Rates for Interstate Inmate Calling Services; Second Further Notice of Proposed Rulemaking, 69681-69708 [2014-26922]
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Vol. 79
Friday,
No. 225
November 21, 2014
Part III
Federal Communications Commission
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47 CFR Part 64
Rates for Interstate Inmate Calling Services; Second Further Notice of
Proposed Rulemaking; Proposed Rule
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Federal Register / Vol. 79, No. 225 / Friday, November 21, 2014 / Proposed Rules
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 64
[WCB: WC Docket No. 12–375; FCC 14–
158]
Rates for Interstate Inmate Calling
Services; Second Further Notice of
Proposed Rulemaking
Federal Communications
Commission.
ACTION: Proposed rule.
AGENCY:
In this document, the
Commission seeks comment on
additional measures it could take to
ensure that interstate and intrastate
inmate calling services are provided
consistent with the statute and the
public interest and the Commission’s
authority to implement these measures.
The Commission believes that
additional action on inmate calling
service will help maintain familial
contacts stressed by confinement while
still ensuring the critical security needs
of correction facilities of various sizes.
DATES: Comments are due on or before
January 5, 2015. Reply comments are
due on or before January 20, 2015.
ADDRESSES: You may submit comments,
identified by WC Docket 12–375, by any
of the following methods:
D Federal Communications
Commission’s Web site: https://fjallfoss.
fcc.gov/ecfs2/. Follow the instructions
for submitting comments.
D People With Disabilities: Contact
the FCC to request reasonable
accommodations (accessible format
documents, sign language interpreters,
CART, etc.) by email: FCC504@fcc.gov
or phone: 202–418–0530 or TTY: 202–
418–0432.
For detailed instructions for
submitting comments and additional
information on the rulemaking process,
see the SUPPLEMENTARY INFORMATION
section of this document.
FOR FURTHER INFORMATION CONTACT:
Lynne Engledow, Pricing Policy
Division, Wireline Competition Bureau,
202–418–1520 or Lynne.Engledow@
fcc.gov.
SUMMARY:
Pursuant
to sections 1.415 and 1.419 of the
Commission’s rules, 47 CFR 1.415,
1.419, interested parties may file
comments and reply comments on or
before the dates indicated on the first
page of this document. Comments may
be filed using the Commission’s
Electronic Comment Filing System
(ECFS). See Electronic Filing of
Documents in Rulemaking Proceedings,
63 FR 24121 (1998).
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SUPPLEMENTARY INFORMATION:
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D Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://fjallfoss.fcc.
gov/ecfs2/.
D Paper Filers: Parties who choose to
file by paper must file an original and
one copy of each filing. If more than one
docket or rulemaking number appears in
the caption of this proceeding, filers
must submit two additional copies for
each additional docket or rulemaking
number.
Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail. All
filings must be addressed to the
Commission’s Secretary, Office of the
Secretary, Federal Communications
Commission.
D All hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary must be
delivered to FCC Headquarters at 445
12th St. SW., Room TW–A325,
Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand
deliveries must be held together with
rubber bands or fasteners. Any
envelopes and boxes must be disposed
of before entering the building.
D Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
D U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street SW.,
Washington, DC 20554.
People With Disabilities: To request
materials in accessible formats for
people with disabilities (braille, large
print, electronic files, audio format),
send an email to fcc504@fcc.gov or call
the Consumer & Governmental Affairs
Bureau at 202–418–0530 (voice), 202–
418–0432 (tty).
This is a summary of the
Commission’s Second Further Notice of
Proposed Rulemaking released on
October 23, 2014. This document does
not contain information collection(s)
subject to the Paperwork Reduction Act
of 1995 (PRA), Public Law 104–13. In
addition, therefore, it does not contain
any new or modified ‘‘information
collection burden for small business
concerns with fewer than 25
employees,’’ pursuant to the Small
Business Paperwork Relief Act of 2002.
A full text of this document is available
at the following Internet address: https://
www.fcc.gov/document/fcc-continuespush-rein-high-cost-inmate-calling-0.
The complete text may be purchased
from Best Copy and Printing, Inc., 445
12th Street SW., Room CY–B402,
Washington, DC 20554. Public and
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agency comments are due January 5,
2015.
I. Introduction
1. In 2013, nearly ten years after
Martha Wright, a grandmother from
Washington, DC, petitioned the Federal
Communications Commission
(Commission or FCC) for relief from
exorbitant long-distance calling rates
from correctional facilities, the
Commission took long overdue steps to
provide relief to the millions of
Americans paying unjust and
unreasonable interstate inmate phone
rates. These exorbitantly high rates
discouraged phone calls and, at times,
made it nearly impossible for inmates to
maintain contact with their families,
friends and communities, to society’s
detriment.
2. Reforming inmate calling service
(ICS) benefits society by making it easier
for inmates to stay connected to their
families and friends. An April 2014
report from the Department of Justice
found that, of the 400,000 prisoners
released over a five-year period, twothirds were rearrested within three
years, and three-quarters were rearrested
within five years. As a nation, we need
to take all actions possible to reduce
these recidivism rates. Studies have
shown that family contact during
incarceration is associated with lower
recidivism rates. Lower recidivism
means fewer crimes, decreases the need
for additional correctional facilities, and
reduces the overall costs to society.
Reform also helps families and the
estimated 2.7 million children of
incarcerated parents in our nation, an
especially vulnerable part of our society.
In addition to coping with the anxiety
associated with a parent who is not
present on a daily basis, these young
people are often suffering severe
economic and personal hardships and
are often doing poorly in school, all of
which are exacerbated by the inability
to maintain contact with their
incarcerated parent due to unaffordable
inmate calling rates.
3. While the Commission prefers to
promote competition to ensure rates are
just and reasonable, it remains clear that
in the inmate calling service market, as
currently structured, competition is
failing to do so. Evidence in the record
indicates that, as of 2013, interstate ICS
rates with comparable security features
and protections varied from as low as
$0.046 per minute to as high as $0.89
per minute, plus a per call charge as
high as $3.95. Even worse, rates are as
high as $2.26 per minute for a call
placed by a deaf or hard of hearing
prisoner. Excessive rates are primarily
caused by the widespread use of site
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commission payments—fees paid by ICS
providers to correctional facilities or
departments of corrections to win the
exclusive right to provide inmate calling
service at a facility. These site
commission payments, which have
recently been as high as 96% of gross
revenues, inflate rates and fees, as ICS
providers must increase rates in order to
pay the site commissions. This forces
inmates and their friends and families,
who use ICS and are forced to absorb
the site commissions in the rates they
pay, to subsidize everything from
inmate welfare programs, to salaries and
benefits of correctional facilities, states’
general revenue funds, and personnel
training. The ICS market has been
characterized by some as subject to
‘‘reverse competition,’’ forcing providers
to compete not on price or service
quality but on the size of site
commission payments—a dynamic that
drives rates ever higher to cover greater
and greater site commission payments.
4. The 2013 Inmate Calling Report
and Order and FNPRM tackled these
issues for the first time and took
important initial steps for reform. The
Order adopted a cost-based approach
with interim interstate rate caps and a
Mandatory Data Collection to allow the
Commission to evaluate ICS costs,
including ancillary charge costs, in
order to develop reforms such as
permanent rate caps and to address the
use of ancillary charges not reasonably
related to the cost of providing service.
With regard to site commission
payments, the Order reaffirmed the
Commission’s previous holding that site
commission payments are an
apportionment of profit. The Order also
determined that site commission
payments and other provider
expenditures not reasonably related to
the provision of interstate ICS are not
recoverable through ICS rates.
5. Although the rate caps adopted in
the Order were interim in nature
pending results of the Mandatory Data
Collection, the reforms have already had
a significant impact on contact between
inmates and their families. Evidence
indicates that as interstate rates have
declined, there has been a
corresponding increase in call volumes.
For example, one provider indicates
that, as a result of the Commissions’
reforms, its interstate ICS rates declined
39 percent and interstate call volumes
increased 20 to 30 percent. Praeses
reports that it tracked interstate ICS call
volume for its clients and that in
comparing a four-month period prior to
the Inmate Calling Report and Order
and FNPRM with another period one
year later, post-adoption, ‘‘call volume
increased nearly seventy percent.’’ But
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interstate rates are only part of the ICS
market. Although the Order set a
framework for states to follow, few have
done so. Many intrastate rates remain
high, with some having even increased
following the Order. There are
indications that ancillary fees have also
increased in number, price, or both,
leading to further expense for ICS
consumers in a manner that is often
unrelated to the cost of providing ICS.
These developments underscore the
critical need for the Commission to
move expeditiously to adopt
comprehensive, permanent reforms.
6. The Commission was unable to
adopt comprehensive reform in the
Inmate Calling Report and Order and
FNPRM due to the limited data in the
record and administrative notice limited
only to interstate ICS. Because we seek
comment on a comprehensive
solution—rather than just reforming
interstate rates—we seek comment on
moving to a market-based approach to
encourage competition in order to
reduce rates to just and reasonable
levels and to ensure fair but not
excessive ICS compensation. This
approach was not feasible when the
Commission previously addressed
interstate rates because new intrastate
rates and fees could circumvent such
efforts. We therefore initiate this Second
Further Notice of Proposed Rulemaking
(Second Further Notice) to develop a
record to adopt comprehensive,
permanent ICS reforms as expeditiously
as possible. In this item, we seek
comment on adopting a simplified,
market-based approach focused on
aligning the interests of ICS providers
and facilities to deliver high quality ICS
with advanced security features at the
lowest prices for end users. We seek
comment on whether such an approach
will significantly limit competitive
distortions in the ICS marketplace. We
seek comment on the Commission’s
legal authority regarding site
commissions and ask whether such
payments should be prohibited. We seek
comment on whether facilities incur
costs in the provision of ICS and, if so,
how facilities should recover these
costs, as well as appropriate transition
periods to enable facilities time to
adjust. We seek comment on proposals
in the record to establish permanent rate
caps for all intrastate and interstate
calls, limit ancillary charges, and adopt
other measures to ensure that ICS rates
are just, reasonable, fair, and accessible
to all Americans. We believe that this
market-based approach is only possible
through a comprehensive reform effort
dealing with all of the major portions of
the ICS market, unlike when the
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Commission addressed only interstate
ICS in the Inmate Calling Report and
Order and FNPRM. We seek comment
on alternative ways to promote
competition in the ICS market. We seek
comment on whether eliminating site
commissions and capping rates and
fees, on both interstate and intrastate
ICS, better aligns the interests of both
ICS providers and correctional
institutions with the interests of
consumers, allowing market forces to
drive rates to competitive levels.
II. Background
7. In 2003, Mrs. Wright and her fellow
petitioners (Wright Petitioners or
Petitioners), who included current and
former inmates at Corrections
Corporations of America-run
confinement facilities, filed a petition
with the Commission seeking to initiate
a rulemaking to address high longdistance ICS rates. The petition sought
to prohibit exclusive ICS contracts and
collect-call-only restrictions in
correctional facilities. In 2007, the same
petitioners filed an alternative
rulemaking petition, asking the
Commission to address high ICS rates
by requiring a debit-calling option in
correctional facilities, prohibiting percall charges, and establishing rate caps
for interstate, interexchange ICS. The
Commission sought and received
comment on both petitions.
8. In December 2012, the Commission
adopted a notice of proposed
rulemaking seeking comment on, among
other things, the proposals in the Wright
petitions. The 2012 ICS NPRM sought
comment on the two petitions and
proposed ways to ‘‘balance the goal of
ensuring reasonable ICS rates for end
users with the security concerns and
expense inherent to ICS within the
statutory guidelines of sections 201(b)
and 276 of the Act.’’ The 2012 ICS
NPRM sought comment on other issues
affecting the ICS market, including
possible rate caps for interstate ICS;
ancillary charges; data in the record;
collect, debit, and prepaid ICS calling
options; site commissions; issues
regarding disability access; and the
Commission’s statutory authority to
regulate ICS.
9. On August 9, 2013, the Commission
adopted the Inmate Calling Report and
Order and FNPRM, finding that
interstate ICS rates were not just and
reasonable as required by section 201 of
the Act, and did not ensure fair, and not
excessive, compensation for ICS
providers as required by section 276 of
the Act. In response, the Commission
adopted reforms to ensure interstate
rates were just, reasonable, and fair as
required by Sections 201 and 276 and
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focused on reforming interstate site
commission payments, rates, and
ancillary charges. The Commission
concluded that, in the absence of
competitive pressures, the default of
cost-based regulation should apply to
the ICS market. As discussed in the
Order, this approach is consistent with
Commission practice that ‘‘typically
focuses on the costs of providing the
underlying service when ensuring that
rates for service are just and reasonable
under section 201(b).’’ In addition, the
Commission noted that ‘‘the cost of
providing payphone service generally
has been a key point of reference when
[it] evaluates rules implementing the
fair compensation requirements of
section 276(b)(1)(A).’’
10. The Commission reaffirmed
previous findings that site commission
payments were not costs but ‘‘profit.’’
As a result, the Commission determined
that site commission payments ‘‘were
not part of the cost of providing ICS and
therefore not compensable in interstate
ICS rates’’ The Commission’s previous
request for ‘‘updated data from all
interested parties and the public, but
especially from ICS providers . . . to
aid . . . in developing a clearer
understanding of the ICS market,’’ went
largely unheeded. Therefore, the
Commission analyzed the limited data
submitted by ICS providers, in addition
to publicly-available data, to establish
interim per-minute interstate ICS safe
harbor caps of $0.12 and $0.14 and hard
rate caps of $0.21 for debit and prepaid
calls and $0.25 for collect calls to ensure
that all rates were reduced, and
provided guidance about the waiver
process for ICS providers that could
show good cause. The Commission also
required that ancillary charges be cost
based. Finally, the Commission chose
not to address intrastate ICS, noting
instead that it had ‘‘structured [its
reforms] in a manner to encourage . . .
states to undertake reform.’’ It noted,
however, that in the absence of state
reform of intrastate ICS, unreasonably
high rates would likely continue, which
would require the Commission to ‘‘take
action to reform unfair intrastate ICS
rates.’’
11. The changes to interstate rates
adopted by the Commission were
significant but interim. To enable the
Commission to adopt permanent ICS
reform, the Commission adopted a
Mandatory Data Collection for ICS
providers to report costs and an Annual
Reporting and Certification Requirement
of ICS rates. In the FNPRM the
Commission sought specific comment
on multiple aspects of permanent ICS
reform regardless of jurisdiction or call
type.
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12. Prior to the effective date of the
Order, the DC Circuit stayed three rules
adopted by the Commission pending
resolution of the appeal, including the
rule requiring rates to be based on costs,
the rule adopting an interim safe harbor,
and the rule requiring ICS providers to
file annual reports and certifications.
The court allowed other aspects of the
Order to take effect, including the
interim interstate rate caps.
13. Since the adoption of the Order,
the Commission has continued to
monitor the effect of its reforms on the
ICS industry and pursue additional
reform, including holding a workshop
entitled ‘‘Further Reform of Inmate
Calling Services’’ on July 9, 2014. The
workshop evaluated options for
additional ICS reforms, discussed the
effects of the Order, the role ancillary
charges play in the ICS market, the
provision of ICS at different types of
facilities, and communications
technologies beyond traditional
payphone calling being deployed in
correctional facilities.
14. On June 11, 2014, the Commission
received approval for its Mandatory
Data Collection from the Office of
Management and Budget, and, after
publication in the Federal Register,
announced in a Public Notice that data
responses were due on July 12, 2014, a
date which was subsequently extended
until August 18, 2014. In response, the
Commission received significant cost
and operational data, including
ancillary charge cost data, from the
following ICS providers: ATN,
CenturyLink, Combined Public
Communications, Correct Solutions,
Custom Teleconnect, Encartele, GTL,
Lattice, ICSolutions, NCIC, Pay Tel
Communications, Protocall, Securus,
and Telmate. Collectively, these
providers represent the vast majority,
well over 85 percent, of the ICS market.
In this Second Further Notice, we seek
comment on these data, including some
reporting and cost allocation
inconsistencies among the providers.
We seek comment on these issues and
generally on the data received as we
propose to move forward and adopt
permanent interstate and intrastate ICS
reform.
15. Proposals for Reform in the
Record. Since the Order, we have
received several proposals in the record
urging comprehensive ICS reform. On
September 15, 2014, GTL, Securus, and
Telmate, who claim to be ‘‘the primary
providers of inmate calling
services . . . in the United States and
representing 85% of the industry
revenue in 2013,’’ jointly filed a
proposal to comprehensively reform all
aspects of ICS. First, the Joint Provider
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Reform Proposal urges the adoption of
rate caps of $0.20 per minute for debit
and prepaid interstate and intrastate
ICS, and $0.24 per minute for all
interstate and intrastate collect ICS,
effective 90 days after adoption of a
final order. The Joint Provider Reform
Proposal supports ‘‘reductions in site
commission payments’’ but does not
specify exactly what such reductions
would entail. The Proposal suggests the
prohibition of ‘‘in-kind payments,
exchanges, technology allowances,
administrative, fees,’’ or anything ‘‘not
directly related to, or integrated with,
the provision of ICS.’’ These three ICS
providers contend that the Commission
does not have authority over ‘‘ancillary
fees for transactions other than the
provision of ICS’’ but propose to
eliminate some ancillary fees, limit
allowable ancillary fees to those
specified in the document, and cap
other ancillary fees. Finally, these three
ICS providers ‘‘commit to continue to
comply with their existing obligations’’
under the Americans with Disabilities
Act and other statutes for inmates with
disabilities, and suggest that the
Commission require officers of ICS
providers to certify compliance with all
adopted rules under penalty of perjury.
