
Washington, DC, February 13, 2002. 
FCC  License  Auctions,  Society  of  Government  Economists  Conference,  Washington,  DC,  November  22, 
2002. 
Spectrum Management Panel, CTIA Wireless 2002, Orlando, FL, March 18, 2002. 
A Note on Correlation, ASSA Annual Meetings, Atlanta, GA, January 6, 2002. 
Regulatory Forbearance, Powerline Communications Conference, Washington, DC, December 13, 2001. 
Spectrum License Valuations, CTIA Wireless Agenda 2001, Dallas, TX, May 2001. 
Old Spectrum in the New Economy, with David Moore, invited paper, Society of Government Economists 
Conference “The New ‘Economy’: What Has Changed and Challenges for Economic Policy,” Washington, 
DC, November 2000. 

 

 

 

 

 

 

 

 

               

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COLEMAN BAZELON 
Principal 

 

11 

Discounting Inside the Washington DC Beltway, Energy Information Agency Seminar Series, Washington, 
DC, March 2000. 
Discounting  Inside  the  Washington  DC  Beltway,  Congressional  Budget  Office  Seminar  Series, 
Washington, DC, November 1999. 
Completing  the  Transition  to  Digital  Television,  Telecommunications  Policy  Research  Conference, 
Arlington, VA, September 1999. 
Digital Television Transition, Congressional Budget Office Seminar Series, Washington, DC, April 1999. 
The  Budgetary  Treatment  of  Asset  Sales,  briefing  for  the  staff  of  the  Senate  Budget  Committee, 
Washington, DC, February 1997. 
The Value Added from Multilateral Bargaining Theory for Applied Research, with Greg Adams, Selected 
Paper, AAEA Annual Meeting, Baltimore, MD, August 1992. 
The Importance of Political Markets in Formulating Economic Policy Recommendations, Selected Paper, 
AAEA Annual Meeting, Manhattan, KS, August 1991. 
L.D.C. Debt and Policy Linkages in the Determination of World Commodity Prices, with Gordon Rausser, 
Selected Paper, AAEA Annual Meeting, Vancouver, B.C., Canada, August 1990. 
 

TESTIMONY, DECLARATIONS, AND AFFIDAVITS 
“Rebuttal Testimony of Coleman Bazelon,” In re: Petition for Suspension or Modification of Application 
of  the  Requirements  of  47  U.S.C.  §  251(b)  and  (c),  pursuant  to  47  U.S.C.  §  251(f)(2)  regarding  Time 
Warner  Cable  Information  Services  (Maine)  LLC’s  Request,  State  of  Maine  Public  Utilities  Commission, 
Docket  No.  2012‐198,  Docket  No.  2012‐218,  Docket  No.  2012‐219,  Docket  No.  2012‐220,  Docket  No. 
2012‐221, October 12, 2012. 
“Testimony of Coleman Bazelon, Ph.D.,” In re: Petition for Suspension or Modification of Application of 
the Requirements of 47 U.S.C. § 251(b) and (c), pursuant to 47 U.S.C. § 251(f)(2) regarding Time Warner 
Cable  Information  Services  (Maine)  LLC’s  Request,  State  of  Maine  Public  Utilities  Commission,  Docket 
No. 2012‐198, Docket No. 2012‐218, Docket No. 2012‐219, Docket No. 2012‐220, Docket No. 2012‐221, 
August 20, 2012. 
“Expert  Report  of  Dr.  Coleman  Bazelon,”  Salsgiver  Communications,  Inc.,  Salsgiver  Telecom,  Inc.,  and 
Salsgiver Inc. v. Consolidated Communications Holdings, Inc., North Pittsburgh Systems, Inc., and North 
Pittsburgh  Telephone  Company,  Inc.,  Court  of  Common  Pleas,  Allegheny  County,  Pennsylvania,  Civil 
Division, No. GD 08‐7616, May 10, 2012. 
“Oral Testimony of Coleman Bazelon, The Brattle Group, Inc. before the U.S. House of Representatives, 
Committee  on  Energy  and  Commerce  Subcommittee  on  Communication  and  Technology,”  April  12, 
2011. (spectrum) 
“Testimony of Coleman Bazelon, Principal, The Brattle Group, before the U.S. House of Representatives, 
Committee  on  Energy  and  Commerce,  Subcommittee  on  Communications,  Technology,  and  the 
Internet,” June 17, 2010 (spectrum valuation). 
“Supplemental  Expert  Report  of  Coleman  Bazelon,”  Gemalto  PTE  LTD  and  Gemplus  S.A.  v. 
Telecommunications Industry Association, United States District Court for the Eastern District of Virginia, 
Alexandria Division, Case 1:08‐cv‐00776‐LMB‐TRJ, December 16, 2008. 

 

 

 

 

 

 

 

 

               

        www.brattle.com 

COLEMAN BAZELON 
Principal 

 

12 

“Expert Report of Coleman Bazelon,” Gemalto PTE LTD and Gemplus S.A. v. Telecommunications Industry 
Association,  United  States  District  Court  for  the  Eastern  District  of  Virginia,  Alexandria  Division,  Case 
1:08‐cv‐00776‐LMB‐TRJ, November 6, 2008. 
“Prefiled Rebuttal Testimony of Coleman D. Bazelon,” In re: Complaint and request for emergency relief 
against Verizon Florida LLC for anticompetitive behavior in violation of Sections 364.01(4), 364.3381, and 
364.10,  F.S.,  and  for  failure  to  facilitate  transfer  of  customers’  numbers  to  Bright  House  Networks 
Information  Services  (Florida)  LLC,  and  its  affiliate,  Bright  House  Networks,  LLC,  Florida  Public  Service 
Commission, Docket No. 070691‐TP, July 25, 2008. 
“Prefiled  Direct  Testimony  of  Coleman  D.  Bazelon,”  In  re:  Complaint  and  request  for  emergency  relief 
against Verizon Florida LLC for anticompetitive behavior in violation of Sections 364.01(4), 364.3381, and 
364.10,  F.S.,  and  for  failure  to  facilitate  transfer  of  customers’  numbers  to  Bright  House  Networks 
Information  Services  (Florida)  LLC,  and  its  affiliate,  Bright  House  Networks,  LLC,  Florida  Public  Service 
Commission, Docket No. 070691‐TP, May 30, 2008. 
“Declaration  of  Coleman  Bazelon  in  Support  of  Plaintiffs’  Motion  for  Class  Certification,”  Kenneth 
Stickrath, et al v. Globalstar, Inc., United States District Court for the Northern District of California, San 
Francisco Division, Case No. 07‐CV‐01941 TEH, April 25, 2008. 
“Testimony of Coleman Bazelon, Principal, The Brattle Group, before the U.S. House of Representatives, 
Committee  on  Energy  and  Commerce,  Subcommittee  on  Telecommunications  and  the  Internet,”  April 
15,2008 (reviewing the 700 MHz auction). 
“Concerning  the  Meaning  of  ‘Fair  and  Reasonable  Compensation’  in  Section  253(c)  of  the 
Telecommunications  Act  of  1996  and  the  Comparability  of  the  Rights‐of‐Way  Fees  Paid  by  Level  3  in 
Massachusetts and Elsewhere,” The Massachusetts Turnpike Authority v. Level 3 Communications, LLC, 
et  al.,  The  United  States  District  Court  for  the  District  of  Massachusetts,  Civ.  Act.  No.  06‐11816, 
December 17, 2007. 
“Concerning  the  Effects  of  the  Fixed  Rent  Charged  for  Access  to  the  Massachusetts  Turnpike,”  The 
Massachusetts Turnpike Authority v. Level 3 Communications, LLC, et al., The United States District Court 
for the District of Massachusetts, Civ. Act. No. 06‐11816, November 12, 2007. 
“Affidavit  of  Dr.  Coleman  Bazelon,”  Gulfside  Casino  Partnership  v.  Mississippi  Riverboat  Council,  et  al., 
United States District Court for the Southern District of Mississippi, Southern Division, Cause No. 1:07‐
CV‐110‐LG‐JMR, May 4, 2007. 
“Rebuttal  Report  of  Dr.  Coleman  Bazelon,”  Level  3  Communications,  LLC,  v.  City  of  St.  Louis,  Missouri, 
United States District Court for the Eastern District of Missouri, Eastern Division, Consolidated Case No. 
4:04‐CV‐871 CAS, June 17, 2005. 
“Affidavit of Dr. Coleman Bazelon,” Informed Communications Systems, Inc. v. Intelogistics Corp., d/b/a 
Prosodie Interactive, United States District Court, Southern District of Florida, Miami Division, Case No.: 
04‐61245 CIV Huck/Turnoff (October 12, 2004). 
 

