Communications Daily

Vol. 24, No. 186

September 25, 2014

Inmate Calling Rate Cap to Be Considered in FNPRM

The FCC will explore making permanent the interim cap on interstate inmate calling rates the agency set last year, as well as imposing a new cap on intrastate rates, under a Further NPRM to be circulated Thursday, senior commission officials told us. They said the draft FNPRM tentatively concludes that inmate calling service (ICS) providers' payments to correctional facilities should be banned. Providers and inmate groups have cited the payments as a significant factor in driving up rates.

The FNPRM, which will be circulated by Chairman Tom Wheeler working with Commissioner Mignon Clyburn, will not recommend where the caps be set and would instead seek comment on what the amounts should be, one official said.

The payments in some cases make up 96 percent of what’s charged to the people inmates speak with, the official said. While the FNPRM would explore banning the charges, it would recognize that because jails and prisons incur some costs in allowing phone service and ensuring there aren’t security risks with the calls, it asks how they should be reimbursed. It would tentatively propose giving facilities and local governments two years to prepare before the charges are eliminated, the official said. The agency would also seek comment on how to handle such ancillary charges as transactional fees heaped on top of the phone rates.

The moves come about a year after the agency set an interim interstate cap of 21 cents per minute for debit and prepaid calls, and 25 cents a minute for collect calls. Rates have dropped 40 percent and the number of calls has gone up by 30 percent since the 2013 order was released, said an FCC official. Despite the progress, intrastate rates, commissions and ancillary charges like transaction fees have continued to rise since the order, the official said.

At an FCC inmate calling services workshop in July (CD July 10 p4), Wheeler had called bringing down rates a "top priority.” He backed making the interim interstate caps permanent and dealing with "unreasonably high" intrastate rates, and said additional charges that are tacked on to phone charges "need to be addressed if not attacked."

ICS Proposal

The FNPRM comes as three inmate calling service providers representing 85 percent of inmate calls are shopping a proposal to the agency offering a number of concessions including lowering rates below the agency’s interim interstate caps, according to interviews and a letter they wrote to the FCC. The providers would concede the commission’s ability to impose intrastate caps, and the head of one ICS provider said the adoption of the proposal could lead to the providers' dropping the U.S. Court of Appeals for the D.C. Circuit challenge that left the interim caps in place but stayed other aspects of the 2013 (CD Jan 14 p3). The FCC official said some of the ideas the ICS proposal contains would be included as questions raised in the FNPRM. The Human Rights Defense Center (HRDC), which has been pushing for lowering the cost of inmate calls, said the ICS proposal does not go far enough.

In a letter to Wheeler and commissioners last week, the heads of Global*Tel Link, Securus Technologies and Telmate said they were willing to agree to a flat rate cap of 20-cents-a-minute debit and prepaid calls and 24 cents-a-minute for collect calls. The caps would apply regardless of whether the calls are interstate or intrastate.

The three providers agreed to make the proposal in part because of the possibility the FCC would pass even lower “draconian” caps, and because it had a sense the agency has a strong legal argument to be able to regulate intrastate rates, said Securus CEO Richard Smith in an interview. A legal fight over the FCC’s ability to regulate intrastate rates could drag on for years, he said. The providers want regulatory certainty, he said, because the pending regulatory changes inhibit their ability to take on debt or get private equity investments. Global Tel Link and Telmate did not comment.

Should the agency approve an order “reasonably close” to what the providers proposed, Smith said Securus would consider dropping the pending D.C. Circuit appeal. He did not want to speak for other providers, but thought they would consider it.

ICS Concessions

The ICS proposal also made concessions on other key areas, including barring ICS providers from paying commissions to correctional facilities. The commissions are a significant cost that drives up the rates the ICS providers charge, the letter said, adding the proposed lowered caps “are feasible for the parties only if implemented in conjunction with corresponding reductions in site commission payments.” Correctional facilities bear some administrative and other costs to allow inmate phone calls, the letter said. The providers could not agree on how much administrative costs they should pay the facilities, or how it could be calculated, and opted to leave it to the FCC to resolve those questions, the letter said. Unless the cost is “nominal,” the providers said they may have to raise the cap.

Lowering commissions would let the providers drop 19 ancillary fees “in a spirit of compromise,” the letter said. The providers said they would keep charging transaction or deposit fees; a cost recovery fee related to validation and security features; third-party money transfer fees; and fees for convenience or premium channels. The providers proposed a cap on each type of fee.

Commissions are the “biggest issue” that’s held up resolving the debate over high rates, Smith said. Whether jails and sheriffs’ associations, which have fought any reduction in commissions because of the impact on their budgets, would go along is unknown, Smith said. “Whenever you talk about taking money out of somebody’s budgets, it’s something they don’t think kindly about,” Smith said. The providers, though, have told the groups the $540 million paid in commissions nationally represent only about 0.5 percent of the cost of running the correctional institutions. The National Sheriffs' Association and American Jail Association did not comment.

The providers' proposed cap is “still fairly well inflated,” said HRDC Associate Director Alex Friedmann in an interview, saying that some states like New York have intrastate rates of less than 5 cents a minute. The group wants an outright ban on commissions, saying correctional facilities should bear the cost of providing phone service, just as for other types of inmate services. “That cost is part of the prison system,” said Friedmann. “If you’re going to lock up a lot of people and keep them there a long time, you’re going to incur costs.” The ancillary fees the providers would still allow “is just making up fees,” Friedmann said. — Kery Murakami (kmurakami@warren-news.com)