GTL, a signatory of the Proposal, later
characterized the Proposal as ‘‘part of a
new framework that is designed to
respond to market forces’’ and noted
that ‘‘[t]he proposed rates and fees are
caps, which can vary by contract based
on the correctional facility needs and
the bidding process.’’
16. In addition to the Joint Provider
Reform Proposal, several individual ICS
providers also submitted proposals for
reform. CenturyLink asserts that it could
‘‘support a unified cap approximately at
the current interstate cap levels,’’ which
would apply ‘‘for both interstate and
intrastate calls, with an additional
allowance for collect calling.’’
CenturyLink supports a prohibition on
‘‘all or all but a very narrow class of
ancillary fees.’’ CenturyLink also asserts
that the Commission should ‘‘allow
reasonable commissions or
administrative fees,’’ exempt from
regulation high-cost facilities such as
secure mental health facilities, and
grandfather existing contracts. Pay Tel
also submitted a proposal for reform,
which it characterizes as a
‘‘comprehensive solution to ICS reform
that attempts to be fair to all affected
parties, including inmates and their
families, facilities, and vendors.’’ Pay
Tel’s Proposal suggests ‘‘postalized’’
per-minute rate caps, at a rate to be
determined, for both intrastate and
interstate calls, separated between
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prisons and jails, with no per-call
charges allowed. Specific ancillary fees
would be allowed, with some ‘‘premium
calling options’’ for jails, and all other
ancillary fees prohibited. Pay Tel
proposes that all facilities would be
required to comply with existing
obligations and laws regarding people
with disabilities.
17. The Wright Petitioners, along with
several public interest groups, urge the
Commission to adopt a $0.07 per minute
rate cap for all interstate debit, prepaid,
and collect calls, with no per-minute
rate, and no other ancillary fees or taxes
allowed. Prisoners’ Legal Service of MA
(PLS) contends that the interim safe
harbors and caps that the Commission
implemented in the Order are
conservative and ‘‘exceed cost data that
any party submitted in the record.’’ PLS
opposes extending the interim safe
harbor rates and caps, and instead
proposes that the Commission adopt a
flat all-distance rate of $0.07 per minute,
regardless of the size of the facility or
the call volume generated from the
facility. To justify this rate, PLS points
to the fact that ICS providers are
charging as low as $0.04 and $0.05 per
minute absent commissions in some
states.
18. A few states have undertaken ICS
reform since the Commission’s Order.
The Alabama Public Service
Commission (Alabama PSC) recently
adopted comprehensive ICS reforms
that include intrastate rate caps as well
as restrictions on the number and rates
of ancillary charges it authorized. The
Minnesota Department of Corrections
initiated a pilot program in a limited
number of correctional facilities in
which a flat rate of $0.07 per minute is
charged for all local and long-distance
debit calls, bringing the cost of a 15minute call to $1.05, plus applicable
tax. New Jersey recently lowered ICS
rates to $0.15 a minute for all interstate
and intrastate calls from state prison
facilities. We applaud these efforts and
seek comment below on what more the
Commission and states can do to enact
comprehensive ICS reform.
III. Discussion
19. In this Second Further Notice, we
take the following steps to reform and
modernize interstate and intrastate ICS
regulations while ensuring adequate
security measures for correctional
facilities. First, we seek comment on
eliminating all site commission
payments on both interstate and
intrastate ICS to fulfill the Commission’s
statutory obligations to promote
competition and ensure just and
reasonable rates and fair compensation.
We also seek comment on whether
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facilities incur costs in the provision of
ICS and, if so, how facilities should
recover these costs, as well as
appropriate transition periods for reform
to allow correctional facilities time to
adjust. We seek comment on adopting
intrastate and interstate rate caps. We
seek comment on reforming ancillary
fees including adopting ancillary fee
rate caps, and prohibiting certain
ancillary charges. We also seek
comment on alternative ways to
promote competition in the ICS market.
We seek comment on whether we
should periodically review the ongoing
impact of ICS rate reforms. Finally, we
seek further comment on issues related
to enforcement, disability access,
advanced communications in the
correctional setting, and the cost/benefit
analysis of all of the proposals herein.
A. Payments to Correctional Facilities
20. The record, including data from
the 2014 ICS Workshop and the
Mandatory Data Collection, makes clear
that the Order’s interim rate caps have
significantly lowered the expense of
interstate ICS calls to end users. On the
positive side, the interim interstate rate
caps have resulted in increased call
volumes, evidence that unreasonable
rates were discouraging
communications and that reasonable
rates foster communications between
inmates and their families and friends.
Yet failures in the ICS market continue.
Interstate reform in some cases has been
met by increased intrastate ICS rates and
has not discouraged other practices that
also increase the costs of ICS to
consumers, such as excessive ancillary
charges and an increase in the use of
single call services. The pressure to pay
site commissions that exceed the direct
and reasonable costs incurred by the
correctional facility in connection with
the provision of ICS continues to
disrupt and even invert the competitive
dynamics of the industry. These and
other market failures demonstrate that
the interstate-only reforms adopted in
the Order, while an important first step,
did not completely address the
problems in the ICS marketplace. This
highlights the need for morecomprehensive reform of the ICS
industry to address both interstate and
intrastate ICS.
1. Restrictions on Payments to
Correctional Facilities
21. In this section, we seek comment
on prohibiting site commissions as a
category, including all payments,
whether in-kind payments, exchanges,
allowances, or other fees. The record is
clear that site commissions are the
primary reason ICS rates are unjust and
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unreasonable and ICS compensation is
unfair, and that such payments have
continued to increase since our Order.
Moreover, where states have eliminated
site commissions, rates have fallen
dramatically. We therefore predict that
prohibiting such payments will enable
the market to perform properly and
encourage selection of ICS providers
based on price, technology and services
rather than on the highest site
commission payment. Although we seek
comment on prohibiting site
commissions as a category, we seek
comment on whether correctional
institutions incur any costs in the
provision of ICS and, if so, how to
enable the facilities to recover such
costs. We also seek comment on how
best to proceed if a state has already
prohibited site commission payments.
22. As part of its reform of
unreasonable and unjust interstate ICS
rates in the Inmate Calling Report and
Order and FNPRM, the Commission
addressed site commissions and
concluded that they were an
apportionment of profits between
service providers and correctional
facilities and were not, in and of
themselves, a cost of ICS. The payment
of site commissions distorts the ICS
marketplace by creating ‘‘reverse
competition’’ in which the financial
interests of the entity making the buying
decision (the correctional institution)
are aligned with the seller (the ICS
provider) and not the consumer (the
incarcerated person or a member of his
or her family).
23. This ‘‘reverse competition’’ is
reflected in data in the record.
Aggregated data from the Mandatory
Data Collection from 14 ICS providers
show that over $460 million in site
commission payments were paid to
facilities in 2013. This means that ICS
users and their families, friends and
lawyers spent over $460 million to pay
for programs ranging from inmate
welfare to roads to correctional
facilities’ staff salaries to the state or
county’s general budget. These are passthrough payments from the provider to
the facility, absent which, rates would
be lower. Moreover, the magnitude of
payments is significantly higher than
previous estimates in the record. For
example, using publicly available data
in 2012, the Human Rights Defense
Center (HRDC) estimated ICS providers
paid over $123 million in site
commissions to correctional facilities.
To put the number in context, however,
the record and data from the Mandatory
Data Collection suggest that these
payments represented just 0.3 percent of
prison facilities total budgets in 2012.
Similarly, one ICS provider estimated
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that site commission payments
represented 0.4 percent of total prison/
jail operating budgets in 2013. What
appears to be of limited relative
importance to the combined budgets of
correctional facilities has potentially
life-altering impacts on prisoners and
their families.
24. Despite their limited overall
budget impact, site commission
payments are the chief criterion many
correctional institutions use to select the
ICS provider for their facilities and are
thus the main cause of the dysfunction
of the ICS marketplace. The demand for
site commission payments generates
pressure on ICS providers to raise rates
and assess additional ancillary charges,
which are typically not subject to site
commissions. The existing contract
proposal process (RFP, or request for
proposal) often focuses the competition
between bidding ICS providers on who
can pay higher site commissions to
correctional institutions instead of
creating incentives for ICS providers to
provide the lowest rates to consumers.
25. The Alabama PSC articulated an
alternative perspective on the cause of
increased site commissions, stating that
‘‘the proliferation of excessive ancillary
fees, not call rates, is the most
significant contributor toward escalating
site commission offerings.’’ It further
asserted that ‘‘to effectively constrain
excessive site commissions, it is
essential to first address the excessive
revenue sources [from ancillary fees].’’
In this Second Further Notice we seek
comment on proposals to address both
site commissions and ancillary fees. We
also seek comment on the Alabama
PSC’s perspective on the cause of
increases in site commissions.
26. At the time the Commission
adopted the Inmate Calling Report and
Order and FNPRM, the highest
commission amount in the record was
88 percent. Since the Order, despite the
Commission’s decision to not permit
site commission payments to be
included in interstate rates, the record
indicates that site commissions have
continued to increase, with recent
contracts including site commission
payments as high as 96 percent of gross
revenues. Moreover, there is evidence
that site commission payments on
intrastate ICS revenue, which were not
addressed by the Order, have increased.
Absent further action, we are concerned
that the market will continue to fail to
promote competition and ensure rates
are just, reasonable and ensure fair
compensation consistent with the
dictates of the Communications Act.
Indeed, several commenters urge the
Commission to adopt an approach that
‘‘will lead to lower, market-based rates.’’
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Securus has suggested that if the
Commission does anything short of
completely banning site commission
payments, it will allow gaming.
27. We seek comment on prohibiting
all site commission payments for
interstate and intrastate ICS to enable
market-based dynamics to ensure just
and reasonable ICS rates and fair ICS
compensation. Eliminating the
competition-distorting role site
commissions play in the marketplace
should enable correctional institutions
to prioritize lower rates and higher
service quality as decisional criteria in
their RFPs, thereby giving ICS providers
an incentive to offer the lowest end-user
rates. Indeed, when states such as
Missouri, New York and New Mexico
eliminated site commission payments,
ICS rates decreased significantly. We
therefore seek comment on such an
approach and on whether it will foster
a competitive market that will ensure
just and reasonable rates and fair
compensation for ICS while minimizing
regulatory burdens on ICS providers and
the Commission. We also seek comment
below on whether the Commission
should undertake periodic review to
verify this.
28. We seek comment on a two-year
transition away from site commissions
to avoid flash cuts and permit
correctional institutions time to adjust.
In addition, we seek comment on
whether correctional facilities incur
costs for provisioning ICS. We request
data that demonstrate the costs that
facilities bear that are directly related to
the provision of ICS. We seek comment
on the magnitude of these costs and
how to enable facilities to recover such
demonstrated costs in a manner that
does not disrupt a market-based
approach to lowering rates for end users
of ICS.
2. Legal Authority
29. We seek comment on the
Commission’s legal authority to restrict
the payment of site commissions in the
ICS context pursuant to sections 276
and 201(b) of the Act. We begin with a
review of the authority accorded the
Commission under section 276. In
relevant part, section 276(b)(1) states:
In order to promote competition among
payphone service providers and promote the
widespread deployment of payphone
services to the benefit of the general public,
within 9 months after the date of enactment
of the Telecommunications Act of 1996, the
Commission shall take all actions necessary
(including any reconsideration) to prescribe
regulations that—
(A) establish a per call compensation plan
to ensure that all payphone service providers
are fairly compensated for each and every
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completed intrastate and interstate call using
their payphone. . . .
30. As discussed herein, the
Commission has previously concluded
that site commission payments are a
significant cause of ever increasing
rates. This fact was recently
underscored by the Joint Provider
Reform Proposal, which stated that the
rate caps they propose ‘‘are feasible for
the parties only if implemented in
conjunction with corresponding
reductions in site commission
payments.’’ We seek comment on the
assertion that absent reform, achieving
the statutory mandate of just and
reasonable ICS rates and fair ICS
compensation would be difficult, if not
impossible, to achieve. At the same
time, we are mindful that ICS providers
should receive ‘‘fair’’ but not excessive
compensation, and seek comment on
implementation and transition below to
ensure that this occurs. We therefore
seek comment on whether the payment
of site commissions would be an
appropriate object of regulation under
this statutory provision. Would a
prohibition on site commission
payments ensure ‘‘fair compensation’’ as
that term is used in section 276? While
the Commission has previously found
the phrase ‘‘fairly compensated’’ to be
ambiguous, and acknowledged that a
range of compensation rates could be
considered fair, it has treated the
concept of fairness as encompassing
both the compensation received by ICS
providers and the cost of the call paid
by the end user. As the record continues
to show that the payment of site
commissions causes ICS rates to be set
at excessive levels, could the
Commission under section 276 find that
site commissions result in unfair
compensation and therefore should be
prohibited or otherwise restricted?
31. We seek comment on our
prediction that a prohibition on the
payment of site commissions would
foster a more competitive marketplace
for the provision of ICS. If site
commissions hinder and distort
competition among ICS providers,
hinder the widespread deployment of
payphone services, or both, would that
support the Commission’s exercise of
section 276 authority ‘‘to prescribe
regulations’’ to ensure that ICS
providers are ‘‘fairly compensated’’? If
so, would the statutory duty to ensure
fair compensation encompass an
outright ban on the payment of site
commissions by ICS providers? We
note, for example, that if a correctional
institution were to self-provision ICS
and seek to charge rates that include an
amount that would be deemed a site
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commission as part of its profits, above
and beyond a normal return, such
conduct could be directly addressed by
Commission regulation of ICS rates to
limit rates to a level that ensures fair
compensation, but no more. Does this
approach support the view that
Commission regulation directly
targeting site commissions likewise can
be justified to the extent providers
ensure that ICS rates provide no more
than fair compensation?
32. If, as the record currently shows,
the payment of site commissions leads
to ICS rates that are set at unreasonably
high, even exorbitant, levels, then, as
has occurred in states that have
eliminated site commissions, we predict
that a prohibition on making these
payments would lead to significantly
lower ICS rates. We seek comment on
the reasonableness of this presumption
and whether there are criteria other than
site commissions that might discourage
correctional institutions from
prioritizing lower rates and better
service quality in their RFPs. If the
elimination of site commissions does
lead to lower rates, we seek comment on
whether lower ICS rates would lead to
greater ICS usage. How should we
interpret the word ‘‘deployment’’ in this
context? For instance, is ‘‘deployment’’
limited to installation of new physical
infrastructure that would enable the
provision of ICS, or can ‘‘deployment’’
reasonably be construed to include new
incentives or opportunities for end users
to access existing payphone services?
Similarly, can ‘‘payphone service’’—
which section 276 defines to include
‘‘any ancillary services’’—reasonably be
construed to include new features that
might be offered to accommodate greater
demand? We seek comment on this
analysis.
33. We seek comment on any other
relevant language in section 276 that
may bear upon our authority to prohibit
site commissions. For instance, what is
the relevance of section 276(b)(1)(A)’s
requirement that regulations adopted by
the Commission ensure that payphone
service providers are compensated ‘‘per
call’’ and for ‘‘each and every completed
intrastate and interstate call’’? More
generally, are there alternative
interpretations or theories for
implementing section 276 that counsel
for or against particular approaches to
addressing site commission payments?
34. We seek comment on the proposal
that site commission payments
undermine the achievement of section
276’s goals in the ICS context, even
though the Commission previously has
permitted location rents in the context
of public payphones. For example, as to
public payphones, the Commission
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found that ‘‘[p]ayphones in many
locations are likely to face a sufficient
level of competition from payphones at
nearby locations to ensure that prices
are at the competitive level,’’ and thus
‘‘[a]s a result, we believe that payphones
at such locations are unlikely to need
additional scrutiny.’’ The Commission
recognized, by contrast, that there could
be ‘‘locations where . . . no ‘off
premises’ payphone serves as an
adequate substitute for an ‘on premises’
payphone.’’ As the Commission
observed:
In such locations, the location provider can
contract exclusively with one PSP [payphone
service provider] to establish that PSP as the
monopoly provider of payphone service.
Absent any regulation, this could allow the
PSP to charge supra-competitive prices. The
location provider would share in the
resulting ‘‘location rents’’ through
commissions paid by the PSPs. To the extent
that market forces cannot ensure competitive
prices at such locations, continued regulation
may be necessary.
35. We seek comment on whether
market conditions for ICS differ
sufficiently from those the Commission
previously found in the case of public
payphones as to warrant different
treatment under section 276. Are ICS
providers inherently ‘‘monopoly
providers of payphone service’’ and
therefore able ‘‘to charge supracompetitive prices?’’ Do inmates have
access to competing alternatives? One
way to mitigate this problem would be
to require correctional institutions to
enter into service contracts with
multiple ICS providers instead of
awarding a monopoly to a single
provider, as the Wright Petitioners
initially suggested. However, the record
suggests that requiring multiple
providers at correctional institutions,
and thereby enabling competition, could
present significant practical challenges
and potentially could increase costs and
therefore drive up rates. Further, it is
unclear whether allowing multiple
providers at correctional institutions
would substantially lower ICS costs to
consumers if facilities were still able to
receive site commission payments. We
seek comment on these views, and
whether action on site commissions
thus can be reconciled with
Commission precedent under section
276 for public payphones, or if action to
prohibit or restrict site commissions for
ICS locations would require the
Commission to change course in any
respect.