EXPERT DESIGNATIONS 
 Touch America, Inc. v. Qwest Communications International, Inc. 
‐ Designated as an expert in Arbitration (June 2003) 

 

 

 

 

 

 

 

 

               

        www.brattle.com 

COLEMAN BAZELON 
Principal 

 

13 

  Informed  Communications  Systems,  Inc.  v.  Intelogistics  Corp.,  d/b/a  Prosodie  Interactive,  United 
States  District  Court,  Southern  District  of  Florida,  Miami  Division,  Case  No.:  04‐61245  CIV 
Huck/Turnoff 
‐ Filed affidavit (October 12, 2004) 
  Level  3  Communications,  LLC  v.  City  of  St.  Louis,  Missouri,  United  States  District  Court  for  the 
Eastern District of Missouri, Eastern Division, Consolidated Case No. 4:04‐CV‐871 CAS 
‐ Filed Rebuttal Report (June 17, 2005) 
‐ Deposition (July 14, 2005) 
 Cable Merger before the FTC 
‐ Presented analysis to FTC staff (March 20, 2007) 
 Gulfside Casino Partnership v. Mississippi Riverboat Council, et al., United States District Court for 
the Southern District of Mississippi, Southern Division, Cause No. 1:07‐CV‐110‐LG‐JMR 
‐ Filed affidavit (May 4, 2007) 
 Motorola, Inc. v. State of Mississippi Department of Information Technology Services and M/ACom, 
Inc., Chancery Court of Hinds County, Mississippi, Cause No. G2006‐2179 S/2 
‐ Testified (May 23, 2007) 
 American Towers, Inc. v. Jackson & Campbell, P.C., et al., DC Superior Court, No. 003277‐06 
‐ Deposition (March 19, 2009) 
‐ Filed Affidavit (May 22, 2009) 
  The  Massachusetts  Turnpike  Authority  v.  Level  3  Communications,  LLC,  et  al.,  The  United  States 
District Court for the District of Massachusetts, Civ. Act. No. 06‐11816 
‐ Filed Expert Report (November 12, 2007) 
‐ Filed Rebuttal Report (December 17, 2007) 
‐ Deposition (January 21, 2008) 
 Kenneth Stickrath, et al v. Globalstar, Inc., United States District Court for the Northern District of 
California, San Francisco Division, Case No. 07‐CV‐01941 THE 
‐ Filed Declaration (April 25, 2008) 
‐ Deposition (June 11, 2008) 
 In re: Complaint and request for emergency relief against Verizon Florida LLC for anticompetitive 
behavior in violation of Sections 364.01(4), 364.3381, and 364.10, F.S., and for failure to facilitate 
transfer of customers’ numbers to Bright House Networks Information Services (Florida) LLC, and 
its affiliate, Bright House Networks, LLC, Florida Public Service Commission, Docket No. 070691‐TP 
‐ Filed Direct Testimony (May 30, 2008) 
‐ Filed Rebuttal Testimony (July 25, 2008) 
‐ Deposition (August 13, 2008) 
  Gemalto  PTE  LTD  and  Gemplus  S.A.  v.  Telecommunications  Industry  Association,  United  States 
District Court for the Eastern District of Virginia, Alexandria Division, Case 1:08‐cv‐00776‐ LMB‐TRJ 
‐ Filed Expert Report (November 6, 2008) 
‐ Deposition (December 2, 2008) 
‐ Filed Supplemental Expert Report (December 16, 2008) 
  Salsgiver  Communications,  Inc.,  Salsgiver  Telecom,  Inc.,  and  Salsgiver  Inc.  v.  Consolidated 
Communications  Holdings,  Inc.,  North  Pittsburgh  Systems,  Inc.,  and  North  Pittsburgh  Telephone 

 

 

 

 

 

 

 

 

               

        www.brattle.com 

COLEMAN BAZELON 
Principal 

 

14 

Company, Inc., Court of Common Pleas, Allegheny County, Pennsylvania, Civil Division, No. GD 08‐
7616 
‐ Filed Damages Analysis (February 27, 2009) 
‐ Deposition (April 3, 2012) 
‐ Filed Expert Report (May 10, 2012) 
 
 Certain Products Containing Interactive Program Guide and Parental Control Technology (Inv. No. 
337‐TA‐820) 
      ‐ Designated as an expert (June 8, 2012) 
 
  In  re:  Petition  for  Suspension  or  Modification  of  Application  of  the  Requirements  of  47  U.S.C.  § 
251(b) and (c), pursuant to 47 U.S.C. § 251(f)(2) regarding Time Warner Cable Information Services 
(Maine)  LLC’s  Request,  State  of  Maine  Public  Utilities  Commission,  Docket  No.  2012‐198,  Docket 
No. 2012‐218, Docket No. 2012‐219, Docket No. 2012‐220, Docket No. 2012‐221 
‐ Filed Direct Testimony (August 20, 2012) 
‐ Filed Rebuttal Testimony (October 12, 2012) 
‐ Testified (October 23, 2012) 
 
 
 January 18, 2013 

 

 

 

 

 

 

 

 

               

        www.brattle.com 

EXHIBIT D

Securus
• Provides Service to 2,200 Facilities via Public Contract (State, County and Local Jails)
• Service provided in 44 States, D.C., and Canada
• Provides inmate calling service with safety, security and investigative features critical to
correctional facilities
• As recognized in the Dial Around docket, and for safety and security, Securus Inmate
Services are permitted to block dial-around and forwarded calls

Legitimate Inmate Call

Diverted Inmate Call

 Terminating number is validated in
LIDB

Χ False local number is queried in
LIDB

 Name and address of terminating
number is generally known
• LIDB is real-time query in
industry-standard database

Χ False local number is queried in
LIDB
o Commercial databases (e.g.,
LSSi) not real-time database or
industry-standard

 OCN of carrier serving called party
is known
• Enables blocking calls to cell
phones where required (e.g.,
FL DOC)

Χ OCN of transport provider is known
o Prevents blocking calls to cell
phones, hindering contract
compliance

 Service provider is certificated
carrier holding public contract after
bid
• States require certificate as
OSP, LD reseller, or LEC

Χ Call diverter registers as
“interconnected VoIP” (if at all) and
does not hold public contract
o Call diversion cannot satisfy
VoIP definition in 47
C.F.R. 9.3

 Service provider must block calls to
protected persons and to persons
whom inmates are prohibited from
calling

Χ Call diverters enable inmates to
complete calls to prohibited
numbers

SCP Centralized System
Path of an Inmate Call
Legitimate Call
Inmate Payphone
Diverted Call

Securus Centralized System
Including call Validation
Correctional
Facility

VoIP Cloud

Local Call
Adtran VoIP Router

LD Call
Transport
[Intermediary Switches]

Local LEC Switch

Distant LEC Switch

Local Call
Call Diverter’s VoIP Router

Distant LEC Switch

Diverts Call to Different Telephone Number

VoIP Cloud

Securus’ correctional authority clients discovered the call diversion
scheme and demanded that it be blocked.
Unknown Party

Dialed Party

State of Wisconsin
Department of Corrections
RFP # SM-1752 Inmate Telephone Services
October 16, 2008

Administration Sites

Workstation(s)

Router/Switch

\

GTLPC
Workstation

,

MIST1
IPSEC

"MIS,J1
MLPPPf,
IPSEC
',_
-Validation
LAN to1Js;N- __
IPSEC

------+

AT&T

LD Calls

PSTN

LazerPhone Network - DOC Sites

GTL Response to RFP # SM-1752

Functional & Technical Proposal 4-103

State of Wisconsin
Department of Corrections
RFP # SM-1752 Inmate Telephone Services
October 16, 2008

Internet

PRI (60MB LAN)

GTL Houston
Data Center
BGP/HSRP Routers &
Firewall

Fiber Hub

Validation Server

CDR Records
ISystem Configurations

Validation Server
Fail-Over

lazerPhone Network - GTl Houston Data Center

GTL Response to RFP # SM-1752

Functional & Technical Proposal 4-104

State of Wisconsin
Department of Corrections
RFP # SM-1752 Inmate Telephone Services
October 16, 2008

Internet

PRI (45MB LAN)
SEC (45MB LAN) + - -..

