Finishing The Job On Prison Phone Calls

The FCC will cap prison phone rates

The Federal Communications Commission is about to finish its long-delayed proceeding to reform the rate structure for prisoner phone calls. The FCC has announced that it will take up the issue at its next meeting on October 22.

As I explained in a previous article, about a year ago, the FCC adopted rules governing interstate prison phone calls and set an “interim” cap on those rates while it collected detailed cost information. Significantly, the FCC also expanded its proceeding to consider whether it should expand the coverage of its rules to regulate intrastate calls, which represent the vast majority of prisoners’ calls. In January, 2014, a federal court stayed the new interstate rules in part, but a final court ruling on the FCC’s action was deferred while the FCC finished its work. The court did allow the rate caps to go into effect, and they have been very successful; the FCC has said that under the new rate scheme, the volume of interstate calls has increased by 70%.

It has taken a very long time to get this far. A determined group of prisoners and their families (“the Wright Petitioners”) first asked the FCC to address the problem in 2003. The FCC did nothing until Commissioner Mignon Clyburn arrived at the FCC in 2009. She championed the cause and pushed her colleagues to adopt reforms. She has continued to press for action, and she has played a major role in crafting the latest rules.

Simply put, prisoners are captive customers and they have been ripped off. Charges vary by locality, but some 15 minute calls could cost $20 or more. Prison phone companies compete for their exclusive contracts by offering “site commissions,” which are more accurately described as kickbacks, to prison authorities. Since prisoners have no choice and no bargaining power, the market is upside-down, so the competition has created higher, rather than lower, rates.

Learn more about this debate in The Legal Underpinnings Of The Prison Phone Call Debate

In addition, as the FCC moved to cap calling rates, the prison phone providers began to devise new and exorbitant “ancillary fees” for establishing and maintaining accounts, using credit cards and so on. For example, depositing money to a prison phone account by Western Union (a common mode for prisoner families) costs several dollars more than an ordinary money transfer; Western Union and the phone companies split the extra charge.

According to Commissioner Clyburn and this fact sheet, the FCC will cap rates, allowing slightly higher rates for local jails and smaller institutions. It will allow a few fixed additional transaction fees, such as for credit card calls paid through a live operator, but ban all other ancillary fees. As in its earlier order, phone companies will have to bear the cost of site commissions and may not pass them on to prisoners.

Not surprisingly, the reform effort raises many legal and policy issues. Perhaps the most important question is whether the FCC can extend its jurisdiction to intrastate calls. A number of states and, most vociferously, local sheriffs and the National Sheriffs’ Association, contend that the FCC lacks authority to regulate intrastate prison phone calls. I delved into that issue previously in The Legal Underpinnings Of The Prison Phone Call Debate. Another critical issue -- exactly what price caps the FCC should establish -- is more of a factual than legal issue, based upon the extensive cost data the companies have submitted to the FCC. There are several other legal issues, but the two most important of these are whether the FCC can and should prohibit or cap site commissions, and whether it can or should regulate ancillary fees.

Prison authorities understandably wish to continue receiving site commissions. Although they argue that these revenues are used for “inmate welfare,” in many states and localities this is simply untrue. (See pages 15-17 of the brief that Georgetown Law School’s Institute for Public Representation filed on behalf of the Wright Petitioners.) Rather, in a number of states, all or most of the money is diverted to states’ general treasuries. In other cases, “inmate welfare” is defined as including salaries for prison guards and personnel and general maintenance of prisons. Even if the claim were true, it is irrelevant to determining the rate that users should pay. (It also begs the question of why prisoners and their families should have to pay for educational and other programs that benefit prisoners. Those functions should be paid for by the state which imprisoned them and is supposed to providing rehabilitation.)

In its 2013 decision addressing intrastate rates, the FCC clearly ruled that site commissions are not part of the costs incurred by phone companies in providing service (like paying salaries for operators and technicians). Thus, it ruled that phone companies are free to pay site commissions but that they must come out of the profits that phone companies generate. In light of that, the prison authorities have changed their position, arguing that they (not the phone companies) incur costs in administering phone service in their prisons, such as for security and recording equipment and that the FCC should require that a separate administrative charge payable to the prison authorities, be included in phone call prices. However, prisons are not phone companies, so even if this were a wise policy, the FCC’s power to impose such fees is questionable.

The ancillary fee question is more complicated. In essence, the argument is that the FCC is empowered under Section 1 and Section 2 of the Communications Act to regulate “communication by wire or radio.” The phone companies say that fees for opening an account, closing an account, making payment by Western Union and so on are not charges for “communications” but are ordinary financial transactions between private parties over which the FCC has no jurisdiction. The FCC finds power to regulate these fees in Section 201 of the Communications Act, which declares that “[a]ll charges, practices, classifications, and regulations for and in connection with such communication service, shall be just and reasonable,” and directs the FCC to regulate them. According to the FCC, these ancillary fees are charged “in connection with” the offering of phone calls, which is a “communications service.”

As with all such disputes, it will ultimately be resolved in the courts. Lawyers for all the parties have been preparing for this confrontation for a long time. In the meantime, unless the prison authorities or phone companies can get a stay, the new rules will likely into effect by the end of the year.

By Andrew Jay Schwartzman.