36. We also seek comment on any
other sources of Commission authority
to regulate site commissions. For
example, section 201(b) of the Act
requires all charges and practices ‘‘for
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69687
and in connection with’’ an interstate
common carrier service to be ‘‘just and
reasonable.’’ We seek comment on
whether section 201(b), independent of
any authority under section 276, gives
us jurisdiction to prohibit the payment
of site commissions for interstate ICS. Is
the payment of site commissions a
‘‘practice’’ under section 201(b)?
Conversely, could it be viewed as a
‘‘rate,’’ or component of a ‘‘rate,’’ under
section 201(b)? Under either alternative,
is the payment of site commissions ‘‘for
and in connection with’’ interstate ICS?
To what extent would a prohibition of
site commissions under section 201(b)
differ from a prohibition under section
276? Are there circumstances under
which section 201(b) would support the
regulation of site commissions in
connection with intrastate, as well as
interstate, ICS? For example, would
declining to prohibit or restrict site
commissions in connection with
intrastate ICS undermine the
Commission’s ability to ensure lawful
interstate ICS rates? Do other statutory
provisions inform how the Commission
can or should approach the issue of site
commissions in the ICS context? The
possible reforms that we seek comment
on would apply to site commissions on
both interstate and intrastate ICS traffic.
In what ways would the Commission’s
legal basis for its actions differ based on
the jurisdiction of the traffic under
particular legal theories? In addition to
regulating ICS providers’ payment of
site commissions, does section 276 or
other Commission authority enable us to
regulate the conduct of correctional
institutions or other third parties if they
seek to induce ICS providers to make
such payments? If so, what is that
authority?
3. Possible Reforms to Site Commissions
37. We seek comment on prohibiting
site commission payments for all ICS as
part of comprehensive reform and
whether transitioning away from site
commission payments is essential to
achieving the statutory requirements of
just and reasonable ICS rates and fair
ICS compensation. We seek comment on
a definition of site commission
payments that are subject to any
prohibition or restriction to include
‘‘payments in money or services from
ICS providers to correctional facilities or
associated government agencies,
regardless of the terminology the parties
to the agreement use to describe them.’’
We seek comment on interpreting this
language to include any products or any
other thing of value such as, for
example, so-called ‘‘contract
administration’’ fees. This is consistent
with the approach in the Order where
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the Commission noted that it would
treat in-kind payments as site
commissions.
38. The Joint Provider Reform
Proposal supports the elimination of site
commissions and proposes a similar
definition of impermissible site
commission payments to include a
comprehensive range of ‘‘in-kind
payments, exchanges, technology
allowances, administrative fees, or the
like.’’ It proposes that ‘‘the Commission
define as impermissible: Any payment,
service, or product offered to, or
solicited by an agency (or its agent) that
is not directly related to, or integrated
with, the provision of communications
service in a correctional facility.’’ We
seek comment on these definitions and
on any other ways to define ICS
provider payments to correctional
institutions that would be subject to any
regulation discussed herein. We also
seek comment on whether we should
prohibit gifts or charitable contributions
from ICS providers to correctional
facilities to ensure they are not used to
undermine a potential site commission
prohibition. In an analogous context, the
Commission included in its E-rate
program rules a prohibition on gifts by
service providers to schools or libraries
to ensure that such gifts do not
‘‘circumvent competitive bidding and
other E-rate program rules.’’
Additionally, we seek comment on
whether any certification required of
ICS providers should include a
certification of compliance with any
prohibition on site commissions and
gifts the Commission may impose.
39. Costs Incurred by Correctional
Facilities. Although we seek comment
on eliminating site commissions as a
category, the Commission
acknowledged in the Order that some
portion of payments to correctional
facilities ‘‘may, in certain
circumstances, reimburse correctional
facilities for . . . costs,’’ such as
security costs, that the Commission
would likely consider reasonably and
directly related to the provision of ICS.
Consistent with the Order, we seek
comment on whether correctional
institutions incur any costs in the
provision of ICS and, if so, how to
quantify them and how the facilities
should recover such costs. We seek
comment on the idea that any recovery
by facilities for costs reasonably and
directly related to making ICS available
be built into any per-minute ICS rate
caps set by the Commission.
40. We seek comment on any filings
in the record attempting to demonstrate
‘‘legitimate costs incurred by
correctional facilities . . . related to the
provision of inmate calling services.’’
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The Joint Provider Reform Proposal
states that ‘‘[t]he parties recognize . . .
that correctional facilities may incur
administrative and security costs to
provide inmates with access to ICS,’’
referencing them as ‘‘admin-support
payments.’’ Yet, the participating
providers ‘‘have not reached agreement
as to what amount or what percentage
(if any) should be required, or how such
admin-support payments can accurately
be measured.’’ Some parties suggest that
costs to facilities may include
monitoring calls, submitting trouble
tickets on equipment, handling billing
disputes that inmates may have with the
provider, and infrastructure and
security costs. Praeses asserts that
‘‘correctional facilities incur real costs
to enable inmate calling’’ and lists a
number of functions they assert are
related to such costs. However, other
parties question whether the facilities
incur any additional costs for the
provision of ICS. Also, Securus notes
that correctional facilities benefit
significantly from having ICS in terms of
reduced recidivism, solving and
preventing crimes and inmate control
and satisfaction suggesting that any
costs are far outweighed by the benefits.
Should the Commission be concerned
that prohibiting or restricting site
commission payments or prohibiting
rates that include recovery of site
commissions will lead correctional
facilities to stop allowing inmates access
to ICS altogether, or else to restrict
inmates’ access to ICS? We seek
comment on whether correctional
institutions in states that have
prohibited site commissions bear any
costs and, if so, whether such costs are
recovered through ICS rates or are
recovered through the general budget of
the correctional institution.
41. We note that because the
Mandatory Data Collection applied to
ICS providers, not correctional
institutions, the costs submitted by the
providers do not include any costs that
may be incurred by facilities. We seek
comment on the actual costs, if any,
incurred by correctional facilities in
providing ICS, the amounts associated
with these costs, and the appropriate
vehicle for enabling facilities to recover
such costs. Is an allocation of a guard’s
time for walking a prisoner to an ICS
facility necessary and appropriate to
include in ICS costs? Do facilities
monitor calls for security purposes or is
such monitoring done by ICS providers?
If facilities monitor calls, should such
costs be considered a cost recoverable
through ICS rates? The Allegany
County, NY Sheriff asserted that his
facility ‘‘does experience real costs in
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administering these services,’’ but did
not quantify or otherwise provide a
context for understanding the relative
magnitude of these costs as compared to
the county’s correctional budget.
42. The record is mixed on whether,
and if so, how much facilities spend on
ICS. For example, GTL provides
research that suggests significant
variations in how facilities apportion
costs. For example, one department of
correction that GTL serves allocates 42
full time employees to the provision of
security for ICS, whereas a second,
similarly sized, department of
correction allocates only 0.5 full time
employees to the provision of security
for ICS. GTL estimates prisons’ ICSrelated costs at $0.005 per minute of use
and jails’ costs at $0.016 per minute of
use, or 3.4 percent of total ICS revenue
at prisons and 7.6 percent in jails. In
contrast, CenturyLink asserts that to
‘‘monitor just ten percent of the calls
placed by inmates at either a prison or
a jail would cost the facility 5.28 cents
per minute applied to all calls placed by
inmates at the facility.’’ We seek
comment on these estimated costs,
particularly on why they vary so
significantly, and the underlying
assumptions, i.e., staffing costs and time
commitments. For example,
CenturyLink provides a list of
‘‘administrative and security functions’’
that correctional facilities commonly
perform,’’ such as ‘‘responding to other
law enforcement requests for records/
recordings,’’ validating attorney or other
privileged numbers, ‘‘blocking/
unblocking numbers blocked for
security issues,’’ and ‘‘administration of
debit purchase.’’ We seek comment on
this list of functions and whether, in
commenters’ experiences, it accurately
represents costs that correctional
facilities incur in the provision of ICS.
Other comments contend that ICS
facilities do not incur costs in the
provision of ICS. For example, is it
appropriate for any portion of a salary
of a full-time guard to be considered a
cost of ICS?
43. To the extent the record indicates
that facilities incur costs related to the
provision of ICS, we seek comment on
allowing cost recovery through a perminute rate cap included in any rate cap
adopted by the Commission, or some
other approach. The per-minute
approach presumes that facilities’ costs
vary with usage. We seek comment on
the variable or fixed nature of
correctional institutions’ costs. GTL
estimates prisons’ ICS-related costs at
$0.005 per minute of use and jails’ costs
at $0.016 per minute of use. We seek
comment on whether a per-minute
amount between $0.005 and $0.016 or at
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some other per minute amount would
ensure that correctional facilities
recover their costs. Would allowing cost
recovery based on a per-minute amount
give correctional facilities an incentive
to increase ICS usage? What would be
the policy advantages or disadvantages
of such an approach? Would
correctional facilities be likely to select
ICS providers with lower rates and fees,
so as to increase usage and, depending
on the elasticity of demand, thereby
increase cost recovery to the facilities?
We seek comment on whether any such
cap should be reevaluated and adjusted
as minutes of use (MOU) change.
44. We seek comment on using a perminute approach over one that would
set such payments at a capped
percentage of ICS revenues. This
approach would promote simplicity and
deter possible improper incentives tied
to a percentage of revenues approach, as
occurs today. If, however, we used a
percentage-based approach, we seek
comment on the appropriate level of any
recovery percentage. GTL estimates
prisons’ ICS-related costs at 3.4 percent
of total ICS revenue and jails’ costs at
7.6 percent. We seek comment on
whether a percent of gross revenues
between 3.4 percent and 7.6 percent or
some other percent amount would
ensure correctional facilities recover
their costs. Would basing cost recovery
on a percentage of ICS revenues
encourage gaming and provide no or
less incentive to facilities to lower ICS
rates? For example, would basing cost
recovery amounts on a percentage of
revenues give ICS providers incentives
to maintain rates at the highest
allowable level in order to maximize
site commission revenues? Will
correctional facilities structure their
RFPs so as to require such an outcome?
We seek comment below on a transition
period to achieve any cost recovery
level. Praeses suggests that the
Commission should consider
developing ‘‘a safe harbor payment level
in addition to a payment cap—in much
the same way that the Commission
regulated interstate ICS rates in the ICS
Report and Order in light of the varying
ICS costs borne by ICS providers with
respect to the different types of
correctional facilities served.’’ We seek
comment on these and any other
alternative regulations that could govern
the relationship between any restriction
on site commissions and ICS rate
regulations.
45. To ensure our reforms produce
just and reasonable rates and fair
compensation, we seek comment on
whether state statutes or regulations that
require any site commission payment,
as we sought comment on defining here,
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are inconsistent with the possible
regulation herein and would therefore
be preempted, pursuant to section
276(c) as discussed below. What criteria
should the Commission use to
determine which state actions are
consistent? For example, should state
actions to eliminate or restrict site
commissions be considered consistent
with any reforms that the Commission
adopts? Should such an approach also
preempt state statutes that only mandate
how site commissions are to be used,
but not require them in the first
instance? Or would such statutes simply
be rendered moot to the extent that
correctional institutions elect not to
seek, or ICS providers elect not to pay,
site commissions in those states?
46. We also seek comment on possible
state roles to address the issues
discussed above. Are there
circumstances where states might be
better positioned to engage in oversight?
Would states be limited to oversight in
the context of intrastate ICS or could
they also play some role in the context
of interstate ICS? If so, what might that
role be? Finally, we seek comment on
setting interstate and intrastate ICS rates
at levels that do not include the
recovery of site commission payments
instead of prohibiting site commission
payments directly. If the Commission
determines that it does not have
authority over site commission
payments, does such an approach still
allow for just and reasonable ICS rates
as well as fair compensation? Would
such an approach help satisfy the goals,
provided in section 276 of the Act, of
promoting competition and widespread
deployment of payphone services?
B. Interstate and Intrastate ICS Rate
Reform
47. A goal of ICS reform is to move
to a market-based solution to reduce
rates. While we continue to see the
benefits of a the approach adopted in
the Order last year, now that we are
seeking comment on comprehensively
reforming all aspects of ICS (including
intrastate rates and site commissions)
this allows the Commission to ask about
a more market-based approach to
promoting competition and just and
reasonable rates and to ensure fair
compensation. Given the high rates,
excessive compensation and market
failure we see today, we seek comment
on adopting permanent rate caps to
ensure that ICS rates are just and
reasonable. These rate caps will serve as
a backstop to the market-based solution
described above. We seek comment on
how to set those rate caps. Specifically,
we seek comment below on the data
submitted by ICS providers pursuant to
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the Mandatory Data Collection. We also
seek comment on the proposals for rate
reform filed in the record. In addition,
we seek comment on prohibiting perconnection or per-call charges. Should
any such expenses be collected through
a per-minute rate? We seek comment on
the best ways to address flat-rate charges
for ICS.
48. We seek comment on adopting
permanent rate caps for interstate and
intrastate debit/prepaid and collect ICS
calls. In the Order, the Commission
adopted a requirement that rates be costbased. At that time, because reform was
limited to interstate rates, market forces
alone would not bring all rates down to
just and reasonable levels because
intrastate rates, ancillary charges and
site commission payments on intrastate
rates would still thwart market forces.
While we continue to see the benefits of
a cost-based approach as adopted in the
Order last year, the Commission prefers
to allow market forces to ensure that
rates are just and reasonable. Now that
we seek comment on comprehensively
reforming all aspects of ICS, including
intrastate rates, will the elimination of
site commissions facilitate the market
moving to just and reasonable rates? We
also seek comment on adopting
permanent rate caps to ensure that ICS
rates are just and reasonable and ICS
compensation is fair, particularly while
we transition away from site
commissions. We ask about the
advantages and disadvantages of this
approach as compared to setting safe
harbors or simply requiring cost-based
rates. We seek comment above on a
possible cost recovery amount for
correctional facilities and seek comment
on including an amount for correctional
facility cost recovery in any rate caps
ultimately adopted by the Commission.
49. Data Analysis. We seek comment
on the data filed by the 14 ICS providers
in response to the Mandatory Data
Collection. The data filed by ICS
providers include cost, site commission
and ancillary services data, which are
informative and useful, and we take this
opportunity to remind all ICS providers
of the filing requirement. These data
include the cost of the full spectrum of
safety and security features, including
verification, monitoring and other
advanced security capabilities that
ensure that correctional facilities have
the security necessary for the provision
of ICS. We generally seek comment on
the data and invite parties to analyze the
data and submit any analysis consistent
with the terms of the Protective Order.
We also invite parties to submit
concerns or alternative proposals for the
Commission to consider as it evaluates
further reforms. Throughout this section
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we use 2012 and 2013 actual data filed
by the responding ICS providers.
50. While the data are useful to the
Commission’s evaluation of further ICS
reforms, we seek comment on some
apparent inconsistencies and anomalies.
For example, differing cost allocations
by providers were particularly notable
and could affect the consistency and
reliability of the data as reported. The
Wright Petitioners noted several
anomalies based on their analysis of the
data, including the fact that ‘‘[t]he
average cost per minute of use is
substantially less than the interim
Interstate ICS hard rate caps adopted in
August 2013; [t]he ICS providers
inconsistently allocated their costs
among the four cost categories
(Telecom, Equipment, Security, Other);
[t]he ICS providers used different
methodologies to allocate costs to
facilities and payment methods.’’ We
seek comment on these apparent
inconsistencies and how the data may
be analyzed to make an allowance for
such variances.
51. A large proportion of costs
reported by ICS providers are common
costs, which is consistent with the fact
that ICS providers typically use
centralized calling platforms to process
calls from the different facilities they
serve. The Commission’s Mandatory
Data Collection did not dictate a
particular methodology for allocating
common costs—and, indeed, doing so
could have greatly increased the
administrative burden of providing the
data. As a result, the providers took
varied and often inconsistent
approaches to allocating common costs
among types of facilities and types of
services. Given the preponderance of
common costs in ICS providers’ data
submissions, analysis of the data is
particularly sensitive to such varied and
inconsistent common cost allocation
methodologies.
52. We note that, as a whole, ICS
providers allocated common costs
among types of facilities and types of
services differently as compared to the
volumes of traffic those facilities and
services experienced. Specifically, ICS
providers that served both jails and
prisons generally allocated a higher
proportion of their common costs to
jails than would otherwise be warranted
given the minutes of use from those
jails. Although the exact allocation
varied by provider, on average about
two thirds of common costs were
allocated to jails, whereas only about
half the reported total traffic volume
originated from jails. The data evidence
similar discrepancies between the
allocation of common costs to types of
service and the volume of traffic for
those services. For example, ICS
providers as a whole allocated about 16
percent of their common costs to collect
calls, whereas collect calls represented
only about eight percent of total traffic.
It is not readily apparent why common
costs (as opposed to direct costs) would
not follow usage more closely. And the
results of the data from these allocations
show costs for jails that are higher than
proposals for comprehensive reform that
the providers themselves submitted,
which raises concerns about the
accuracy of their methodology and
whether alternative allocation methods
would more accurately represent costs.