GTL Mobile AI
Data Center
BGP/HSRP Routers &
Firewall

Fiber Hub

Validation Server

Validation Server
Fail-Over

Web Server
System Configurations

LazerPhone Network - GTL Mobile Data Center

GTL Response to RFP # SM-1752

Functional & Technical Proposal 4-105

(

Los Angeles County Sheriff's Deportment
RFP No. 388-SH
Prooosal for the Inmate Teleohone Svstem (ITS) and Services

~PCS

SYSTEM ARCHITECTURE

PtlOne

Authorized

ON·SITE
(FACILITY)

Fm

PCS CLASS 4 DATA

mirrorir;~J

OFF-SITE

PSTN

PubliC

Com munication Link
Secured Login
Data Redundancy

2.7.5.6

Complaint Investigations

Proposer shall describe the means and the process in sufficient detail for the
timely investigation of Inmate complaints pertaining to ITS operations and/or
billing errors. The process shall provide various means for the Proposer to
receive either inmate or outside customer complaints including, but not limited
to, an 800-number, 24/7 fax number, an e-mail address and/or web link.

pes Response: PCS has read, agrees and will comply. The PCS Customer Service
Department is dedicated to providing friendly and helpful solutions to end user customer
service requests. Customers who accept calls from any of the PCS managed correctional
facilities may call a dedicated toll-free number: (888) 288-9879. This number is staffed with
live representatives 24 hours a day, seven days a week, with average wait times of less
than 30 seconds. The Customer Service Representatives handle issues such as setting up
prepaid accounts, customer billing, call rate inquiries, disputes, credits, refunds, complaints,
and questions.

C. Proposer's Approach to Provide Required Services

C-231

Unisys Proposal To Los Angeles County

Data Sheet

router that enable the hardware-based encryption on the motherboard provide a robust array of features such as
Cisco lOS Firewall, IPS support, IP Security (lPSec) VPNs (Digital Encryption Standard [DES], Triple DES [3DES],
and Advanced Encryption Standard [AESJ), SSL Web VPN, Dynamic Multipoint VPN (DMVPN), Group Encrypted
Transport (GET) VPN, and Easy VPN, Network Admissions Control (NAC) for antivirus defense, Secure Shell (SSH)
Protocol Version 2.0, and Simple Network Management Protocol (SNMP) in one solution set In addition, the Cisco
1841 router offers bundled network security solutions with IPSEC and SSL VPN encryption-acceleration modules,
making it the industry's most robust and adaptable security solution available for small-to-medium-sized businesses
and small enterprise branch offices. As Figure 2 demonstrates, the Cisco 1800 Series routers help enable customers
to deliver high-performance, concurrent, mission-critical data applications with integrated, end-to-end security.
Figure 2.

Secure Network Connectivity with Cisco 1841 Router

Central Site

•

Cisco 7200
Midsize Branch
Cisco 2800

ill
INAG Support ~I

Service Provider'"
IPVPNCore

Small Branch

- - VPNTunnel

G

VolP-Enabled

Integrated Services
The new, high-performance and secure integrated services architecture of the Cisco 1841 router (as shown in
Figure 2) enables customers to deploy simultaneous services such as secured data communications with traditional
IP routing at wire-speed performance. By offering a hardware-based encryption on the motherboard that can be
enabled with an optional Cisco lOS Software security image and the flexibility to integrate a wide array of services,
modules, and interface cards, the Cisco 1841 router helps enable businesses to incorporate the functions of a
standalone secure data solution.

Primary Features and Benefits
Architecture Features and Benefits
The Cisco 1841 modular architecture has been specifically designed to meet requirements of small to medium-sized
businesses and small enterprise branch offices as well as service provider-managed applications for concurrent
services at wire-speed performance. The Cisco 1841 router, together with other Cisco integrated services routers

© 2009 Cisco Systems, Inc. Ali rights

~served,

This document is Cisco Public Information,

Page 2 of 10

Section 4 - Functional & Technical Requirements

Benefits include:
• High-quality recordings, allowing investigators to easily discern key words as
well as suspicious background sounds in both the inmate's and the called
party's environment
• Reduced complaints due to poor sound quality
• Improved effectiveness of the ITS to detect and prevent fraudulent activity,
such as 3-Way calling attempts

TRADITIONAL PROVIDERS
LIMrrED VolP System
PrOcessing Area

1

RESTRICTED N.O..n-VolP

PnX:essing Area

1
GATEWAY

JA/UPRISON

GATEWAY

TOM "OLP'
CALL PROCESSING

CALLED PARTY

SECURUS' SCP-SECURE CALL PLATFORM
~--

UNLIMITED END-TO-END VoIP
System Processing Aree

CALLED PARTY

JA/UPRISON

LEGEND:

•

lP

•

Faci!rty

i# Centra!

Camet' TermmatlOn

•

Wisconsin Department of Corrections
RFP # SM-1752 - Inmate Telephone Services
October 16, 2008

Page 105

EXHIBIT E

Interstate ICS Rates*
Company

*Obtained from Prison Legal News. Reprinted with Permission.

Rates (2012)
Pre-Paid

Collect

Cost of 15-Minute Call
Collect
Pre-Paid
Debit

Debit

IL

CCPS

2.50 + .19-.26/min.

1.80 +.16-.26/min.

N/A

$5.35-6.40

$4.20-5.70

AL

CenturyLink

$3.95 + .89/min.

$3.95 + .89/min.

$3.95 + .89/min.

$17.30

$17.30

N/A
$17.30

KS

CenturyLink

1.70 + .40/min.

1.30 + .35/min.

1.28 + .30/min.

$7.70

$6.55

$5.78
$2.25

NH

CenturyLink

1.20 + .10/min.

.15/min.

.15/min.

$2.70

$2.25

NV

CenturyLink

3.00 + .59/min.

3.00 + .59/min.

3.00 + .59/min.

$11.85

$11.85

$11.85

TX

CenturyLink

.43/min.

.43/min.

.387/min.

$6.45

$6.45

$5.81

WI

CenturyLink

.18/min.

?

N/A

$2.70

?

N/A

WY

CenturyLink

2.80 + .55/min.

2.40 + .50/min.

2.00 + .25/min.

$11.05

$9.90

$5.75

AR

GTL

3.95 + .45/min.

N/A

N/A

$10.70

N/A

N/A

CA

GTL

.44/min.

.44/min.

N/A

$6.60

$6.60

N/A

CO

GTL

3.00 + .15/min.

1.50 + .13/min.

1.50 + .10/min.

$5.25

$3.45

$3.00

DE

GTL

1.71 + .66/min.

1.71 + .66/min.

1.71 + .66/min.

$11.61

$11.61

$11.61
N/A

GA

GTL

3.95 + .89/min.

?

N/A

$17.30

?

IA

GTL

N/A

N/A

3.00 + .30/min.

N/A

N/A

$7.50

ID

GTL

3.80 + .85/min.

3.60 + .80/min.

3.40 flat

$16.55

$15.60

$3.40

IN

GTL

.24/min.

?

.24/min.

$3.60

?

$3.60

MA

GTL

.86 + .10/min.

.86 + .10/min.

.65 + .08/min.

$2.36

$2.36

$1.85
N/A

ME

GTL

3.00 + .69/min.