53. One possible approach to
addressing apparent inconsistencies in
the providers’ common cost allocation
methodologies would be to use minutes
of use for each provider as an alternative
basis on which to allocate providers’
common costs. Given the high
proportion of common costs reported by
the industry and the centralized nature
of its networks, using minutes of use to
allocate common costs would seem
likely to reflect the providers’
operational realities. We seek comment
on whether employing a usage-based
allocation of common costs would more
closely reflect cost causation and
provide more consistent and reliable
data. We further seek comment on how
these data should inform the rate cap
levels for interstate and intrastate debit/
prepaid and collect calls. The following
table shows the costs per minute for
jails and prisons when using three
different methods to allocate common
costs: As submitted by ICS providers, as
reallocated using total minutes of use,
and as reallocated using the providers’
cost allocations between jails and
prisons prior to reallocating those costs
by minutes of use for each type of and
facility.
TABLE ONE
Common costs as
allocated by providers
Common costs allocated by MOU
(in cents)
Common costs allocated by
facility type
(in cents)
Facility type
Average debit/
prepaid cost
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Jails ..............................................
Prisons .........................................
All .................................................
15.8
10.0
13.3
54. We seek comment on the two
reallocation methodologies in Table
One, both of which use minutes of use
in different ways as a means of
reallocating common costs in manner
tied more closely to usage. We initially
examine and seek comment on the
reallocation based on total minutes of
use. This method uses the ratio of total
industry minutes of use for jails to total
minutes of use for all facilities to
reallocate all common costs among
facility and service types. Minutes of
use for jails represent about 53 percent
of all minutes of use, resulting in an
allocation of about 53 percent of
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Average collect
cost
Average debit/
prepaid cost
48.7
13.7
28.3
Average collect
cost
14.8
14.0
14.5
common costs to jails instead of the
average of approximately 68 percent
allocated to jails in the data as reported
by providers. The results of this
reallocation methodology are more
consistent with provider proposals in
the record, both from 2008 and more
recently. For purposes of comparison,
the 2008 ICS provider proposal reported
costs of $0.164 per minute for debit calls
and $0.236 per minute for collect calls,
whereas the providers’ data reported
costs of $0.133 per minute for debit and
prepaid and $0.283 per minute for
collect. Similarly, the Joint Provider
Reform Proposal recommends a single
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Average debit/
prepaid cost
21.9
17.2
19.2
18.1
9.9
N/A
Average collect
cost
26.3
14.3
N/A
per-minute rate cap of $0.20 for debit
and prepaid and $0.24 for collect
calling. CenturyLink’s proposal
advocates unified rate caps at the
current interstate caps ($0.21 for debit
and prepaid and $0.25 for collect). We
seek comment on these apparent
allocational discrepancies.
55. This alternative methodology
would standardize common cost
allocations among the five providers
that serve a mix of jails and prisons.
And the fact that providers that serve
only jails have no prison minutes of use
would ensure that their common costs
would not be allocated to prisons. Does
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this method more closely approximate
the operational realities of the
providers? Is it more effective in
replicating cost causation in the
industry? Does it have any disparate
impacts on providers that only serve
jails?
56. We also examine and seek
comment on a potential reallocation of
providers’ common costs based on
providers’ allocation of common costs to
facility types (jails or prisons). This
method accepts each individual
provider’s allocation of common costs
between jails and prisons and then
allocates those costs among facility and
service types based on total minutes of
use for each type of facility. This
method shifts fewer costs to prisons and
results in higher costs for jails than the
total minutes of use allocation due to
the reliance on the 68 percent average
allocation of common costs to jails by
providers, as noted above. Is this
method more appropriate because
providers’ initial allocations of common
costs are more accurate? Alternatively,
is this method’s greater reliance on the
accuracy of those allocations a potential
vulnerability or flaw?
57. The data provided by ICS
providers also allocated costs to
different subsets of facilities based on
size of facility. This allocation resulted
in a wider range of per-minute costs
with some apparent anomalies, such as
per-minute costs for certain facility size
groups being well above the range of
rate cap proposals submitted by any ICS
provider, including those that
exclusively serve purportedly highercost facilities such as jails. The cost data
generated by facility size groups also
resulted in some anomalies that raised
questions about whether smaller
facilities have higher costs than larger
ones, and vice versa, as some
commenters have asserted in this
proceeding. Given confidentiality of the
data, we cannot disaggregate all data for
jails and prisons by size but we note
that while the data indicate that smaller
jails are most costly and the largest jails
are less costly to serve, the data did not
show the same correlation between size
and cost for prisons. This raises
questions about whether assumptions
about facility size determining cost are
accurate. Even if size were the
appropriate measure, would the
administrative burden of using rates
tiered by size and type of facility
outweigh the benefits of multiple rate
tiers? Can rate caps for different types of
services and facilities provide sufficient
flexibility to ensure fair compensation
short of resorting to size-based tiers?
Does the Commission need to adopt
such a regulatory approach?
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58. To the extent that particular
facilities are more costly to serve than
suggested by the rate cap proposals in
the record, can the Commission more
effectively ensure fair compensation and
reduce administrative costs to providers
by addressing such outliers through the
use of the waiver process? We note that
the Commission already granted a
waiver of its interim rate caps to one ICS
provider to address unique
circumstances. Would using a waiver
process be easier to manage than
adopting and policing the multiple rate
tiers the Commission would otherwise
have to adopt?
59. We also seek comment on other
alternative methods of analyzing the ICS
providers’ cost data. For example,
would evaluating jail data separately
from prison data be useful? We seek
comment on any other methods of
evaluating the data that commenters
may want to propose that may prove
useful to the Commission in its analysis
of this data to ensure just and
reasonable rates and fair, not excessive,
compensation.
60. Previous Data Submissions in the
Record. ICS providers have previously
filed data in the record throughout this
proceeding. In 2008, seven ICS
providers filed a cost study based on
proprietary cost data for certain
correctional facilities with varying call
cost and call volume characteristics.
The study indicated that the per-call
cost for debit calls was $0.16 per minute
and $0.24 per minute for collect calls.
In response to the 2012 ICS NPRM,
Securus filed data which showed, as
discussed in the Order, ‘‘an average perminute cost for interstate calls from all
facilities included in the report to be
$0.12 per minute with commissions and
$0.04 per minute without them.’’ Pay
Tel filed financial and operational data
for its ICS operations. The nonconfidential cost summary included in
the filing reported actual and projected
2012–2015 average total costs for collect
and debit per-minute calling of
approximately $0.23 and $0.21,
respectively (including the cost of an
advanced security feature known as
continuous voice biometric
identification). Although CenturyLink
did not file a cost study at that time, it
did file summary cost information for its
ICS operations. Specifically,
CenturyLink reported that its per
minute costs to serve state departments
of corrections facilities (excluding site
commission payments) averaged $0.116
and that its per-minute costs to serve
county correctional facilities (excluding
site commission payments) averaged
$0.137. We seek comment on how to
reconcile these data submissions with
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the data filed in response to the
Mandatory Data Collection and the
Commission’s analysis of that data
described above, and how these data
should inform our selection of rate caps.
We also seek comment on and updates
to intrastate rate data currently in the
record. And we seek updated comment
on international ICS and the need for
Commission reform focused on such
services.
1. Proposals for a Unitary Rate
61. Throughout this proceeding
interested parties have filed in support
of the Commission adopting unitary ICS
rate caps for all intrastate and interstate
debit/prepaid and collect calls in all
facilities. We seek comment here on
those proposals.
62. Joint Provider Reform Proposal.
The Joint Provider Reform Proposal
supports a rate cap of $0.20 per minute
for debit and prepaid interstate and
intrastate calls, and a rate cap of $0.24
per minute for all interstate and
intrastate collect calls exclusive of percall or per-connection charges,
exclusive of any facility cost recovery,
and regardless of facility size. The
providers that submitted this proposal
assert that this ‘‘simplified rate
structure’’ ‘‘will make ICS charges more
transparent for inmates and their friends
and family,’’ as well as ‘‘easy for ICS
providers and correctional facilities to
implement quickly, and will simplify
oversight and enforcement.’’
63. Pay Tel and the Alabama PSC
have raised concerns about the Joint
Provider Reform Proposal for a unitary
rate and urged the adoption of different
rates for jails and prisons. For example,
Pay Tel stated that the rate caps were
‘‘excessively high for prisons.’’
64. We generally seek comment on the
rate caps proposed by the Joint Provider
Reform Proposal. We seek comment on
how our data analysis described above
reconciles with the rate caps proposed
by the providers. As noted above,
average debit and prepaid costs are
lower than $0.20 per minute. Should we
adopt the Joint Provider Reform
Proposal’s rate caps because any
adopted rate caps will serve as a
backstop to ensure that rates are just and
reasonable? Would these rates enable
the Commission to include a per-minute
cost recovery of $0.005 for correctional
facilities’ cost recovery? We also seek
comment on how ICS providers’ earlier
data filings reconcile with the rate caps
suggested in the Joint Provider Reform
Proposal.
65. Current Interim Rate Caps. Some
parties have supported making the
interim rate caps permanent for all
interstate and intrastate ICS calls.
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CenturyLink asserts that it could
‘‘support a unified cap approximately at
the current interstate cap levels.’’ NCIC
asserts that collect ICS rates should be
capped at $0.25 per minute and debit
call rates at $0.21 per minute. We seek
comment on these proposals in light of
the data received in response to the
Mandatory Data Collection.
66. Wright Petitioners’ Proposal. The
Wright Petitioners previously proposed
a $0.07/minute rate cap for all interstate
ICS. We sought comment on this
proposal in the FNPRM, particularly as
it related to distance insensitive rate
proposals. ICS providers suggested that
the rate may jeopardize ICS security.
Other commenters suggested that the
Commission should adopt a $0.07/
minute rate cap for all ICS and that
current rates in states like New Mexico
($0.043/minute) and New York ($0.048/
minute) support this cap. We now seek
comment on whether we should adopt
this proposal. If the Commission were to
adopt this proposal, would rate caps at
this level preclude ICS providers from
paying site commissions and therefore
negate the need for the Commission to
regulate site commission payments as
discussed above? What level of rate cap
do commenters believe would change
what providers are able to offer
correctional facilities? Do the data from
the Mandatory Data Collection support
this rate cap? What are the
considerations associated with such an
approach?
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2. Tiered Rate Caps
67. While we see certain benefits to a
single set of rate caps such as
administrative ease and avoidance of
potential loopholes, some commenters
recommend rates tied to the size or type
of facility. In the FNPRM the
Commission sought comment on the
adoption of, and benefits of, tiered rates
based on a facility’s volume of minutes,
type (i.e., jail versus prison) or size.
Responses centered on the distinction
between jails and prisons, with some
commenters advocating for different ICS
rate tiers for jails and prisons. These
same commenters also point out that the
differences between jails and prisons are
not absolute, and acknowledge that
some prisons ‘‘are more costly to serve
than jails and the range of costs of
serving jails and prisons is very wide.’’
The record indicates that jail
administrators support a tiered rate
instead of a flat rate because jails may
face different costs than prisons as a
result of their smaller size, higher
turnover rate, and relative inability to
take advantage of economies of scale.
How do the data collected and reported
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herein impact our evaluation of these
claims?
68. Pay Tel Proposal. In its proposal
Pay Tel recommends separate rates for
jails and prisons. Pay Tel proposes an
$0.08 per minute rate for all prisons
regardless of population. Pay Tel also
estimated a $0.067 per minute average
rate for the eight state prison systems
that barred site commissions. Pay Tel
suggests a rate of $0.26 per minute for
jails with 1–349 average daily
population [ADP], a $0.22 per minute
rate for jails with 350 plus ADP, and a
$0.08 per minute rate for all prisons
regardless of size. We seek comment on
these proposed rate caps.
69. Alabama recently adopted ICS
rates tied to facility type. For example,
the Alabama PSC has adopted perminute rates of $0.30, decreasing to
$0.25 over two years, for jails and $0.25,
decreasing to $0.21 over two years, for
prisons. We seek comment on this
approach.
70. Commenters suggest that rates tied
to the type or size of facility would open
loopholes in ICS reform and allow for
gaming. Is this accurate? Recently,
CenturyLink said it ‘‘does not support
complex or tiered rate caps.’’ Other
commenters contend that an insufficient
record exists from which to develop rate
tiers, and point to evidence that many
jails house long-term inmates, which
may indicate that costly account set-up
fees are less of an issue than suggested.
Do the data received in response to the
Mandatory Data Collection assuage the
concern regarding the sufficiency of the
record? The data also suggest that
certain ICS providers reported a large
proportion of the costs of ICS as
common costs, rather than direct or
facility-specific costs. Does this further
call into question the cost allocation
methods used by providers in their data
submissions to allocate common and
direct costs? Or does it suggest that ICS
providers did not use uniform standards
to distinguish between direct and
common costs? We seek updated
comment on interested parties’ opinions
on tiered rates for different types of
facilities. Specifically, if the
Commission adopts a market-based
approach of addressing site commission
payments and allowing competition to
drive rates closer to cost, should we
consider rate tiers, or should we instead
adopt common rate caps for all
correctional institutions to
accommodate any differences between
jails and prisons? Would the adoption of
tiered rates help promote competition
among ICS providers and promote the
widespread deployment of ICS—a form
of payphone service—consistent with
the goals of section 276? For example,
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would a lower rate cap for ICS in prison
facilities promote additional usage, a
potential means of promoting
widespread deployment of payphone
ICS service?
71. The Commission seeks comment
above on prohibiting site commissions
to address the primary cause of the ICS
market failure. If the Commission does
not prohibit site commissions should
we focus more on rates tied to facility
size or type? If the Commission were to
set tiered rates, we seek comment on
defining a jail facility as a correctional
facility operated by a political
subdivision of a state or its agent and
defining a prison facility as a state-run
or federally-run correctional facility.
How would differences in tiered rate
caps be administered? We seek
comment on a simpler approach. Would
a variety of rate caps cause confusion?
We also seek comment on the
administrability of cost on 4ICS
providers on an approach that varies by
size and type of facility. CenturyLink
urges the Commission to exclude from
ICS rate reform certain types of facilities
that it considers high-cost, such as
juvenile detention centers and secure
mental health facilities. Do other
commenters agree that these types of
facilities are particularly high cost? If so,
why? Are there other categories of
facilities that the Commission should
consider exempting because they are
high cost? Would doing so be in keeping
with our statutory mandate? How
should the Commission regulate the
provision of ICS at such facilities?
Should it exempt such facilities from
ICS rate reform? We seek comment on
the appropriate definitions for juvenile
detention facilities and secure mental
health facilities.
72. In the FNPRM, the Commission
also sought comment on rate tiers based
on facility size as measured by the
average daily population of the facility.
The Prison Policy Initiative suggested
that the Commission could use the
Census of Jail Facilities population data
to capture facility size but could also
use more recent data. Would following
the Census numbers result in too few or
too many tiers? We seek comment on
what interested parties believe to be the
appropriate inflection points, in terms
of ICS providers’ scalability of costs,
with regard to possible tiered rates.
Some states have recently adopted ICS
rate tiering. We seek comment on the
jail and prison rates adopted by the
Alabama PSC or any other states.
3. Additional Considerations Related to
ICS Rates
73. Debit/Prepaid and Collect Calling.
In the Order the Commission treated
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debit and prepaid ICS alike and collect
ICS separately because ‘‘[t]he record
indicates that prepaid calling is
generally less expensive than collect
calling but can be about equal in rates
to debit calling.’’ Data from the
Mandatory Data Collection suggest a
difference in cost between collect ICS
calling and debit/prepaid ICS calling.
The data also show, however, that debit
and prepaid ICS costs are very similar.
Commenters have recommended higher
rates for collect calls. The Alabama PSC
adopted different rate caps for different
types of service from prisons. Other
commenters have opposed
differentiated rate caps for different
types of ICS. We seek comment on
retaining this distinction and adopting a
rate cap for debit and prepaid calls and
a rate cap for collect calls. We also seek
comment on the appropriate
differential, if any, between the debit/
prepaid cap and the collect cap.
74. Per-Call or Per-Connection
Charges. Per-call or per-connection
charges are one-time fees often charged
to ICS users at call initiation. We seek
comment on banning the imposition of
per-call or per-connection charges. In
the Inmate Calling Report and Order
and FNPRM the Commission noted
several problems with per-call or perconnection charges, including the level
of some of the charges, their effect on
the rate for short calls, and evidence of
premature, non-security related call
terminations, and the assessment of
multiple per-call charges for what was,
in effect, a single conversation. The
Commission, recognizing that many
different ways to address per-call
charges exist, did not prohibit all percall charges in the Order but sought
comment in the FNPRM. In the FNPRM
the Commission noted the flexibility it
gave ICS providers to use a rate
structure that included per call charges
and sought further comment on the risks
and benefits of allowing per call
charges. Specifically, the Commission
‘‘express[ed] serious concerns about
such charges.’’ Some commenters
suggested that the Commission
eliminate per-call charges and that
doing so would be beneficial because it
‘‘would lead to significant reductions in
customer complaints regarding charges
associated with dropped calls and in the
amount of time providers are required to
spend analyzing and resolving such
complaints.’’ Is there continuing
evidence of premature, non-security
related call terminations since the
Commission adopted the Order? The
per-minute rate caps proposed by Joint
ICS Providers do not contemplate the
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continued charging of a per-call or perconnection fee.
75. We seek comment on our legal
authority to ban the imposition of percall or per-connection charges, for both
interstate ICS calls and intrastate ICS
calls. More specifically, we seek
comment on whether such fees are part
of the rate for ICS and therefore subject
to the section 276 mandate to ensure fair
compensation. Alternatively, should the
Commission consider per-call or perconnection charges an ancillary service
as discussed in section 276(d)? Are
there instances in which the
correctional facility or some other third
party assesses a per-call or perconnection fee? If so, we seek comment
on our authority to ban such charges.
Would the elimination of per-call
charges allow for just and reasonable
interstate and intrastate ICS rates and
fair compensation for providers? Would
pure per-minute rate caps at an
appropriate level or levels ensure fair
compensation for ICS providers?
Section 276 specifically requires us to
‘‘establish a per call compensation
plan.’’ We seek comment on whether
section 276 gives the Commission the
legal authority to ban per-call
compensation. We seek comment on
whether we should also rely on our
section 201 authority to ban per-call
charges for interstate calls. The record
has not shown significant per-call costs
that could not reasonably be recovered
using per-minute charges. With one
exception, ICS providers have
successfully implemented the interim
per-minute rate caps for interstate ICS
mandated by the Order. We seek
comment below on transitions and
whether rate caps should be effective 90
days after the effective date of a
Commission order. If the Commission
continues to allow per-call charges,
should it nonetheless disallow an
additional per-call charge when a call
has been reinitiated within one or two
minutes of having been mistakenly
disconnected? If states have conducted
ICS reform, we seek comment on
whether we should review the effective
rates for consistency with the
Commission’s regulations based on the
calculation of the cost of a 15-minute
ICS call. Are there other considerations
relating to per-call charges in the ICS
context that the Commission should
consider?
76. Flat-Rate Charges. We seek
comment on whether or not it is
necessary to ban flat-rated charges for
calls of a fixed duration to ensure rates
are just and reasonable and fair. In the
Order the Commission stated that ‘‘a
rate will be considered consistent with
our rate cap for a 15-minute
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conversation if it does not exceed $3.75
for a 15-minute call using collect
calling, or $3.15 for a 15-minute call
using debit, prepaid, or prepaid collect
calling.’’ Rule 64.6030 mirrors this
language and was intended to illustrate
that a five-minute collect call would
equal $1.25 and a five-minute debit or
prepaid ICS call would equal $1.05,
while a 30-minute collect call could
equal no more than $7.50 and a 30minute debit or prepaid ICS call could
equal no more than $6.30. In the
FNPRM the Commission sought
comment on whether it should adopt an
overall rate cap based on call duration,
how such a rate cap might ensure that
ICS rates are just, reasonable, and fair,
and whether a per-minute cap is still
necessary to ensure that shorter calls are
reasonably priced. Commenters
expressed concern that ‘‘consumers who
make shorter calls would necessarily be
penalized’’ and that ‘‘there is no
principled basis for capping the amount
that can be charged for a call.’’ The
Public Service Commission of the
District of Columbia discussed the
benefits of its $1.75 per-call cap
regardless of call length.
77. Subsequent to the FNPRM
comment deadline, Securus sought
additional guidance on whether the
Order allows providers to use a flatrated charge based on the interim rate
caps for a 15-minute call regardless of
call duration. We seek comment on this
practice. Should we allow ICS providers
to charge fixed call duration pricing for
all interstate ICS usage regardless of call
duration? Is this an appropriate
interpretation and application of rule
64.6030 and the relevant discussion in
the Order? We also seek comment on
how we should address the use of flatrate charges for ICS going forward and
our legal authority to act on such
charges. We seek comment on whether
we should revise the existing rules to
prohibit flat-rate charges or develop new
rules prohibiting flat-rated charges. If
not, how much flexibility should the
Commission allow if flat-rate charges
are permitted? How can we ensure that
flat-rate charges allow for just and
reasonable ICS rates to end users as well
as fair compensation to ICS providers?
78. One commenter asserts that
correctional facilities seek such flatrated charges. Is this the case and, if so,
why? What impact would allowing this
level of flexibility have on the effective
per-minute rates end users pay? If the
Commission adopted a lesser degree of
flexibility, how would it work? Should
such a flat rate be used only for calls 15
minutes in length? Will flat-rated
charges, at the rate caps discussed
above, for a 15-minute call duration
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allow for just and reasonable ICS rates
and fair compensation? In the Order, the
Commission found that the record
supported 15-minute average call
duration. Data from the Mandatory Data
Collection show that the average call
length reported by respondents was
below 13 minutes in 2013. Is 15 minutes
still a useful average call duration for
purposes of discussing flat-rate charges?
If not, what would be an appropriate
average call duration?
79. Waivers. The Order made clear
that the Commission’s standard waiver
process applies to ICS, specifically, that
ICS providers seeking a waiver of the
interim rules must demonstrate good
cause. The Commission delegated to the
Bureau the authority to seek additional
information necessary for evaluating
waivers. Since release of the Order, the
Bureau has processed three waiver
requests. CenturyLink suggests that the
Commission ‘‘invite waivers where new
rules conflict with state statutes, or
where they would force ICS providers to
offer service at a loss.’’ The ICS
providers that submitted the Joint
Provider Reform Proposal suggest that
the Commission ‘‘permit an ICS
provider to seek a waiver of the rate cap
for a particular correctional facility if
the ICS provider can demonstrate that
the proposed rate cap does not allow the
ICS provider to economically serve the
correctional facility. However, such
waivers should be permissible only on
a facility-by-facility basis.’’ We seek
comment on these suggestions.
Specifically, is such action necessary if
the Commission preempts inconsistent
state regulations pursuant to section
276(c) of the Act? We seek comment on
how the Commission would determine
that rates are below-cost in a waiver
proceeding and how any adopted
regulations should address this issue.
We further seek comment on what
information would be important for
providers to demonstrate when seeking
a waiver in the ICS context. We also
seek comment on whether exempting a
provider’s highest-cost facilities from
the final, adopted regulations would be
a suitable remedy to a waiver request.
Conversely, would such an exemption
encourage ICS providers to focus on
particular facilities so as to arbitrage our
rules?
C. Reforms to Ancillary Charges
1. Background
80. In addition to unreasonable rates,
ICS providers typically assess a wide
range of separate charges for services
ancillary to the provision of ICS. These
charges impose significant additional
burdens on consumers and considerably
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inflate the effective price they pay for
ICS. The record indicates that ancillary
charges represent a significant
proportion of the total expense of ICS to
consumers. The Prison Policy Initiative
estimated that ancillary charges
represent 38 percent of all consumer
payments for ICS. Others have suggested
that this estimate may be low. Fees to
open, fund, maintain, close, and refund
an ICS account represent just a few of
a variety of ancillary charges assessed
by ICS providers. The sheer number of
ancillary charges, their varying
nomenclature, and the variability of the
amounts charged cause considerable
customer confusion, let alone
consternation.
81. In the Order, the Commission
‘‘question[ed] whether such charges are
reasonable in and of themselves’’ and
noted that ‘‘the levels of such charges do
not appear to be cost-based.’’ The
Commission required that all interstate
ancillary service charges be cost-based
and reasonably and directly related to
provision of ICS. The Commission
concluded that it had the jurisdiction
and authority to regulate ancillary
service charges. The Commission also
required ICS providers to file cost data
about ancillary services as part of the
Mandatory Data Collection, and in the
FNPRM sought comment on additional
steps the Commission could take to
address ancillary service charges and
ensure that they are cost-based. We now
seek further comment on issues related
to ICS ancillary charges.
82. Since the release of the Order,
evidence indicates that ancillary charges
have increased, suggesting that any
reforms limited to ICS rates could be
circumvented through increased and
new ancillary charges. As the
Commission stated in the Order, ICS
reform and ensuring just and reasonable
rates to end users ‘‘could not be
achieved if ancillary charges were not
also controlled.’’ Given that ancillary
charges are typically shielded from site
commission assessments in correctional
institutions’ contracts with providers,
ICS providers appear to have an
incentive to assess additional ancillary
charges as an alternative source of
revenue to compensate for lowered ICS
rates or for increasingly high site
commission payments. We seek
comment on the extent to which the
proliferation of ancillary charges may be
a result of the market distorting effects
of site commissions.
83. There is broad consensus in the
record on the need for the Commission
to reform ancillary charges. The Wright
Petitioners and prisoner advocacy
groups have recommended the
regulation or elimination of ancillary
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charges. A number of ICS providers
have made similar recommendations.
For example, CenturyLink stated that
‘‘the Commission should prohibit all or
all but a very narrow class of ancillary
fees. Ancillary fees are the chief source
of consumer abuse and allow
circumvention of rate caps.’’ NCIC
stated ‘‘[a]lthough telecom companies
don’t normally welcome a regulation,
we see the need for the FCC and state
regulators to set a standard rate and fee
structure.’’ Pay Tel stated ‘‘you ought to
get rid of all of them except the fees
where the consumer makes a choice.’’
And Securus stated that it ‘‘offered,
however, to cease passing through
several types of fees and to cap its fees
for optional, convenient payment
methods for a period of five years.’’
84. Mandatory Data Collection. ICS
providers submitted a significant
amount of ancillary service cost and
usage data in response to the Mandatory
Data Collection. The ancillary services
data provide some useful insight into
the costs of ancillary services. For
example, the data show that
approximately 82 percent of total
ancillary costs incurred by ICS
providers pertain to the provision of bill
processing services, particularly for the
processing of credit and debit card
transactions. Conversely, only about 10
percent of providers’ ancillary costs
pertain to ancillary services that are
typically treated as normal utility
overhead. Even so, the data have some
limitations given providers’ inconsistent
approaches in assessing and labeling
such fees, different allocation
methodologies, and different ways of
reporting those costs. The data, while
mixed, also show that the per
transaction cost of processing financial
transactions point to the reasonable
nature of the $3.00 caps for financial
transaction processing fees set by the
Alabama PSC. We seek comment on
these general observations and on the
ancillary charge data generally.
2. Legal Authority for Ancillary Charge
Reform
85. In the Order, the Commission
asserted jurisdiction over interstate ICS
ancillary charges, citing as sources of
authority sections 201(b) and 276 of the
Act. Given section 276’s mandate of fair
compensation ‘‘for each and every
completed intrastate and interstate
call,’’ and its inclusion of ‘‘inmate
telephone service’’ and ‘‘any ancillary
services’’ in the definition of ‘‘payphone
service,’’ we seek comment on whether
section 276 gives the Commission
authority to regulate both interstate and
intrastate charges for ICS ancillary
services. While the Commission has
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previously adopted a definition of
ancillary charges, we have not adopted
a definition for ‘‘ancillary services’’ and
therefore seek comment on such a
definition. Additionally, given the
absence of any qualifying statutory
language to the contrary, we seek
comment on whether section 276 gives
the Commission jurisdiction over
charges that are ancillary to ICS to the
extent such services are considered IPenabled services. Further, in the Order
the Commission asserted in regard to
ICS generally that ‘‘[o]ur exercise of
authority under sections 201 and 276 is
further informed by the principles of
Title I of the Act.’’
86. We seek comment on whether this
assertion also encompasses the
Commission’s regulation of services
ancillary to the provision of ICS to the
extent that ICS may be considered an IPenabled service. Additionally, to the
extent that ancillary charges are
assessed in connection with ICS
provided through wireless phones, we
seek comment on whether sections 276
and 332(c) confer jurisdiction on the
Commission to reform such fees. We
also seek comment on assertions that
charges for ancillary services are
primarily related to billing and
collection and therefore may not be
considered to be communications
services subject to Commission
regulation. Finally, we seek comment on
whether regulation by the Commission
of ICS ancillary services should be
treated as a default federal framework,
with states encouraged to adopt
additional reforms to the extent they are
consistent with the Commission’s
regulations. Regarding the jurisdictional
nature of ancillary charges, the Alabama
PSC stated that ‘‘any schedule of
ancillary fees applies to both the
interstate and intrastate jurisdictions.’’
Are ancillary charges inherently dual
jurisdictional in nature? We seek
comment on this assertion and its
impact on our legal authority to regulate
such charges.
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3. Discussion
a. Prohibition of Certain Ancillary
Charges
87. The FNPRM sought comment on
whether certain ancillary charges
constituted unjust and unreasonable
practices under section 201(b), or
practices that would result in providers
being unfairly compensated under
section 276. We now seek comment on
prohibiting separate charges for certain
ancillary services that are basic
requirements for consumers to gain
access to ICS, and that are typically
recovered through rates as part of
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normal utility overhead costs. We also
seek comment on capping charges for
certain other ancillary services such as
payment processing for credit and debit
card payments that enhance
convenience for ICS consumers. We
seek comment on whether this approach
will promote the Commission’s mandate
of ensuring just and reasonable ICS rates
and fair compensation for ICS providers,
as well as promote competition and
deployment in the ICS market.
88. The record, including the
discussion at the Commission’s 2014
ICS Workshop, supports the notion that
the Commission should prohibit
separate ancillary charges for services
that represent normal utility overhead
but allow other charges for services that
represent an additional option or
convenience for consumers. For
example, the Alabama PSC workshop
participant stated that its approach ‘‘is
first, establish a basic level of ICS
service and what is included in that
basic service at no additional charge to
the customer. . . . Beyond that basic
level, the Commission will consider
fees.’’ The Alabama PSC participant
described its goal to be to ‘‘[m]ake the
rates a true reflection of cost for
providing the service.’’ Other
commenters support making a similar
distinction. For example, Pay Tel’s
President stated at the 2014 ICS
Workshop ‘‘what I characterize as
ancillary fees are all these extra things
that really should be incorporated into
the cost of the call. . . . [T]he fees that
should be separated are the ones that are
driven by consumer choice.’’ Securus
similarly proposed ‘‘not to have any
mandatory fees and to have only fees for
optional, convenience-related payment
methods.’’ The Minnesota Department
of Commerce stated that if an ancillary
charge applies ‘‘to all ICS end-users at
a facility, or cannot be avoided by a
purchaser of ICS (e.g., in a situation in
which a no-cost alternative is not
offered), the ancillary charge or lineitem fee should be incorporated in the
per-minute rate, and should be subject
to the per-minute rate cap.’’
89. We seek comment on prohibiting
separate ancillary charges for functions
that are typically a part of normal utility
overhead and should be included in the
rate for any basic ICS offering. These
functions should include account
establishment by check or bank account
debit; account maintenance; payment by
cash, check or money order; monthly
electronic account statements; account
closure; and refund of remaining
balances. Separate charges for such
ancillary services can often represent
unreasonable practices and result in
unfair compensation. For example, the
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record indicates that GTL currently
requires a minimum deposit of $25 to
create a prepaid collect account for an
inmate’s family member. If the customer
does not spend the $25 in the account,
GTL charges a $5 refund charge that is
only triggered once the customer asks
for a refund. If the account remains
inactive for 180 days, the remaining
funds become the property of GTL. We
seek comment on prohibiting separate
charges for these functions and on
whether separate charges for other
services should also be prohibited.
Would such prohibitions help ensure
just and reasonable ICS rates and fair,
not excessive, ICS compensation?
90. The Alabama PSC implemented
such an approach to the regulation of
ancillary charges in its Further Order. It
defined basic utility overhead services
as including account set-up, account
maintenance, account funding, payment
by check or money order, monthly
electronic billing statements, and
refunds, declining to authorize separate
fees for these services. The Alabama
PSC took other steps to address fees and
practices, including barring payment
limits for certain forms of customer
payments, barring wireless
administration fees for linking wireless
numbers to an account, and requiring
providers to include up to five preapproved numbers on the call list for
prepaid ICS at no charge. In contrast, it
authorized, but capped, separate
ancillary charges for other services,
including debit/credit card payment,
payment via live agent, bill processing
for collect calls billed by a call
recipient’s local telecommunications
service provider, third party payment
services, inmate canteen/trust fund
transfers, and paper billing statements.
We seek comment on whether the
Alabama PSC’s approach to prohibiting
certain fees and capping others is
reasonable and would lead to just and
reasonable rates and fair ICS
compensation. We also seek comment
on the approach taken by the New
Mexico Public Regulation Commission,
which adopted a similar but more
proscriptive approach, barring all fees
except payment processing fees for
credit card or check by phone payments
and a refund fee.
91. We seek comment on other
proposals in the record to reform ICS
ancillary charges. The Wright
Petitioners recommend prohibiting all
ancillary charges but, if the Commission
were to permit ancillary fees, it suggests
adopting an approach similar to
Alabama’s and New Mexico’s. The
Prison Policy Initiative recommends
‘‘ban[ning] all illegitimate fees.’’ Several
ICS providers also recommend
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reforming ancillary charges. Pay Tel
recommends that ancillary charges be
‘‘generally prohibited, subject to a
narrow list of clearly-defined
exemptions,’’ particularly ‘‘fees
associated with the processing of
payments.’’ CenturyLink suggests
similar treatment. Securus proposes
eliminating all mandatory fees, bill
statement fees, federal regulatory
recovery fees and state cost recovery
fees, and capping all convenience fees,
including transaction funding fees, for
five years.
92. We also seek comment on the
Joint Provider Reform Proposal, which
includes a proposal ‘‘that ancillary fees
are limited to a specified list of
permissible fees,’’ proposing to
eliminate a number of types of fees,
including per call fees, account set-up
fees, billing statement fees, account
close-out and refund fees, wireless
administration fees, voice biometrics
and other technology fees, and
regulatory assessment fees and the
capping of rates for remaining fees. The
Proposal also requires providers to offer
free payment processing options such as
payment by check or money order when
offering single call payment options.