3.00 + .69/min.

N/A

$13.35

$13.35

MI

GTL

.23/min.

.23/min.

.21/min.

$3.45

$3.45

$3.15

MN

GTL

3.95 + .89/min.

?

.32/min.

$17.30

?

$4.80

MS

GTL

3.30 + .75/min.

?

?

$14.55

?

?

NC

GTL

3.40 flat

?

3.06 flat

$3.40

?

$3.06
$1.25

NE

GTL

.70 + .05/min.

.50 + .05/min.

.50 + .05/min.

$1.45

$1.25

NJ

GTL

.33/min.

.33/min.

.33/min.

$4.95

$4.95

$4.95

NY

GTL

.048/min.

.048/min.

.048/min.

$0.72

$0.72

$0.72

OH

GTL

3.94 + .88/min.

?

?

$17.14

?

?

OK

GTL

3.00 flat

3.00 flat

N/A

$3.00

$3.00

N/A

Debit calling only; $9.00 max for calls.

Confirmed 03/08/2013 with provider

Confirmed 03/08/2013 with provider

PA

GTL

3.50 + .50/min.

2.45 + .46/min.

2.33 + .43/min.

$11.00

$9.35

$8.78

RI

GTL

1.30 + .30/min.

?

1.17 + .27/min.

$5.80

?

$5.22

SC

GTL

.99 flat

.75 flat

.75 flat

$0.99

$0.75

$0.75

All flat rates are for 15-minute calls.

SD

GTL

3.15 + .43/min.

1.35 + .09/min.

1.35 + .09/min.

$9.60

$2.70

$2.70

Inmate voicemail also available, $1.00 for a 60-second message.

TN

GTL

3.535 + .6175/min.

?

3.1817 +.55579/min.

$12.80

?

$11.52

Actual rates are $3.53525 + .61755/min. collect and $3.181735 +.555795/min. debit

UT

GTL

3.00 + .45/min.

3.00 + .45/min.

N/A

$9.75

$9.75

N/A

Confirmed 03/08/2013 with provider

VA

GTL

2.40 + .43/min.

2.40 + .40/min.

2.40 + .40/min.

$8.85

$8.40

$8.40

VT

GTL

1.25 + .15/min.

1.00 + .10/min.

.50 + .10/min.

$3.50

$2.50

$2.00

WA

GTL

3.50 + .50/min.

3.50 + .50/min.

3.50 + .50/min.

$11.00

$11.00

$11.00

Confirmed Debit Rates on 03/08/2013 with provider; other rates in contract.

WV

GTL

.85 + .50/min.

?

N/A

$8.35

?

N/A

Debit calls included in contract but not in practice

HI

Hawaii Telcom

?

?

N/A

?

?

N/A

FBOP

Multiple vendors

2.45 + .40/min.

?

?

$8.45

?

?

AK

Securus

3.95 + .89/min.

3.95 + .89/min.

N/A

$17.30

$17.30

N/A

AZ

Securus

2.40 + .40/min.

2.00 + .40/min.

2.00 + .40/min.

$8.40

$8.00

$8.00

CT

Securus

.3245/min.

.2433/min.

N/A

$4.87

$3.65

N/A

FL

Securus

1.20 + .06/min.

1.02 +.06/min.

N/A

$2.10

$1.92

N/A

KY

Securus

2.00 + .30/min.

?

2.00 + .30/min.

$6.50

?

$6.50

LA

Securus

2.15 + .17-.27/min.

?

1.935 + .153-.243/min.

$4.70-6.20

?

$4.23-5.58

MD

Securus

2.85 + .30/min.

.30/min.

.30/min.

$7.05

$4.50

$4.50

MO

Securus

1.00 + .05/min.

.05/min.

.05/min.

$1.75

$0.75

$0.75

Provided by MD DOC; no per-minute charge for first minute of collect interstate calls. Pending Contract with GTL, under protest.

ND

Securus

2.40 + .24/min.

.34/min.

.34/min.

$6.06

$5.10

$5.10

$.30 for the first minute for collect interstate calls, then $.24/min. thereafter.

NM

Securus

.65 flat

.59 flat

.65 flat

$0.65

$0.59

$0.65

All flat rates are for 20-minute calls.

MT

Telmate

.24 + .12/min.

.24 + .12/min.

.24 + .12/min.

$2.04

$2.04

$2.04

OR

Telmate

.16/min.

.16/min.

.16/min.

$2.40

$2.40

$2.40

EXHIBIT F

ICS Commission Data
State

Company

Alabama
Alaska

CenturyLink
Securus

Arizona
Arkansas
California

*Obtained from Prison Legal News. Reprinted with Permission.

Commission Payments
FY 2010
FY 2011

FY 2009

Percentage
2012

FY 2012

?
$84,125.08

?
$74,503.59

?
$83,393.95

?
$85,438.58

?
7%

Securus
GTL
GTL

3,723,046.36
2,394,900.77
5,985,850.00

3,884,803.26
2,475,527.50
NONE

4,120,894.06
2,447,253.75
NONE

4,314,062.50
2,010,223.57
NONE

53.70%
45%
NONE No commissions, but California Technology Agency receives an $800,000 annual fee from GTL

Colorado
Connecticut

GTL
Securus

2,800,132.91
3,590,667.50

2,464,650.70
3,797,824.40

2,495,865.97
4,032,757.64

1,912,792.10
4,212,201.86

49% FY2012 commission amount is for 10 months of the FY.
68.75%

Delaware
Florida

GTL
Securus

1,310,401.78
2,727,756.86

1,444,827.32
5,374,083.28

1,195,151.36
5,205,803.74

998,380.04
5,156,269.19

Georgia
Hawaii
Idaho
Illinois

GTL
Hawaiian Telcom
GTL
CCPS

7,445,914.55
104,875.00
1,248,804.57
10,392,626.00

7,695,712.76
?
1,368,425.38
10,940,246.00

6,284,715.76
?
1,495,963.54
12,649,898.00

5,316,672.82
?
1,441,051.81
11,699,879.00

Indiana
Iowa

GTL
GTL

1,693,965.32
1,231,000.00

1,547,481.77
1,231,000.00

1,929,932.14
750,000.00

1,696,977.76
650,972.00

Kansas

CenturyLink

1,814,693.80

1,876,165.29

1,769,540.31

1,839,450.64

Kentucky
Louisiana

Securus
Securus

3,333,168.00
3,602,686.75

2,706,767.00
3,303,407.37

2,880,166.00
3,289,038.16

2,796,139.00
3,044,009.33

Maine
Maryland

GTL
Securus

234,329.79
?

225,504.10
?

171,379.45
?

319,383.27
?

40%
35% FY2009 commission amount is only for January through June 2009.
60%
?
see note The commission is $2.25 per debit call, $2.00 per pre-paid collect call and $1.75 per collect call. Community Work Centers have a 20%
56% FY2012 commission amount is through April 2012.
43.50%
see note Not called “commissions,” but the Iowa DOC receives payments from its ICS provider.
41.30% Commissions amounts are for calendar years, not fiscal years.
54%
70%
60% Uses a calendar year, not fiscal; 2012 amount is through November 2012.
48-60%

Massachusetts

GTL

1,972,546.06

1,870,044.28

1,706,889.43

1,714,972.89

15-30%

Michigan
Minnesota

GTL
GTL

NONE
3,388,860.00

NONE
3,470,898.00

NONE
3,767,811.00

NONE
3,690,953.00

NONE
59%

Mississippi

GTL

2,788,922.59

2,262,203.71

1,945,008.21

1,651,805.23

60.50%

Missouri

Securus

NONE

NONE

NONE

NONE

Montana
Nebraska

Telmate
GTL

252,121.02
NONE

226,095.50
NONE

227,834.67
NONE

220,617.00
NONE

25%
NONE
54.20%

NONE

Nevada

CenturyLink

3,033,941.22

2,747,336.97

2,736,802.16

2,706,372.51

New Hampshire
New Jersey

CenturyLink
GTL

?
?

?
?

?
?

?
?