The Alabama PSC raised concerns with
the Joint Proposal, including its
treatment of site commissions, proposed
rate caps that purportedly
overcompensate providers serving
prisons, and proposed ancillary fees that
it asserted would result in substantial
net revenue increases for providers. Pay
Tel also identified concerns with the
Proposal, stating that it ‘‘lacked
legitimacy from a number of
perspectives’’ and ‘‘would allow the
Proposers . . . to continue to burden
inmates and their friends and family
with excessive fees and practices that
significantly and unjustifiably increase
the cost of ICS.’’ The Alabama PSC’s
and Pay Tel’s concerns are addressed at
greater length below. Will the
suggestions in the Joint Provider Reform
Proposal result in just and reasonable
rates for consumers and fair, not
excessive, compensation? If the use of
ancillary charges was driven by pressure
from increasingly high site commissions
and the Commission were to prohibit
site commissions, is there continued
justification for allowing providers to
assess ancillary fees generally?
93. If the Commission were to
prohibit some ancillary charges, should
ICS providers be required to seek prior
Commission approval before assessing a
new ancillary charge? If so, what should
such an approval process involve and
what information should providers file?
Certain states already require prior
approval of new ancillary charges.
Should states continue to play such a
role even if the Commission regulates
ICS ancillary charges? In lieu of seeking
approval, should ICS providers file a
notice about a change such as 60 days
before? If we take this approach, should
the new fee be allowed to go into effect
absent Commission or a state action? We
seek comment on these approaches,
including the administrability and
relative burden associated with each
approach.
b. Rate Caps for Ancillary Charges
94. We seek further comment on
whether the Commission should set rate
caps for ancillary charges that it finds
permissible to ensure those charges are
just and reasonable and ensure fair
compensation. Commenters, including
some ICS providers, support the use of
rate caps. Some commenters note with
approval the Alabama PSC’s Further
Order that capped rates for ancillary
charges it allows. For example, the
Wright Petitioners support the use of
rate caps for ancillary charges if the
Commission decides to authorize them,
and cites with approval the two states
that already proposed taking such a
step. Would either the Alabama PSC’s or
the New Mexico PRC’s approaches to
capping ancillary charges be appropriate
models for the Commission to consider?
If the Commission were to establish rate
caps for ancillary charges it did not
prohibit, what would be appropriate
levels for such rate caps? We seek
comment specifically on the Alabama
PSC’s rate caps for debit and credit card
payment fees via the web, an IVR, or a
kiosk ($3.00 maximum) and for live
operator assisted payments ($5.95
maximum). NCIC and Pay Tel expressly
support ancillary charge rate caps at
these levels, as other ICS providers
reportedly have. How do these rate caps
compare to providers’ costs?
95. In the alternative, we seek
comment on whether we should
prohibit separate ancillary fees and
instead permit the recovery of such
costs using a per minute rate cap. The
data submitted by ICS providers on the
cost of processing financial transactions
yields a wide range of per-minute costs.
We seek comment on establishing a perminute ancillary charge rate cap or safe
harbors. If so, how should these charges
be set and what level is appropriate? If
so, what would permanent rate caps
inclusive of such charges be?
96. We also seek comment on the
Joint Provider Reform Proposal which
proposes to (1) cap deposit fees to fund
prepaid and debit ICS accounts at $7.95
for three years, (2) allow providers to
charge a $2.50 administrative fee to
process payments made through third
party payment processing companies
such as Western Union and MoneyGram
in addition to the fees they charge, (3)
allow providers to charge a per call
validation fee of eight percent to
compensate providers for call-specific
security functions, and (4) cap fees for
‘‘convenience or premium payment
options’’ for single call services at
current rates for three years. The
Alabama PSC generally opposes these
fee proposals. AmTel agrees and asserts
that the ‘‘Proposal is very misleading
and will not lower prices to inmate
families.’’ Pay Tel comments that the
consumer benefits of the proposed
ancillary fees’ ‘reduction’ are illusory.
For example, Pay Tel suggested that
‘‘[v]alidation is a legitimate expense, but
one that is included in Pay Tel’s normal
cost of providing service. In no event
does this expense rise to the level of 8%
of gross call revenue.’’ We seek
comment on whether these proposals
would ensure reasonable rates and fair
compensation. How do these proposed
caps compare with providers’ costs?
How do they compare with previous
proposals made by ICS providers?
97. The following table is provided as
a means of facilitating comparison of
several of the ancillary charge reform
proposals referenced herein. The fees
included in this table represent a nonexhaustive list of fees addressed in the
various proposals.
TABLE TWO
Ancillary charge proposals
Alabama PSC further order
Check/money order payment ........
Debit/credit card payment or deposit fees.
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ICS provider reform proposal
No charge .....................................
$3.00 cap (web/IVR) .....................
$5.95 cap (live operator) ..............
No charge .....................................
$7.95 cap for 3 years ...................
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Pay Tel proposal
No charge.
$3.00 cap (web/IVR).
$5.95 cap (live operator).
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TABLE TWO—Continued
Ancillary charge proposals
Alabama PSC further order
ICS provider reform proposal
Sum of $3.00 cap on bill processing fee plus capped per
minute charge for a 12 minute
call.
Prohibited ......................................
Cap at existing fees (as high as
$14.99 billed to card, $9.99
billed to cell phone) for 3 years.
Jails (ADP 1–349): $6.12.
Jails (ADP 350+): $5.64.
Prisons: Prohibit service.
Prohibited ......................................
Not addressed.
$3.00 cap ......................................
Not addressed ..............................
Not addressed.
Not addressed ..............................
Money transfer fees .......................
No charge for electronic bill. $2.00
cap for paper bill.
Fees above $5.95 require affidavit
and are subject to investigation.
Regulatory cost recovery fees .......
State regulatory cost recovery
fees prohibited.
No charge for electronic bill. $2.00
cap for paper bill.
$5.95 cap (Western Union).
$5.65 cap (MoneyGram).
No additional fee.
Not addressed (but pass through
government mandated taxes
and fees).
Security fees ..................................
Allow separate security biometrics
fee.
Single call/single payment services
Account set-up, maintenance, closure, and refund fees.
Bill processing fee for collect calls
(by call recipient’s carrier).
Bill statement fee ...........................
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c. Charges for Other Services
98. Single Call Services. ICS providers
also make available so-called single
payment or single call services. These
services enable the billing of ICS collect
calls through third party billing entities
on a call-by-call basis to parties whose
carriers refuse to bill collect calls. The
Alabama PSC addressed single call
services in its Further Order, asserting
jurisdiction over intrastate single call
services and capping the rates ICS
providers may charge for them. By some
accounts, the use of single call services
has increased dramatically, particularly
since the adoption of the Inmate Calling
Report and Order and FNPRM. One
commenter stated that such services
have recently been estimated to account
for as much as 40 percent of provider
revenues. We seek further comment on
the prevalence of the use of single call
services in the ICS industry. Have such
services become more prevalent in the
market since the Commission’s Order? If
so, why? Are such services effectively
an end run around the Commission’s
rate caps or are customers fully apprised
of the higher costs and select such
services for convenience or value? We
also seek comment on how significant a
role such services play in the ICS
market today and what usage trends for
such services are likely to be.
99. While ICS providers appear to
offer single call services under a variety
of names, they appear to be generally
two types. The first involves a one-time
credit or debit card payment to enable
the completion of a single collect call to
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Existing fees (as high as $11.95)
plus an additional administrative
fee capped at $2.50.
Various regulatory cost recovery
fees prohibited (but ‘‘federal
and state regulatory fees’’ allowed).
Validation fee of up to 8% per
call. Prohibited fees include
VINE, location validation fees,
voice biometrics fees, and technology fees.
a wireline phone. Examples of this type
of single call service include Securus’
‘‘Pay Now’’ and GTL’s ‘‘Collect2Card’’
services, both of which are priced at a
flat rate of $14.99 per call, substantially
higher than the Alabama PSC’s
proposed interim intrastate rate caps. A
second type of single call service
involves a similar payment arrangement
for the completion of a single collect
call to a wireless phone, the charge for
which is confirmed by a text message to
the called party’s wireless phone.
Examples of this type of single call
service include Securus’ ‘‘Text2Collect’’
and GTL’s ‘‘collect2phone’’ services,
both of which are priced at a flat rate of
$9.99 per call, also well above the
Alabama PSC’s intrastate rate caps, as
well as the Commission’s interstate rate
caps. Do charges for such services
circumvent or violate either set of rate
caps or are such services sufficiently
distinct from collect ICS to warrant
separate pricing? Both types of single
call services are charged on a flat rate
basis, regardless of call duration, further
distorting the effective per-minute
charge consumers pay and raising
concerns about multiple charges in the
case of inadvertent call disconnection.
Consumers using these services may be
unaware that they could dramatically
reduce the charges for ICS simply by
establishing an account with an ICS
provider. Some ICS providers have been
successful in educating consumers on
lower cost options. We seek comment
on whether these rates are just and
reasonable and whether they ensure fair
and not excessive compensation for
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$0.02 per minute voice biometric
fee (only where deployed; lower
in prisons).
Vendors may apply for new technology fees.
providers. We also seek comment on
whether ICS providers incur additional
costs in providing single call services,
and if so, what they are.
100. Providers have challenged the
Alabama PSC’s jurisdiction over both
types of single call services. In the case
of single call services to wireline
phones, ICS providers disputed the
Alabama PSC’s authority to regulate
such services, citing interference with
their contractual relationships with
third party billing and payment
processing entities which typically
contract with ICS providers to provide
the service. The Alabama PSC
characterized these entities as ‘‘third
party billing aggregators’’ which
performed the ‘‘the billing and delivery
functions for ICS calls.’’ We seek
comment on the nature of these services
and the types of functions such entities
provide. For example, do these third
parties perform functions analogous to
those performed by third party billing
entities used by local exchange carriers?
Do the third parties actually contribute
any facilities or services used to provide
these services? The Alabama PSC also
noted that ICS providers advertise and
provide these services in their own
name and bills refer consumers to an
ICS provider Web site. The Alabama
PSC determined that it had ‘‘jurisdiction
over the charges for collect calls
originating from Alabama confinement
facilities regardless of any
intermediaries the ICS provider chooses
to include prior to call termination.’’ We
seek comment on whether Commission
regulation of single call services would
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not impermissibly infringe on such
contractual relationships.
101. In the case of single call services
to wireless phones, ICS providers have
asserted that such services are not
subject to state commissions’ authority
since they entail the use of a text
message to confirm the source and
charges for the call and involve calls to
wireless phones, the rates for which are
not subject to state jurisdiction. We seek
comment on the concept that neither the
fact that such calls are preceded by a
text message nor the fact that the called
party uses a wireless phone alters the
nature of the ICS provided. If, however,
the Commission were to determine that
either of these factors is relevant to
determining the nature of the ICS, we
seek comment on whether the
Commission’s section 276 jurisdiction
over all forms of ICS give it authority to
regulate such services.
102. The Alabama PSC set a rate cap
for single call services at a flat rate
amount that included a billing or
payment charge capped at $3.00 per call
and a usage charge derived from its perminute rate caps. We seek comment on
this approach. Should the Commission
adopt a rate cap for single call services?
Should ICS providers be required to
charge a per-minute rate on the basis of
actual call duration? Should the rates
for such calls reflect the per-minute
charge for collect calls along with an
appropriate bill or payment processing
fee? Should there be a transition period
to allow providers to adapt their single
call service offerings? Are ICS providers
required to publish on their Web sites
their charges for single call services and
notify consumers of the option of
establishing an account to obtain a more
reasonable rate? Alternatively, should
these services be considered ancillary
services?
103. Money Transfer Services. The
FNPRM sought comment on fees
assessed by third parties such as
Western Union and MoneyGram to
process debit and prepaid account
payments for ICS. The Prison Policy
Initiative previously noted that third
party payment processing fees for the
provision of ICS are typically higher
than such fees in other industries and
suggested that ICS providers were
receiving compensation from such third
party service providers. We seek
comment, data and other evidence on
how prevalent the use of third party
money transfer services is and what
percent of account funding is
accomplished through such services.
We also seek comment on the Alabama
PSC Proposed Order which
acknowledges that money transfer ‘‘fees
are set by these financial services but
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[the PSC] is also aware that agents
hosting such services are paid a portion
of the fee.’’ The Alabama PSC Proposed
Order states that ‘‘ICS providers are
prohibited from receiving any portion of
fees paid by their customers to thirdparty financial services.’’ It also
proposed a rate cap of $5.95 per
transaction, above which providers
would face an investigation of their
rates and potential refund liability.
Similarly, CenturyLink suggests that
‘‘[c]ertain consumer-optional third party
fees such as Western Union charges
should be allowed, but without markups, revenue sharing arrangements or
volume rebates.’’ In contrast, the Joint
Provider Reform Proposal suggested
adding an additional administrative fee
of a maximum of $2.50 per transaction
on top of existing money transfer fees.
We seek further comment on these
proposals and on whether ICS
providers’ receipt of payments from
payment processing companies in
connection with their provision of ICS
represents an unreasonable practice
under section 201(b) or results in unfair
compensation under section 276.
104. We seek comment on how the
Commission should ensure that money
transfer service fees paid by ICS
consumers are just and reasonable and
represent fair compensation. Are money
transfer services ancillary services
under section 276(d)? Are they a
practice that causes unjust rates or
unfair compensation? Are such charges
encompassed by the definition of
‘‘ancillary charges’’ in the Commission’s
rules? To the extent they involve
charges placed by a third party on a call
recipients’ phone bill, are they
analogous to third party fees that are the
subject of our ‘‘cramming’’ rules? To
ensure just and reasonable rates and fair
compensation, should the Commission
prohibit ICS providers from entering
into revenue sharing arrangements with
money transfer services, receiving
payments from such services, or
including the costs of such services in
their rates? To enforce a similar
prohibition, the Alabama PSC proposes
to require ICS providers operating in the
state to report the payment transfer fees
third parties charge their customers. It
also proposes to require providers to
justify fees over $5.95, and subject such
fees to investigation and potential
refund liability. Should the Commission
adopt a similar enforcement
mechanism? Should it allow states to
enforce such a mechanism? What
impact would any such requirements
have on contracts between ICS
providers and third party money
transfer services? The Alabama PSC
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notes that, according to its research,
contracts between ICS providers and
Western Union may be cancelled on 30
days’ notice. It also notes that Western
Union contracts with providers include
a provision requiring vendor
compliance with all regulatory
requirements and laws. Do commenters’
experiences confirm the Alabama PSC’s
observations? Are there other
approaches to enforcement that the
Commission should consider?
105. Regulatory Recovery Fees.
Commenters have previously
highlighted ICS providers’ use of fees to
recover the cost of regulatory
compliance. The amount of such fees
industry-wide can be quite substantial.
The Alabama PSC noted that ‘‘[s]everal
ICS providers presently absorb
regulatory costs electing not to charge
consumers a separate recovery fee’’ and
barred separate intrastate regulatory
fees, stating that their rate caps were
‘‘sufficient to recover reasonable
regulatory costs incurred by the
provider.’’
106. A number of ICS providers have
also opposed the use of regulatory
recovery fees. The Joint Provider Reform
Proposal recommends eliminating
various types of regulatory recovery fees
and does not include such a fee among
the fees it proposes to retain. Pay Tel,
in its advocacy before the Alabama PSC,
stated ‘‘these expenses are a cost of
doing business reflected in the overall
average cost per minute. Pay Tel
supports the prohibition of such fees.’’
Securus proposes to eliminate its
Federal and State regulatory recovery
fees. We seek comment on whether the
cost of regulatory compliance should be
considered a normal cost of doing
business and as such should be
recovered through basic ICS rates, not
additional ancillary fees. In the
alternative, if the Commission permits
the separate recovery of regulatory fees,
should it require that they be broken out
as a line item on an ICS end users’
billing statement?
107. Security Fees. Some ICS
providers suggest that the Commission
allow fees to recover new security
technology expenses for correctional
institutions. The Joint Provider Reform
Proposal proposed the elimination of
three or four types of fees likely related
to security and the retention of a single
technology-related fee. However, as part
of its comprehensive proposal, Securus
suggests that providers be allowed to
charge ‘‘incremental product pricing
above rate caps if necessary’’ for ‘‘safety
and security features’’ and proposes
such charges ‘‘be filed with [the] FCC
for approval.’’
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108. We seek comment on whether
security costs represent a core function
in the provision of ICS, the costs of
which should be included in rates and
not as ancillary fees. The Commission’s
interim interstate rate caps were based
on ICS providers’ cost data that
included the costs incurred in
developing, deploying and provisioning
security features. The Order also
expressly accounted for the cost of
continuous voice biometrics in its debit
and prepaid rate cap it adopted. Pay
Tel’s Proposal suggests that a voice
biometric fee of $0.02 per minute be
applied to its proposed rates. If the
Commission were to allow providers to
assess customers separate ancillary
charges for such services, how would it
evaluate providers’ claims regarding the
need for such functions or their cost?