New Mexico
New York
North Carolina

Securus
GTL
GTL

NONE
NONE
7,578,956.67

NONE
NONE
7,217,875.33

NONE
NONE
7,464,539.07

NONE
NONE
6,881,021.44

North Dakota

Securus

126,245.62

114,110.95

107,516.94

90,435.73

Ohio
Oklahoma
Oregon

GTL
GTL
Telmate

?
1,240,396.00
3,000,000.00

?
1,218,429.88
3,000,000.00

15,000,000.00
1,167,318.18
3,000,000.00

15,000,000.00
1,017,657.90
3,000,000.00

Pennsylvania

GTL

7,174,942.65

7,250,923.88

7,361,264.77

585,138.73

Rhode Island

GTL

NONE

NONE

NONE

NONE

NONE

South Carolina

GTL

NONE

NONE

NONE

NONE

NONE

South Dakota
Tennessee
Texas

GTL
GTL
CenturyLink

241,839.00
?
224,228.00

154,767.00
2,954,100.00
4,276,006.00

229,398.76
2,679,000.00
5,673,568.00

520,332.05
2,555,800.00
5,893,470.00

33-38% 33-38% on collect calls (varies by distance); $1.00 commission per debit call (all distances).
50.10%
40% FY2012 ended on August 31; commission amount is as of August 5, 2012.

Utah
Vermont
Virginia

GTL
GTL
GTL

798,429.40
65,091.87
4,524,329.69

699,489.59
63,584.34
4,033,303.82

745,155.88
40,974.59
4,104,977.98

765,858.16
44,781.29
3,208,762.44

45-55%
37%
35% FY2012 commission amount is for 11 months.

Washington
West Virginia

GTL
GTL

?
903,735.30

?
890,005.21

?
919,726.80

?
696,374.46

Wisconsin
Wyoming

CenturyLink
CenturyLink

2,039,339.45
347,512.83

2,052,346.15
475,976.21

2,171,279.29
532,305.11

2,344,085.34
385,340.50

FBOP

Multiple vendors

TOTALS:

7,180,900.58

5,734,687.35

4,255,246.24

3,220,277.21

100,601,282.99

101,123,113.89

116,638,370.91

103,923,222.05

20% Commission is $27,000/month + 20%, starting September 2012.
41%
NONE
NONE
58%
40%
see note Ohio DOC receives a flat/fixed annual commission of $15 million.
76.60% Commission is a flat rate of $2.30 per call, which equates to a 76.6% commission based on a flat rate cost of $3.00 per call.
see note $750,000/quarter plus 50% commission if profit is over $1.5 million.
44.40% FY2012 commission data is incomplete.

?
46% FY2012 commission amount is through September 2012.
30%
65.50% FY2012 commission amount is from January through August 2012.
58% Commission does not apply to direct-dial calls; according to the FBOP, most ICS calls are direct dial.

EXHIBIT G

Qlount\! of lli05 Angel..
J;hl'riff'l!I !lEpllrtml'nt 'N1'Il~qullrtenJ
4 700 ll.nmom,1lollltbnro
.ffiontcrl'U lf1urh , Q1lllifornill 91751-2169

JI :Jra(/;/ion if 0erv;c"
September 20, 2011
The Honorable Board of Supervisors
County of Los Angeles
383 Kenneth Hahn Hall of Administration
Los Angeles, California 90012
Dear Supervisors:
APPROVE AGREEMENT WITH PUBLIC COMMUNICATIONS SERVICES,
INCORPORATED FOR INMATE TELEPHONE SYSTEM AND SERVICES
(ALL DISTRICTS) (3 VOTES)

SUBJECT
This letter is a joint recommendation by the Sheriff and the Chief Probation Officer. The Los Angeles
County Sheriff’s Department (Department) and Probation Department (Probation) are seeking your
Board’s approval and execution of an Agreement with Public Communications Services,
Incorporated (PCS) to provide Inmate Telephone System and Services for the inmates and juveniles
being held in both the Department’s and Probation’s facilities.
IT IS RECOMMENDED THAT YOUR BOARD:
1. Approve and instruct the Mayor of the Board to sign the attached revenue-generating Agreement
with PCS to provide Inmate Telephone System and Services for inmates and juveniles being held
throughout the Department’s and Probation’s facilities, with an initial five-year term from November
1, 2011, through October 31, 2016, and three additional one-year option periods, plus one additional
six-month period in any increment.
2. Delegate authority to the Sheriff or his designee to execute Change Orders and Amendments to
the Agreement as set forth throughout the Agreement, including: when the original contracting entity
has merged, been purchased, or otherwise changed; include new or revised standard County of Los
Angeles (County) contract provisions adopted by your Board as required from time to time, including
all applicable documents; implement kiosks and incorporate new technologies, methodologies, and
techniques into the system at additional cost or less revenue to the County if it is in the best interest
of the County; implement rate adjustments mandated by the Federal Communications Commission;
and implement rate decreases for Inmate Telephone Billing Rates and for speed-dial calls.

The Honorable Board of Supervisors
9/20/2011
Page 2

PURPOSE/JUSTIFICATION OF RECOMMENDED ACTION
Approval of the recommended actions will allow the Department and Probation to continue providing
telephone services to inmates and juveniles being held throughout the Department’s and Probation’s
facilities.
The Agreement will allow the Department and Probation to add, change, and/or remove telephones
and kiosks. The telephone system will allow the Department and Probation to have call monitoring
and recording capabilities, system administration, and complete maintenance of all equipment,
hardware, and software.
Implementation of Strategic Plan Goals
The services provided under this Agreement support the County’s Strategic Plan, Goal 1,
Operational Effectiveness; and Goal 5, Public Safety. This Agreement will allow inmates and
juveniles to have access to telephones that generate revenue, which is used to support various
programs and projects for the inmates and juveniles.
FISCAL IMPACT/FINANCING
This is a revenue-generating Agreement. The Department and Probation will receive a Commission
Rate of 67.5 percent from the Total Billable Amount, or the aggregate of all claims by the contractor
against customers for calls, excluding applicable taxes. The Department will receive a Minimum
Annual Guarantee in the amount of $15 million and Probation will receive $59,000 for each year of
the Agreement. Revenue generated from the Departments’ inmate telephone system is deposited
into the Inmate Welfare Fund (IWF) and used for various educational and recreational programs and
projects that benefit the inmates. Revenue generated by Probation will be deposited into their
Detentions Budget (DB) account to benefit juveniles housed at their facilities.
FACTS AND PROVISIONS/LEGAL REQUIREMENTS
Pursuant to California Penal Code Section 4025(d), any commission received from the telephone
provider shall be deposited into the IWF.
There is an active Agreement Number 75480 with Global Tel*link Corporation for inmate telephone
services, which was adopted by your Board on April 8, 2008. We are currently in the six-month
extension approved by your Board on June 21, 2011, which will expire on December 31, 2011.
Approval of the Agreement with PCS will ensure uninterrupted telephone services for inmates and
juveniles located throughout the Department’s and Probation’s facilities, and will allow for the
completion of the necessary transition period prior to the expiration of the existing agreement with
Global Tel*link Corporation.
PCS is in compliance with all Board and Chief Executive Office requirements, including Jury Service
Program, Safely Surrendered Baby Law, and Defaulted Property Tax Reduction Program.
County Counsel has reviewed and approved this Agreement as to form.

The Honorable Board of Supervisors
9/20/2011
Page 3

CONTRACTING PROCESS
On December 31, 2009, the Department released a Request For Proposals (RFP) to solicit for an
agreement with a vendor to provide telephone system and services to inmates and juveniles located
throughout the Department’s and Probation’s facilities. The Department sent notification of the RFP
to 32 vendors through the United States mail and/or by e-mail. The RFP solicitation was also posted
on the County’s and the Department’s websites. The Mandatory Proposers’ Conference and
Mandatory Custody Facility Site Visit were held from April 13 - April 15, 2010, which ten vendors
attended.
On August 5, 2010, the RFP solicitation closed, and the Department received four proposals. An
evaluation committee comprised of individuals from the Department and two other non-County
agencies convened to evaluate the proposals utilizing the informed averaging method in accordance
with the Proposal Evaluation Methodology Policy approved by your Board on March 31, 2009. It was
determined that PCS’s proposal received the highest score, and PCS was the selected vendor for
this Agreement. One non-selected proposer requested a Proposed Contractor Selection Review,
which the Department conducted and found to be without merit. The Department offered the
proposer the opportunity to request a County Review Panel under Board Policy 5.055, but the
proposer did not ask that a County Review Panel be convened.
IMPACT ON CURRENT SERVICES (OR PROJECTS)
Approval of this action will ensure the uninterrupted telephone services for inmates and juveniles
who are being held in the Department’s and Probation’s facilities. Additionally, it will allow for the
continued growth of the IWF and DB, which is the principle source of funding for all inmate programs
and benefits juveniles housed at Probation’s facilities.
CONCLUSION
Upon
approval by
yourofBoard,
please return two adopted copies of this Board letter and three
The Honorable
Board
Supervisors
original
executed
copies
of
the
Agreement to the Department’s Contracts Unit.
9/20/2011
Page 4

Sincerely,

LEROY D. BACA
Sheriff
DONALD H. BLEVINS
Chief Probation Officer
LDB:AW:aw

EXHIBIT H

3. Specify miscellaneous fees incurred by call recipients for which revenue share to
County is not realized (includes but not limited to administrative and convenience fees,
single bill fees, and fees associated with credit card based Pre-Paid Accounts):
Single bill fee: $2.89____________________________________________
Convenience fee: See Table Below________________________________
Other: See Table Below_________________________________________
GTL charges these fees as a means of cost recovery as they represent tangible costs to GTL
and must be accounted for in the development of our commission offer. These additional costs
are not attributable to the cost of originating and completing a telephone call, and they are not
incurred by GTL on behalf of every called party GTL serves.
Rather than embed these costs resulting from the optional services in the surcharges and rate
per minute applied to all account holders, when not all account holders choose to avail
themselves of the optional services, GTL provides consumers with a choice to use these
services and accordingly charges a separate cost recovery fee.
Detailed below, GTL outlines fees and charges that may be charged to a called party. These
additional taxes and services result in incremental costs to GTL that are recovered through
specific fees applied to the account. Our ability to charge cost recovery fees allows us to offer
Los Angeles County our most aggressive financial offer.

When Applied

Amount
Charged

Federal Universal Service Fee (FUSF)

Monthly per Invoice
of interstate calls

13.6% of
interstate calls

Federal Usage Tax

Monthly per Invoice

Varies

State Usage Tax

Monthly per Invoice

Varies

Local/City Usage Tax

Monthly per Invoice

Varies

Monthly per
Paper Invoice

$2.89

Automated IVR Deposit of $25*

Per Transaction

$4.75

Automated IVR Deposit of $50*

Per Transaction

$9.50

Description of Charge

Single Bill Fee

ITS AND SERVICES RFP NO. 388‐SH  
 

 

 

 

3

 
 

 

 

ITS AND SERVICES 
APPENDIX C 
Telephone Rates and Payment Schedule

Credit Card Deposit through GTL Website**

Per Transaction

$9.50

Intrastate calls
billed via Paper
Invoice
Intrastate Prepaid
calls
Interstate Calls
billed via paper
invoice
Interstate Prepaid
Calls

State Carrier Cost Recovery Fee
State Carrier Cost Recovery Fee
Federal Administrative Cost Recovery Fee
Federal Administrative Cost Recovery Fee
AdvancePay Account Close-Out Fee

$1.95
Up to 5% of Call
Amount
$1.99
Up to 5% of Call
Amount

One Time

$5.00

Monthly for wireless
telephone users

Pending Tariff
Approval

Deposit sent to GTL via Western Union***

Per Transaction

$0.00

Certified Check mailed to GTL

Per Transaction

$0.00

Money Order mailed to GTL

Per Transaction

$0.00

Wireless Telephone Account Fee

*Funding an AdvancePay account via IVR deposit (e.g. using a credit card) is an optional personal choice. Fees related to such
transactions are disclosed at the time of transactions and offset GTL’s costs of third-party merchant fees, system support,
customer service staff and network service infrastructure associated with making this optional service available.
**For AdvancePay account payments via Website deposit a $9.50 fee will be charged directly by TouchPay, who provides their
services on behalf of GTL.
***When a person sends money to GTL for an AdvancePay account via Western Union, that person pays Western Union a fee
for that service.
All fees, currently tariffed and prospectively tariffed, are subject to change from time to time as prescribed by the FCC, tax
authorities or by GTL and at the discretion of the entities charging those taxes, charges and/or fees.

The fees and taxes described above are cost recovery in nature and are not considered
revenue and therefore commission is not paid on these cost recovery items.

Note: The County reserves the right to select a proposal in the best interest of the
County.

ITS AND SERVICES RFP NO. 388‐SH  
 

 

 

 

4

 
 

 

 

ITS AND SERVICES 
APPENDIX C 
Telephone Rates and Payment Schedule

I

1/

~

'fflffl.securustech.lletipayrnefltoptbns.asp

SECURUS'

ADVANCE CONNECT TERMS, CONDITIONS & FEES

DIRECT DIll TERMS, CONDITIONS & FEES

TRADITIONAL COllECT TERMS, CONDITIONS & FEES

* When you call or /oq on; there is no minimum payment if you mail us a check
or use your online ba~king service through you,. local barlk. A paymerlt
processing fee of up ~o $7.95 for credit/debit card payments miKle over the
phone or on the web may apply. This fee does not apply to payments made by
mail, or usir>g your onlir>e barlking service through your bank. There i~ no
minimum funding amount if you go to Western Un;"n arid MoneyGram;
however, a paymerlt processing fee may also apply. Please note that the
balarlCe in your Account may not reflect recent call activity. Due to our call
process/rig cycles, it is possible to spend more than the total amount or runds
irl your Accourlt. Please monitor your Account balance and use R"te"Hy-C"l/s
so you know how mu~h each call costs to ensure you don't: spend more than
you intend to, as you will be resporlsible for payment of any balance due on
your Account. YOU have lSO days from the date of the last call received to
request a refund of any unused balance in your Account. For Alaska residents,
there is an exception to that c/osir>g arid refund policy.

A monthly bill processing charge of up to $2.49 may apply. Verification of
ownership of the phone number, including corresponding physical addre~s,
may be required in place of a credit check.

witil this option, yO<.J are assigned a 90 -day rolling spending limit fOf your
Traditional Coijec t accOUf1 t , arul are subjec t to mOfe rigOf()\JS controls. Each time
you accep t a collect ca ll from a n inma te, tile charges are deduc t ed from your
ava i!able spendmg limi t , and we submi t those charges to your local telephone
company to add to yOU!" local telephone bill. If you reach or exceed your
spending limi t during any roning 'Xl -day period, your Trarntional eonect account
will be t emporarily bklcked from receiving additional inma t e calls . As the charges
ro~1 off and your balance drops back belo .. the go -day rolling spending limit, your
account w"1 be UIlbklcl<ed and you w,11 be able to accept add,tIonal ,nmate ca~s
up to the spending limi t . Should you wish to receive inma t e calls prior to w.liting
for your Trad<bonal Co~ect accovn t to be unblocked, y()\J can contac t us to
estabhsh an AdvanceConnect or Direc t all account.

If you receive and accept state- to-state or international calls, you may also be
charged a Federal Regulatory Recovery Fee of $3.49.
YOU may add multiple phone numbers to your Account to ensure you can be
reached wherever you are. If you add One Or more cell phone numbers to your
Account, you may b€ charged a monthly Wireless Administration Fee of up to

$2.99.
MOVE

CLOSE

INMATE DEDIT TERMS, CONDITIONS & FEES
* When you fund online; there is no minimum payment if you mail uS a check
USing a remittance sfp. A payment processing fee of up to $7.95 for
credit/debit card payments made over the phone or on the web may apply. A
payment processing fee may also apply at MoneyGram. This fee does not apply
to payments made by mail. When you fund an Inmate Debit account, the funds
become property of the inmate. you will not be able to request a refund from
an Inmate Debit account.?