How would it ensure that ICS providers
were not recovering the cost of security
features twice—once through their rates
and again through an ancillary charge—
short of a full analysis of the provider’s
costs? If the Commission were to allow
separate fees to recover security costs,
should it require prior approval or 60
days’ notice for such charges?
d. Consumer Disclosures
109. We also seek comment on how
to ensure that rates and fees are more
transparent to consumers. We therefore
seek comment on the requirement that
ICS providers notify their customers
regarding the ICS options available to
them and the cost of those options. One
ICS provider underscores the
importance of ‘‘educating the consumer,
giving them the choice, what’s the most
economical way if they want to get
money on an account and do it
quickly.’’ The same provider states that
when it advertises on its Web site the
most economical way to fund ICS calls,
a substantial percent of its customer
base uses that method, reducing
consumer expense significantly. ICS
providers that offer interstate toll
service are already required to post their
rates on their Web sites and, to the
extent they offer inmate operator
services, their live agents are already
required to make certain notifications to
customers. Should providers’ Web sites,
automated IVRs, and live agents be
required to offer in a more prominent
fashion no-cost or lower-cost options
available to consumers before offering
other, higher-priced optional services?
To what extent would any such
regulation implicate the First
Amendment? Should the Commission
take other steps to ensure consumers are
aware of lower-priced service options?
110. The Joint Provider Reform
Proposal acknowledged existing
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requirements to publish ancillary fee
rates on providers’ Web sites and
offered a detailed proposal regarding
notification requirements for financial
transactions, including:
• The ICS provider shall fully inform
customers of all payment methods
available (including the no-charge
option), the payment processing charges
associated with each payment method,
and the estimated time required to
establish service applicable to each
payment option.
• The ICS provider shall clearly and
conspicuously identify the required
information. The information should be
presented clearly and prominently so
that it is actually noticed and
understood by the customer.
Æ The ICS provider shall provide a
brief, clear, non-misleading, plain
language description of the required
information. The description must be
sufficiently clear in presentation and
specific enough in content so that the
customer can accurately assess each of
the available payment methods.
Æ An ICS provider shall clearly and
conspicuously disclose any information
the customer may need to make
inquiries about the available payment
methods, such as a toll-free number,
email address, or Web site address by
which customers may inquire or dispute
any charges. An ICS provider shall
include any restrictions or limitation
applicable to each payment method
available.
In its proposal Pay Tel suggests that:
• Vendors must post facility-specific
rates and fees for all services, to be
visible to inmates on-site and to
consumers on the Vendor Web site prior
to setting up an account.
• Vendor Web sites must provide a
link to the FCC Enforcement Bureau
Web site and the applicable State
Regulatory Agency Web site.
• Posting/Notice Must Include:
Æ Call rates and transaction fees (at
time of call, printed material available at
facility, Automated IVR, Live Agent &
Web site).
Æ Refund instructions (Web site).
Æ Terms and conditions for service
(Web site).
Æ Cost information for calls, email
and messaging services, video visitation
and any other communication services
offered (Web site).
We seek comment on these proposals as
they relate to ICS financial transactions
and more generally to ICS practices in
general. We also seek comment on
alternative proposals to make rates and
fees more transparent to inmates, their
families, friends and other users of
inmate calling services.
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e. Other Issues
111. Some ICS providers impose
additional policies beyond their
assessment of ancillary fees that further
restrict consumers’ access to ICS. In
regard to such policies, CenturyLink
expresses the concern that ‘‘policies
such as funding minimums and
maximums, prepaid account refund
requirements, and account expiration
policies must be tightly controlled to
avoid gaming.’’ We seek comment on
whether we should prohibit ICS
providers from these and similar
practices that effectively limit end users’
ability to access and use ICS. What other
types of limiting practices should we
prohibit or restrict to preclude such
gaming?
112. GTL asserts that the
Commission’s Truth-in-Billing rules
give providers flexibility to recover their
costs either through rates or other line
item charges. The Minnesota
Department of Commerce asserts that
ancillary charges that exceed a
provider’s costs are inherently deceptive
and violate the Commission’s Truth-inBilling rules. We seek comment on
whether it would be necessary to
harmonize Commission regulation of
ICS ancillary charges with its Truth-inBilling rules. To the extent that such
fees are not commensurate with
providers’ costs, does existing precedent
support the view that those fees violate
the Truth-in-Billing rules, or should we
clarify that the fees are considered
misleading and a violation of the
Commission’s Truth-in-Billing rules,
unreasonable under section 201(b) or
unfairly compensatory under section
276? Should the Commission clarify
that pursuant to section 276, Truth-inBilling rules apply to all ICS providers,
including any that may claim they
provide VoIP services?
D. Additional Ways To Promote
Competition
113. Over the last 30 years, real
competition, as opposed to rate
regulation, has been the preferred
method to advance consumer
protection, lower rates, increase feature
and functionality of equipment and
services, reduce the government
involvement and costs, and improve the
overall consumer experience. To date,
however, correctional facilities
generally have not permitted
competition for consumers within the
ICS market.
114. As an alternative to the ideas
explored in this item to reduce inmate
calling rates, we continue to explore
whether the advent of competition
within the inmate facilities may provide
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a different course of action. The 2013
Inmate Calling Report and Order and
FNPRM sought comment on how to
promote competition within the
correctional facilities, but the
Commission received insufficient
information in response to the questions
posed, so we seek to provide more
targeted questions in order to solicit
further responses. Accordingly, we seek
further comment on ways to remove
barriers to entry and promote
competition in the ICS market. Aspects
of the current ICS market appear to
contribute to the market failure. One is
the practice of site commission
payments, and we seek comment above
on whether, and under what authority,
the Commission should restrict such
payments. Another is the fact that
correctional facilities award ICS
providers exclusive contracts and
therefore do not permit competition
within the facilities. The Commission
previously sought comment on the
impact of exclusive contracts and
whether they should be prohibited.
While some commenters opposed the
idea due to security and cost concerns,
another commenter suggested that the
Commission revisit whether those
concerns continue to justify exclusive
contracts in light of technological
advances. We seek additional comment
on these views. Moreover, some
commenters have questioned whether
facilities incur any additional costs for
the provision of ICS and we seek
comment above on quantifying these
costs. If facilities do not incur costs
when there is one provider, what
additional costs are incurred by
introducing multiple providers? We ask
commenters to specify and quantify any
additional costs.
115. We also seek comment on
whether there are other barriers and, if
so, what steps we should take to address
them and under what authority. For
example, are there ways to allow greater
competition within ICS without banning
exclusive contracts? Are providers
willing to compete on price, quality of
voice and/or video service, service
disruption and outage rates, and other
factors that would be applicable with
multiple providers? Would multiple
providers be willing to serve an inmate
facility if there is already an established
provider? What impact could new
technologies have on competition
within inmate facilities?
E. Harmonization of State Regulations
Under Section 276(c)
116. In this section, we seek comment
on how state reform of ICS may be
harmonized with any federal framework
we may adopt and on the continuing
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roles states should play in advancing
ICS reform. In the FNPRM, the
Commission ‘‘tentatively conclude[d]’’
that section 276 ‘‘affords the
Commission broad discretion to . . .
preempt inconsistent state
requirements.’’ In response, some
commenters opposed state preemption,
while others supported it as crucial to
the Commission’s reform efforts. While
we seek comment on whether it is
necessary to have a comprehensive
framework for interstate and intrastate
ICS, we nonetheless seek comment on
how consistent state regulation of ICS
could be harmonized with our
framework. For example, should we
establish guidelines regarding what a
state would have to do on ICS reform to
not be preempted? What would those
guidelines include? Should we include
reform of site commission payments,
rate caps, actions addressing state
prisons, as well as county or city jails?
117. We recognize the substantial ICS
reform already accomplished in a
handful of states such as Alabama, New
Jersey, New York, and New Mexico.
Such states have provided important
leadership in the effort to reform ICS. In
the FNPRM, the Commission
commended such states and
‘‘encourage[d] more states to eliminate
site commissions, adopt rate caps,
disallow or reduce per-call charges, or
take other steps to reform ICS rates.’’ In
her opening remarks at the 2014 ICS
Workshop, Commissioner Clyburn
urged states to ‘‘follow the FCC’s lead,
grab the baton, and enact their own
reforms.’’ Some states have taken steps
to advance ICS reform since the release
of the Order. New Jersey, for example,
has set lower rates for ICS. Alabama has
recently proposed comprehensive
regulation of intrastate ICS. However,
the vast majority of states have not taken
up our repeated calls for ICS reform. In
addition, states have inconsistently
addressed site commission payments.
For example, while the Order noted
seven states that had eliminated site
commissions for intrastate ICS, by
implication the vast majority have not.
We again encourage states to act on ICS
in their jurisdictions and note that state
action that is consistent with the
regulations that the Commission
ultimately adopts would not be subject
to preemption. We also recognize,
however, that most states either cannot
or will not act and the Commission
must adopt a nationwide framework to
apply in these states to ensure that ICS
rates are just, reasonable and fair.
118. We seek more focused comment
on section 276(c), which states in
reference to payphone regulation that
‘‘[t]o the extent that any State
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requirements are inconsistent with the
Commission’s regulations, the
Commission’s regulations on such
matters shall preempt such State
requirements.’’ We believe that the
Commission has broad discretion to find
that a particular state requirement, or
category of state requirements, is either
consistent or inconsistent with
Commission ICS regulations under
section 276(c). We also seek comment
on the whether preemption is selfeffectuating under section 276(c) and
will occur automatically as a
consequence of the inconsistency.
119. If preemption is not selfeffectuating, and there is no
Commission decision defining the scope
of any inconsistency between federal
and state requirements, how would
states and other parties know that a
particular state requirement had been
preempted because it was inconsistent
under section 276(c)? In the absence of
a prior Commission decision, should
any disputes regarding the
inconsistency of a state requirement be
resolved by the Commission on a caseby-case basis: e.g., through declaratory
ruling or the section 208 complaint
process? Are certain types of state
requirements inherently ‘‘inconsistent’’?
Other preemption provisions in Title II
of the Act require the Commission to
make certain decisions before a state
law can be preempted, whereas section
276(c) does not directly address the
issue.
120. Exemptions to Preemption. To
encourage states to reform ICS, the
FNPRM also sought comment on
possible exemptions to preemption,
asking whether ‘‘the Commission
[should] only take action to reform
intrastate ICS rates in states that have
not reformed rates to levels that are at
or below our interim safe harbor.’’ We
expand on this concept here. What
specific types of state actions to reform
ICS should the Commission interpret as
consistent with its regulations? Should,
for example, the Commission list
scenarios in which state regulations
would be presumed to be consistent
with the federal framework, such as
when states address site commissions
and reform ancillary charges? If so, what
should the Commission consider
‘‘reform’’ or ‘‘partial reform’’ in this
context? For example, we note that the
Alabama PSC proposes capping
ancillary fees but maintaining site
commission payments. If the state
regulates ICS rates in a manner that is
consistent with Commission
regulations, but regulates ancillary
services in a manner inconsistent with
Commission regulations, would all state
regulations be viewed as preempted, or
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would just the regulation of ancillary
services be treated as preempted? To the
extent the question would depend on
how the Commission crafts its
regulations, should the Commission
design them in a way that makes
inconsistency regarding one dimension
severable from consistency regarding
other dimensions? If so, how?
121. One FNPRM commenter suggests
a ‘‘cooperative federalism’’ approach
that would allow ‘‘states to regulate
intrastate rates provided that the
regulatory framework complies with the
core principles contained in the Order.’’
We seek further comment on this and
other approaches to harmonizing federal
and state ICS reform. Some states have
adopted laws that effectively require
intrastate ICS rates to be provided at
below-cost rates, with the difference
presumably to be recouped by charging
interstate rates that are set significantly
above costs. Would any such state laws
that require below-cost intrastate ICS
rates be consistent with a Commission
cap on intrastate ICS rates, even if the
state rate was more ‘‘aggressive’’ than
the Commission cap? For example, if
the Commission adopts a per-minute
cap on ICS rates, should states be free
to regulate the level of per-call and perminute charges for intrastate ICS so long
as the resulting charge for a call of a
particular duration is within the
Commission’s cap? Should states have
other flexibility as it relates to site
commission payments, ICS rates,
charges for ancillary services, or other
ICS regulation? If so, how can the
Commission craft its regulations so that
such state ICS reforms are interpreted as
being consistent with its regulations?
Should the Commission be concerned
that some state reform actions could
undercut the market-based approach
that we seek comment on herein? How
would the Commission then balance the
benefits of encouraging state reform
efforts with the need to ensure just and
reasonable rates and fair compensation
for ICS, as required by sections 201 and
276 of the Act?
122. If the Commission’s final ICS
rules are silent on certain issues (for
example, arguendo, quality of service
regulation), we seek comment on how
the Commission should interpret state
rules. Does the Commission have broad
authority to enforce section 276(c) on a
case-by-case basis even in situations
where it has not previously adopted an
applicable rule or provided relevant
guidance? If a state commission has an
active ICS proceeding, is it consistent
with section 276(c) to permit the state
commission a reasonable period of time
to complete its proceeding prior to a
Commission determination of whether
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such state reform is consistent with
Commission reform? What might
constitute such a reasonable period of
time?
F. Existing Contracts
123. Background. The Wright
Petitioners previously discussed the
possibility of a one-year fresh look
period, essentially a one-year period
during which existing ICS contracts may
be revised regardless of terms within the
contracts that may prohibit such action.
The Commission sought comment on
this proposal in the 2012 ICS NPRM.
124. In the Order, the Commission did
not directly override existing contracts
between correctional facilities and ICS
providers. Rather, the Commission
noted that if ‘‘any particular agreement
needs to be revisited or amended . . .
such result would only occur because
agreements cannot supersede the
Commission’s authority to ensure that
the rates paid by individuals who are
not parties to those agreements are fair,
just, and reasonable.’’ The Commission
acknowledged that ‘‘[t]o the extent that
the contracts contain ‘change of law’
provisions, those may well be triggered
by the Commission’s action today.’’
125. Discussion. We seek comment on
the implementation of the requirements
adopted in the Order and their impact,
if any, on ICS contracts. The record
indicates that the interim rates were
implemented with little to no contract
renegotiation. The record also indicates
that several ICS providers have
unilaterally made decisions about site
commission payments without initiating
contract renegotiations or cancellations.
Is this accurate? We seek comment on
any challenges associated with these
practices. To the extent that commenters
suggest alternatives to the regulatory
approaches discussed above that could
modify or otherwise affect existing
agreements, we seek comment on the
Commission’s authority to take such
action, why it should exercise such
authority, and how any modification or
other effect on existing agreements
should be implemented.
126. We seek comment on a transition
period for comprehensive ICS reform.
Given the transition that we seek
comment on herein, we seek comment
on whether we should retain the
approach in the Order and allow for
change-of-law provisions to govern
changes or whether we should take an
alternative approach with respect to
existing contracts. Should we allow for
a ‘‘fresh look’’ to enable providers to
renegotiate contracts or do most
contracts include change-in-law
provisions so a fresh look is not
warranted? If the Commission adopts a
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transition period for existing ICS
contracts, should it stagger the
transition period as previously
suggested by Telmate? Specifically,
Telmate suggests that ‘‘[s]taggering the
fresh look window among the many
thousands of ICS contracts nationwide
. . . [is] the only practical way to
harmonize the existence of long-term
contracts and the unreasonable burden
on smaller ICS providers in competing
for correctional facility business at
thousands of locations at the same time
nationwide.’’ If so, should the
Commission stagger any transition
period based on contract expiration
dates or some other metric?
127. Alternatively, we seek comment
on whether we should abrogate ICS
contracts or modify particular terms of
such contracts. Will abrogation of
contracts that are focused on site
commission payments better enable the
market-based approach described herein
to be implemented? In the Order the
Commission concluded that it has the
authority to abrogate or modify
contracts. We seek comment on our
legal authority to do so. In the
alternative, should the Commission
grandfather existing ICS contracts for
some period of time and then allow
them to expire? Given that ICS contracts
are often multiple years in duration, is
it consistent with the statute’s
requirement that ICS rates be just,
reasonable and fair if we allow such
rates to continue for an extended period
of time? Are there ways the Commission
could mitigate the possible
disadvantages of a grandfathering
approach? We seek comment on these
issues, including our legal authority for
each approach.
G. Transition Periods
128. In the Order, the Commission
delayed the effective date of the new
rules until 90 days following
publication in the Federal Register to
give parties ‘‘time to renegotiate
contracts or take other appropriate
steps.’’ The FNPRM sought further
comment on ‘‘how the Commission
should proceed in establishing ICS rates
for interstate and intrastate ICS.’’
Comments were mixed. Several
commenters requested that, if the
Commission takes further steps toward
ICS reform, it implement a transition
period ‘‘that is sufficiently long to
enable correctional facilities to revise
budgets and find replacement sources of
funding.’’ Conversely, one commenter
opined that rate changes pursuant to the
interim Order may have been
accomplished through a simple
notification letter from ICS providers to
correctional facilities.
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129. Discussion. The ICS providers
that submitted the Joint Provider Reform
Proposal suggest that ‘‘[t]he new rate
caps should become effective 90 days
after adoption, along with any site
commission reductions and ancillary fee
changes outlined below.’’ The providers
that submitted the Proposal assert that
‘‘[t]his period for implementation
should ensure ICS providers and
correctional facilities have adequate
time to implement the new rate caps
and any corresponding reductions in
site commissions, including any
contract amendments or adjustments
that may be necessary.’’ Pay Tel suggests
a 90-day, after final order publication
transition period for transaction fees,
third party money transfer service fees,
and ancillary fees and an 18-month
transition period for jail and prison rate
caps. Commenters advocating for a
transition to the new rate caps should
identify the appropriate transition and
the justification for doing so.