A payment proce~sing fee of ~p to $7.95 for credit/debit card payments
made to SecUf1JS Correctional &llir>g Services (SCBS) over the phone or on
the web may apply. This fee does not apply to payments made by mail or by
using your online banking service through your bank. A payment processing
("" "''' y "i"" "pply (,,' I"'y"'~·"b ",d<i~ i/""U!J" w.,~t"", U"itm " ,Kl
MoneyGram.
There is no minimum payment amount for payments made through SCBS.
Your bill must be paid in full by the due date in order to continue receiving
calls.
If you receive and accept st.:;te"to"state or international calls, you may also
be charged a Federal Regularory Recovery Fee of $3.49.
Alaska Residents: No credit check is required for Direct Bill Accounts.
Late or non-payment of your Direct &11 invoice may result in your telephone
number being blocked from receiving calls and may also restrict your ability
to obtain future credit. Securus may also take further collection action,
including referral to a collecti'n agency.

* A monthly bill statement fee of up to $3.49 may apply and will appear on your
local phone bill. No fee will be assessed ill any month in which no collect calls
were accepted.

If you receive and accept state"to"stat" or international calls, you may also be
charged a Federal Regulatory Recovery Fee of $3.49.

EXHIBIT I

December 28, 2012
The Honorable Julius Genachowski
Chairman
Federal Communications Commission
445 12th Street, S.W.
Washington, D.C. 20554
RE:

Written Ex Parte Comment on the “Wright Petition” concerning inmate calling rates
filed in CC Docket No. 96-128.

Dear Chairman Genachowski:
As you are undoubtedly already aware, last month the Commissioners attending the National
Association of Regulatory Utility Commissioners (NARUC) Annual Meeting in Baltimore, Maryland, passed
a resolution specifically urging the FCC, with respect to CC Docket No. 96-128, commonly known as the
“Wright Petition,” to take remedial action with respect to inflated interstate prison phone rates. A copy of
that resolution is appended to this letter.
The trade press reports that under your guidance, the FCC is actively considering action on that
petition. NARUC encourages you to act expeditiously “to prohibit unreasonable interstate rates and
charges for inmate telephone services.”
The Wright Petition seeks to remedy some of the inequities visited upon consumers who accept
calls from prisoners by establishing benchmark rates that cap the cost of interstate prison phone calls.
Currently, the cost of interstate prison phone calls ranges up to more than $17.00 for a 15- minute call. It is
less expensive for a consumer in the U.S. to call China than it is to accept a collect phone call from a
prisoner in another state.
It does not appear from the record that all charges can be justified on the bases of additional
security measures. In New York, the prison phone rates are $.048 per minute for local, intrastate and
interstate calls, inclusive of all security features required by New York corrections officials. In Texas, prison
phone rates are relatively low at $.23 to $.43 per minute inclusive of all necessary security features.
Excessive interstate rates mainly affect prisoners’ family members – who have no other option but to pay
the rates. Phone calls are the primary means of communication for many prisoners/families, because many
prisoners are functionally illiterate and many are held in distant facilities, which makes in-person visitation
difficult. Research indicates that family contact during incarceration leads to greater post-release success
for prisoners, and thus less recidivism. High phone rates that economically limit family contact frustrate that
positive outcome.

If you have questions about this letter, please do not hesitate to contact the undersigned at
202.898.2207 or jramsay@naruc.org. Thank you for your attention to this matter.
Respectfully submitted,
James Bradford Ramsay
NARUC General Counsel
cc:

The Honorable Robert McDowell, Commissioner
The Honorable Mignon Clyburn, Commissioner
The Honorable Jessica Rosenworcel, Commissioner
The Honorable Ajit Pai, Commissioner
Zachary Katz, Chief of Staff, Office of the Chairman
Michael Steffen, Legal Advisor, Office of the Chairman
Christine D. Kurth, Policy Director & Wireline Counsel, Office of Commissioner McDowell
Angela Kronenberg, Wireline Legal Advisor, Office of Commissioner Clyburn
Priscilla Delgado Argeris, Legal Advisor, Office of Commissioner Rosenworcel
Nicholas Degani, Legal Advisor, Wireline, Office of Commissioner Pai

Resolution Urging the FCC to take Action to Ensure Fair and Reasonable Telephone Rates from
Correctional and Detention Facilities
WHEREAS, Inmate telephone service contracts are exclusive agreements between detention
facilities and telephone companies that provide specialized functionality to enable monitoring of
inmate telephone calls; and
WHEREAS, Although costly specialized equipment and monitoring services are provided, the
contracts for inmate telephone systems often include high connection fees and per minute rate
charges which are unrelated to the cost of providing the service; and
WHEREAS, Contracts for inmate telephone systems are often made by the operators of detention or
correctional facilities and commonly include commissions paid to the State or local contracting
agencies; and
WHEREAS, The commissions are based on gross revenues of inmate phone calls and could provide
an incentive for operators of detention and correctional facilities to contract with telephone service
providers that charge higher rates and/or provide higher commissions; and
WHEREAS, According to a Prison Legal News survey, roughly 85% of State prison systems receive
commission payments and the average commission to State and local contracting agencies is 42% of
the gross revenues from inmates’ phone calls resulting in annual commissions totaling over $152
million nationwide; and
WHEREAS, Inmate calling rates vary from State to State, however in many States, the charge for a
fifteen minute telephone call from an inmate ranges from $10 to $17; and
WHEREAS, Most inmate calls are made as collect calls. As a result, family members and friends of
inmates must bear the burden of above market per minute rates and connection fees; and
WHEREAS, In 2007, 52% of those in State prisons and 63% of those in federal prisons were parents
of minor children according to a Prison Policy Initiative report (The Price to Call Home: StateSanctioned Monopolization in the Prison Phone Industry); and
WHEREAS, High rates pose a significant barrier to frequent and meaningful communication
between inmates and their families, in many cases forcing families to limit the frequency and length
of communication with inmates; and
WHEREAS, Communication with the outside world is critical for inmates’ successful re-entry into
society so that inmates can secure housing and employment; and
WHEREAS, Successful reentry is critical to reducing overcrowding and high costs of maintaining
prison systems; and
WHEREAS, A 2012 study by the Vera Institute of Justice (The Price of Prisons: What
Incarceration Costs Taxpayers), reported the total taxpayer cost of prisons in the United States now
exceeds $39 billion, the average cost of incarceration per inmate per year is $31,286 and more than
four out of every ten prisoners return to custody within three years of release; and

WHEREAS, Due to the growing costs of prison systems, both Republican and Democratic 2012
Party Platforms explicitly recognized the importance of programs that reduce recidivism; and
WHEREAS, Maintaining contact with family members and community, specifically through
telephone communication, has been consistently shown to reduce recidivism which saves taxpayer
dollars (Examining the Effect of Incarceration and In-Prison Family Contact on Prisoners’ Family
Relationships, Journal of Contemporary Criminal Justice); and
WHEREAS, The Federal Communications Commission (FCC) was asked to resolve the issue of
inmate telephone rates that are much higher than rates charged to other customers by imposing price
caps on long-distance prison telephone rates in the “Wright Petition” which was filed in 2003; and
WHEREAS, In 2007, after no final action had been taken by the FCC, the Petitioners submitted an
alternative rulemaking petition seeking per-minute rate caps on interstate long-distance services,
however, no decision has been made; and
WHEREAS, Many States have addressed this issue by limiting rates for local calling, commissions,
and connection fees; and
WHEREAS, California, Nebraska, New Mexico, New York, Michigan, Missouri, Rhode Island and
South Carolina have banned prison telephone system commissions and, as a result, the cost of prison
phone calls in those States have dropped; and
WHEREAS, A broad coalition of groups and organizations have urged the FCC to address high
phone rates in correctional institutions, including the FCC Consumer Advisory Committee and the
National Association of State Utility Consumer Advocates; now, therefore be it
RESOLVED, That the National Association of Regulatory Utility Commissioners (NARUC),
convened at its 2012 Annual Meeting in Baltimore, Maryland, and encourages the FCC to take
immediate action on the “Wright Petition” by prohibiting unreasonable interstate rates and charges
for inmate telephone services; and be it further
RESOLVED, That State and federal action should consider policies that could lower prison phone
rates as a step to reduce recidivism and thereby lower the taxpayer cost of prisons.
________________________________
Sponsored by the Committee on Telecommunications
Adopted by the NARUC Board of Directors, November 13, 2012
Adopted by the NARUC Committee of the Whole, November 14, 2012 

EXHIBIT J

Policies And Resolutions (Public Correctional Policy on Adult/Juvenile Offender Access to Telephones)

Record Detail
Name 

Public Correctional Policy on Adult/Juvenile Offender Access to
Telephones

Type 

Policy

Date 

Jan. 24, 2001; Feb. 1, 2006; Feb. 1, 2011

Description 

Public Correctional Policy on Adult/Juvenile Offender Access to Telephones
Policy Statement:
Recognizing that there is no constitutional right for adult/juvenile offenders to have
access to telephones, it is nonetheless consistent with the requirements of sound
correctional management that adult/juvenile offenders should have access to a range
of reasonably priced telecommunications services. When contracting for
telecommunications services for adult/juvenile offenders, correctional agencies
should:
A. Comply with all applicable state and federal regulations;
B. Establish rates and surcharges that are commensurate with those charged to the
general public for like services. Any deviation from ordinary consumer rates should
reflect actual costs associated with the provision of services in a correctional setting;
and
C. Provide the broadest range of calling options determined to be consistent with the
requirements of sound correctional management.

This Public Correctional Policy was unanimously ratified by the American Correctional
Association Delegate Assembly at the Winter Conference in Nashville, Tenn., Jan. 24,
2001. It was reviewed and amended at the Winter Conference in Nashville, Tenn.,
Feb. 1, 2006. It was reviewed and amended at the Winter Conference in San
Antonio, Feb. 1, 2011.

 

http://www.aca.org/government/policyresolution/view.asp?ID=2&printview=1[12/12/2012 1:01:18 PM]

EXHIBIT K

FEDERAL C OMMUNICATIONS

COMMISSION

WA S HIN GTON

OFFICE OF

THE CHAIRMAN

June 24, 2010

The Honorable Dianne Feinstein
United States Senate
331 Hart Senate Office Building
Washington , D.C. 20510
Dear Senator Feinstein:
Thank you for your letter regarding inmate calling service (ICS) and the related
rulemaking proceeding pending before the Commission . I appreciate this opportunity to leam
your thoughts about this very complex issue.
In addition to the two petitions that you mention in your letter, the Commission also is
considering a related petition for declaratory ruling filed in 2009 by Securus - one of the largest
providers of ICS. Securus asselts that certain service providers allow inmates to place local calls
to their family and friends by inappropriately avoiding long distance charges. In its petition,
Securus seeks to be allowed to block these calls. Some commenters, on the other hand, argue
that these types of call-routing arrangements exist because the rates for ICS are unreasonably
high.
This proceeding raises complex factual questions and issues. Commission staff is
reviewing the extensive record that has been compiled, and continues to meet with interested
parties to obtain a better understanding of the information that has been submitted to the
Commission. I understand your concem5 and want to assure you that the Commission is
working to address the questions raised in this proceeding as quickly and equitably as possible.

J appreciate your interest in this important matter. If I can provide any further assistance,
please do not hesitate to contact me.

Sincerely,

-----Julius Genaehowski

.

FEDERAL COMMUNICATIONS

C OMMISSION

WASHIN GTON

OFFICE OF

fHl. CHAIRMAN

June 24, 2010

The Honorable Patrick J. Leahy
United States Senate
433 Russell Senate Office Building
Washington, D.C. 20510
Dear Senator Leah y:
Thank you for your leller regarding inmate calling service (ICS) and the related
rulemaking proceeding pending before the Commission. I appreciate this opponunity to learn
your thoughts about this very complex issue.
In addition to the two petitions that you mention in your letter, the Commission also is
considering a related petition for declaratory ruling filed in 2009 by Securus - one of the largest
providers of ICS. Securus asserts that cCl1ain service providers all ow inmates to place local calls
to their family and ffiends by inappropriately avoiding long distance charges. In its petition ,
Securus seeks to be allowed to block these calls. Some commenters, on the other hand, argue
that these types of call-routing arrangements exist because the rates for ICS are unreasonably
high.
This proceeding raises complex factual questions and issues. Commission staff is
reviewing the extensive record that has been compi led , and continues to meet with interested
parties to obtain a better understanding of the information that has been submilled to the
Commission. I understand your concerns and want to assure you that the Commission is
working to address the questions raised in this proceeding as quickly and equitably as possible.
I appreciate your interest in this imponant maller. If I can provide any funher assistance,
please do not hesitate to contact me.

Sincerely,

•
Julius Genachowski

PATRICK J. LEAHY, VERMONT,
HERB KOHL, WISCONSIN
DIANNE FEINSTEIN, CALIFORNIA
RUSSELL D. FEINGOl.D, WISCONSIN
CHARLES E. SCHUMER, NEW YORK
RICHARD J. DURBIN, ILLINOIS
BENJAMIN
L. CARDIN, MARYLAND
SHELDON WHITEHOUSE,
RHODE ISLAND
AMY KLOBUCHAR,
MINNESOTA
EDWARD E. KAUFMAN,
DELAWARE
ARLEN SPECTER, PENNSYLVANIA
AL FRANKEN, MINNESOTA

CHAIRMAN

JEFF SESSIONS, ALABAMA
ORRIN G. HATCH, UTAH
CHARLES E. GRASSLEY, IOWA
JON KYL, ARIZONA
LINDSEY O. GRAHAM, SOUTH CAROLINA
JOHN CORNYN, TEXAS
TOM COBURN, OKLAHOMA

ilnitrd ~rotrs ~rnatr
COMMITTEE

ON THE JUDICIARY

WASHINGTON,

DC 20510-6275

BRuel: A. COHEN, Chief Counsel and Staff Director
A. BENCZKOWSKI, Republican Staff Director

BRIAN

May 13,2010
The Honorable Julius Genachowski
Chairman
Offices of the Commissioners
Federal Communications Commission
445 12th Street SW
Room 8-B201
Washington, DC 20554
Dear Chairman Genachowski:
We write to express our concern regarding the lack of regulation of interstate telephone
calling services for incarcerated persons and their family members. A petition for
rulemaking was first filed with the Commission in 2003 on behalf of Martha Wright. The
Commission never took any action on this petition; as a result, in March 2007 petitioners
filed an alternative rulemaking proposal related to inmate calling services (CC Docket
No. 96-128). This second petition requested that the Commission establish benchmark
rates for all interstate inmate calling services at a rate no higher than $0.20 per minute for
debit calling services and $0.25 per minute for collect calling services.
A substantial number of comments have been submitted to the Commission by a wide
array of organizations, including telecommunications carriers, civil liberties groups, and
prison and correctional authorities. Telecommunications carriers have also provided the
Commission with cost estimates for interstate debit and collect calls. Based on this
information, we ask that you act expeditiously to issue federal regulations on this topic.
We recognize that the majority of phone calls that inmates make are intrastate calls and
hence may not be subject to federal regulation. We note, however, that the children and
families of incarcerated individuals tend to be low-income and often rely on federal
assistance to meet basic needs. We urge the Commission to consider these issues and to
propose recommendations that will help guide state governments and the
telecommunications industry in establishing appropriate rates and other reform measures
to address the high costs that are often charged for intrastate calls.
We look forward to your continued attention to this issue and to a swift examination of
the issue of inmate telephone rates.

Sincerely,

.
~

,... .

~I~

DIANNE FEINSTEIN
United States Senator

cc:

Commissioner
Commissioner
Commissioner
Commissioner

Michael J. Copps
Robert M. McDowell
Mignon Clyburn
Meredith Attwell Baker