130. We seek comment on whether 90
days after the effective date of the order
is the appropriate transition to comply
with all new requirements, including
any rate caps, elimination of per-call
charges, and ancillary fee changes for
existing contracts. We also seek
comment on whether any new ICS
contracts entered into after adoption of
an ICS reform order must comply with
the terms of the order immediately after
the effective date of the order.
131. In addition, we seek comment on
a two-year transition period or at least
one state or state subdivision budget
cycle to transition away from site
commission payments to allow facilities
and states time to adjust. If we adopt a
cost recovery amount for facilities, how
should the transition be implemented in
a manner that does not delay
comprehensive reform? How would the
transition work if the Commission gave
a 90-day transition for rates to be at or
below the cap, while allowing two years
for site commissions to be eliminated?
Would a period of two years allow
sufficient time for correctional facilities
to prepare for forthcoming ICS reform
and its effect on their budgets? Or
should we consider a longer transition
such as a three year transition? Should
the transition be shorter to minimize the
potential for abuse? If so, should the
transition be one year, the same as the
90-day transition to rate caps, or
something else? The record suggests that
site commission payments make up less
than five-tenths of a percent of facilities’
operating budgets. Securus suggests that
site commissions should be completely
eliminated by January 1, 2016 and rate
reform should also be accomplished by
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that date. We seek comment on these
proposals.
132. If the Commission adopts a twoyear transition to the elimination of site
commission payments, how should the
payments be reduced? Should they be
reduced in equal increments over two
years, or should we align the reductions
to state or state subdivision budget
cycles? How have other states that
reduced or eliminated site commissions
implemented this change? Did they
adopt a transition plan or implement the
change immediately? We seek comment
on whether any new contracts that
include any potential cost recovery
payments to facilities and a ban on site
commissions that are entered into after
the adoption of the final order be
required to comply with the order.
Should there be exceptions to a
transition period based on whether
interstate or intrastate rates are already
below the prescribed rate level?
H. Accessible Inmate Calling Services
133. Our goal with ICS reform is to
ensure that ICS is accessible to all
inmates and their families at just and
reasonable rates that represent fair
compensation to ICS providers. Below,
we seek focused comment on several
disability access issues raised in the
Inmate Calling Report and Order and
FNPRM that merit further inquiry.
134. Background. In the Order, the
Commission highlighted the
telecommunications challenges faced by
inmates who are deaf and hard of
hearing, as well as by inmates
communicating with family members or
friends who are deaf and hard of
hearing, such as extremely high rates for
calls placed via the
Telecommunications Relay Service
(TRS). In the Order, the Commission
‘‘clarif[ied] that ICS providers may not
levy or collect an additional charge for
any form of’’ telecommunications relay
services (TRS) call because ‘‘such
charges would be inconsistent with
section 225 of the Act.’’ However, the
record indicates continuing problems,
such as, for example, ‘‘nearly half of
deaf inmates surveyed did not have
access to TTY at their facilities.’’
135. In the FNPRM, the Commission
sought comment on a number of
questions to ensure that ICS is
accessible. The Commission also
tentatively concluded that inmate
calling service rates per-minute for TTY
calls should be set at 25 percent of the
safe harbor rate for inmate calls, and
sought comment on this proposal. The
Commission sought comment on how
ICS providers should recover the costs
of providing such discounted TTY calls,
and on the possibility of allowing ICS
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providers to recover the cost of a TTY
call from the Telecommunications Relay
Service Fund. In the Joint Provider
Reform Proposal, the providers ‘‘commit
to continue to comply with their
existing obligations’’ under applicable
laws, and ‘‘also will work closely with
correction facilities ‘to ensure that deaf
and hard of hearing inmates are afforded
access to telecommunications that is
equivalent to the access available to
hearing inmates.’ ’’ Pay Tel’s Proposal
states that ‘‘ICS Vendors will work with
confinement facilities where requested
to enable video relay services,’’
‘‘[c]omply with all existing obligations
and laws regarding service people with
disabilities,’’ and ‘‘[r]equire that deaf
and hard of hearing inmates will have
full access to TDD/TTY services at no
additional charge.’’ We seek comment
on these proposals.
136. Discussion. In the Order, the
Commission noted commenters’ general
agreement with the Commission’s
statement in the 2012 ICS NPRM that
TTY-to-voice calls take at least three to
four times longer than voice-to-voice
conversations to deliver the same
conversational content, not including
the time it takes to connect to the
operator. In the FNPRM, the
Commission tentatively concluded that
ICS per-minute rates for TTY calls
should be set at 25 percent of the
interim safe harbor rate for standard ICS
calls, and sought comment on this
proposal. CenturyLink asserts that ‘‘a
discounted rate of 25% of the interstate
safe harbor rate for TTY calls . . . is far
too low. In CenturyLink’s experience,
TTY calls can take up to two times as
long as regular calls, not the three or
four times suggested by some
commenters.’’ HEARD, however, asserts
that the proposed discounted rate is
insufficient, as it ‘‘does not account for
varying literacy rates of deaf prisoners
many of whom use sign language as
their primary or only method of
communication.’’ HEARD urges a
greater discount, based on the assertion
that ‘‘prison TTY telephone calls are
typically at least six to eight times
longer than a hearing phone call.’’ We
seek specific comment on the actual
relative length of TTY-to-TTY and TTYto-voice calls as compared to voice-tovoice calls. Given the wide range of
assertions in the record, we request that
comments be backed by data on the
actual lengths of TTY-to-TTY, TTY-tovoice, and voice-to-voice conversations.
Commenters should describe the
methodology they used to collect the
information with specificity.
137. The Commission has observed
that, in implementing section 276 of the
Act, section 276(b)(1)(A) exempts TRS
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calls from the per-call compensation
requirement, and it requires payphone
service providers to provide free access
to connect to TRS. However, if the
outgoing portion of a TRS call is a long
distance call, a caller is required to pay
for that portion. Is it the case that no ICS
provider charges inmates for voice-toTTY or TTY-to-voice calls because the
‘‘interexchange company holding the
[state] TRS contract carries the call to
the called party?’’ If so, should final
reduced ICS per-minute rates for TTY
calls be applicable only to TTY-to-TTY
calls, as those calls are indistinguishable
from standard voice calls because the
inmate is dialing the called party
directly, using the called party’s
terminating phone number, and thus the
call data looks identical to the call data
from a typical voice call?
138. With respect to TTY-to-voice and
voice-to-TTY calls, we seek comment on
AT&T’s request for clarification that the
‘‘manner in which it handles operatorassisted collect calls from inmates via
TRS’’ is ‘‘subject to the rate
requirements set out in the order in WC
Docket No. 12–375.’’ AT&T describes
the issue as follows:
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Pursuant to contract with state authorities,
AT&T provides TRS service in eight states
plus the District of Columbia. Often times,
but not always, the TRS Communications
Assistant (CA) can see that the call has
originated from a detention facility. For
security, operator services practices limit
inmate calling to collect calls. Upon
receiving the call, the inmate can direct the
CA to forward the call to any interexchange
carrier on the carrier of choice list. The CA
in the states where AT&T provides the
service is an AT&T employee. If the inmate
selects AT&T as the IXC for the call, the CA
then functions as the operator service
provider and the called party will be charged
at the tariffed rate for the call, which is
higher than the rate cap for a collect call
specified in the ICS order. AT&T
interexchange collect calling toll services are
not limited to inmates only; anyone making
the same type of TRS collect call will be
treated and charged in the same manner.
139. Section 64.6000 of our rules
defines ICS as ‘‘the offering of interstate
calling capabilities from an Inmate
Telephone;’’ and Inmate Telephone as
‘‘a telephone instrument or other device
capable of initiating telephone calls set
aside by authorities of a correctional
institution for use by Inmates.’’ We seek
comment on whether AT&T and other
entities that provide TRS are providing
ICS for TRS calls placed by inmates. Is
it relevant that ‘‘TRS [communications]
assistants may place only [operator
assisted] collect calls on behalf of
inmates using TRS?’’ Would it be
relevant if inmates are not charged for
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calling TRS, but only for the long
distance component of a TRS call?
140. We seek further comment as to
whether the rates and charges levied for
operator-assisted collect calls from
inmates via TRS are subject to the rate
requirements set out in the Order. Does
the fact that an inmate ‘‘can direct the
CA to forward the call to any
interexchange carrier on the carrier of
choice list’’ indicate that the
interexchange portion of the call is no
longer ICS, and therefore not subject to
our rate requirements?
141. TTYs are only one form of
accessible equipment, and TTY relay is
only one form of TRS, and commenters
to the FNPRM, as well as some 2014 ICS
Workshop participants, decry
correctional facilities’ continued
reliance on TTY equipment, as well as
their failure to make newer equipment
technology such as videophones for
Video Relay Service (VRS) and point-topoint video communications, devices
for Internet Protocol Relay Service (IP
Relay) and Internet Protocol Captioned
Telephone Services (IP CTS), available
to inmates. We seek comment on the
availability of these technologies as well
as any other advanced technologies that
meet persons with disabilities
communication needs in correctional
facilities. Should all correctional
facilities be required to install a certain
type or types of equipment for inmates
with disabilities, such as videophone
equipment, IP CTS devices or other
assistive technologies? Should they do
so upon the request of an inmate with
a disability? We seek comment on our
authority to regulate correctional
facilities in this manner. If correctional
facilities are required to provide such
equipment, how should the facilities
recover the costs of purchasing and
installing the necessary equipment, and
how should ICS providers recover the
costs of the calls? In the alternative, are
ICS providers responsible for providing
any communications equipment needed
to meet the communications demands of
all inmates regardless of ability? How
would such a requirement fit into the
Commission’s section 225 authority? Do
ICS providers meet criteria as a common
carrier for offering telecommunications
relay service eligible for cost recovery
from the TRS Fund? Why or why not?
And, if not, is there a justification for
different treatment in this industry?
Will ICS providers or facilities incur
costs to install equipment for use by any
inmate with a disability? What is the
impact of such approaches on ICS
providers? Should providers be able to
recover any additional costs if they are
unable to do so through the TRS Fund?
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142. The Commission has imposed
differing registration requirements for
users of the various types of TRS. We
seek comment on how the
Commission’s evolving relay service
registration requirements can be met in
an institutional setting where more than
one user will be utilizing equipment.
We also seek comment about security
issues related to IP telephone
technologies, such as VRS, IP-captioned
telephone service, and IP Relay. Do
these types of advanced technologies
pose a security risk in a correctional
setting? If so, what is the nature of such
risk? Is the risk greater or lesser than
that associated with traditional
telecommunications and interconnected
VoIP services utilized by ICS providers?
143. What are just, reasonable and fair
per-minute rates for end users and ICS
providers for forms of TRS other than
traditional TTY TRS that will allow
service to be accessible to all inmates
regardless of ability? HRDC suggests
that, consistent with section 225 of the
Act, the rates for accessible
communications technology from
correctional facilities should be no more
than calls made from traditional
telephones. Would it be appropriate to
discount the per-minute rate for ICS
calls made using other accessible
equipment or other forms of TRS, such
as Speech to Speech relay services or
Captioned Telephone Service, as
previously proposed for TTY calls?
Would different rate setting
methodologies be appropriate given the
differing nature of TTY and other forms
of TRS?
144. TRS Reporting Requirements. In
the FNPRM the Commission asked
whether ICS providers should be
required to submit TRS usage data and
report on user complaints. Commenter
HEARD asserts that ‘‘nearly half of deaf
inmates surveyed did not have access to
TTY at their facilities’’ and suggests that
correctional facilities begin to track and
report to the Commission the number of
relay calls being made. We seek further
comment on this proposal. Should ICS
providers be required to report to the
Commission the number of disabilityrelated calls they provide, the number of
problems they experience with such
calls, or related complaints they
receive? Or should any such data
collection be more narrowly tailored as
suggested by the Federal Bureau of
Prisons? Should such data be part of the
periodic review we seek comment on
below?
I. Advanced Inmate Communications
Services
145. We seek comment on newer
technologies and services available for
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inmate communications. We believe
that our core goals for inmates and their
families remain the same regardless of
the technologies used—ensure
competition and continued widespread
deployment of ICS and the societal
benefits that they bring. We expect that
new technologies available in
correctional settings—like new
technologies available to consumers in
the general public—should offer
improvements and innovations that
benefit users and thus serve our goals
for ICS reform. In this section we seek
comment on these newer technologies,
on whether there are any pertinent
differences that justify any differences
in rules, and on the legal considerations
that may need to be addressed.
146. Background. In the FNPRM, the
Commission sought comment on ‘‘the
impact of technological advancements
on the ICS industry.’’ The Commission
also invited comment on the
Commission’s legal authority to regulate
the rates for services provided over
newer technologies. In response, Pay
Tel states that ‘‘[t]here is no question
that new technologies will continue to
emerge that will affect and improve
provision and quality of, and security
related to, ICS.’’ The Prison Policy
Initiative suggests that there are benefits
to advanced technologies in correctional
settings such as video visitation systems
(VVS), but cautions that there is ‘‘clear
evidence that the video communications
market is currently driven by the same
perverse incentives that caused market
failure in the correctional telephone
industry.’’
147. At the Commission’s 2014 ICS
Workshop, MeshIP discussed its ‘‘secure
prison cell phone solution that gives
detainees highly customized cell phones
with all the security and control features
of prison payphones.’’ JLG Technologies
described for the audience voice
biometrics technology, the second
generation of voice biometrics, known
as continuous voice identification, and
next generation voice biometrics
technology currently under
development. GTL believes the biggest
technological trends in inmate
communications will be access to wallmounted, multiservice kiosks, which
offer more frequent and better contacts
with the inmates’ families and friends
and then a shift to hand-held devices.
148. Discussion. We seek a greater
factual understanding of the availability
of these and other services. What kinds
of services are available? Are they
available commonly in most facilities,
or only in certain ones? What is the
demand for these services and what
rates and fees are charged? What
additional functionalities do they offer?
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Do they provide any greater benefits to
inmates, their families, or others, than
traditional services? What are ICS
providers’ rates for other services such
as email, voicemail or text messaging?
The record indicates that some ICS
providers offer tablet computers and
kiosks that allow inmates to access
games, music, educational tools, law
library tools and commissary ordering.
What is the compensation mechanism
for access to these offerings?
149. Are there additional costs to ICS
providers in developing, provisioning,
or offering these services? Participants
at the 2014 ICS Workshop suggest that
there are ‘‘huge challenges in
anticipating and funding costs
associated with developing,
implementing, and maintaining these
new systems and services.’’ GTL noted
that ICS providers bear the costs of the
‘‘development for the kiosk, to put that
device on the wall . . . to provide the
additional bandwidth, to develop and
do the software development research
for the applications that go in that
device, for the additional maintenance
and support to support the device once
it’s on the wall.’’ We seek comment on
the costs of these services in general. We
also seek comment on the rates and fees
charged for their use.
150. We seek comment on whether
there is a similar market failure for
service provided by new technology as
described above for existing ICS. For
instance, in response to evidence of
unreasonable rates, the Alabama PSC
capped VVS rates at $0.50 per minute
and VVS recorded message download at
‘‘$1.00 for the first minute and $0.50 for
each additional recorded minute.’’ Do
commenters consider these just and
reasonable rates and fair compensation
for VVS? We seek comment on Pay Tel’s
proposal that the Commission establish
a discrete mechanism by which
providers may seek approval for a
separate ancillary charge related to some
type of advanced technology. How
would such a charge function in the
context of the proposed reform of
ancillary charges discussed above?
Securus also suggests that the
Commission allow for ‘‘incremental
product pricing above rate caps if
necessary’’ for ‘‘[p]roduct [e]xceptions.’’
Is such a separate mechanism
necessary? If so, how do proponents of
such a mechanism suggest that it
function? Will advanced ICS
technologies continue to be developed
and deployed without a separate and
discrete recovery mechanism? Finally, if
the Commission were to adopt
regulations for advanced technologies
like video visitation and video calling,
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what is the best way to harmonize our
approach with that of the states?
151. In the Order, the Commission
found that the application of section 276
is not restricted to any one form of
communications technology and made
clear that reforms apply to ICS
regardless of technology used to
provision the service, such as IP-based
and TDM-based provisioning. Some ICS
providers are developing wireless
options. We therefore seek comment on
whether ICS provisioned through
wireless technology will also be subject
to any final reforms adopted by the
Commission under section 276. We also
seek comment on whether advanced
services like video visitation service and
video calling services constitute
‘‘inmate telephone service’’ within the
meaning of the term in section 276.
Given the technologically neutral nature
of section 276 and the fact that video
calling shares many of the attributes of
traditional ICS, including the fact that it
is a pay per use service involving real
time, two-way voice communications,
are these services ‘‘inmate telephone
service’’? Does the Commission’s
recognition of video relay service as a
reimbursable relay service under section
225 of the Act (defining the video
service as ‘‘functionally equivalent’’ to
traditional TRS) provide analogous
support for including video calling as an
inmate telephone service? To the extent
any communications services available
to inmates fall outside the statutory
definition of ‘‘inmate telephone
service,’’ what other sources of authority
provide the Commission with the ability
to ensure that rates are just and
reasonable? Could such services be
regulated pursuant to sections 201 and
202 to ensure the rates, charges, and
practices associated with those services
are just, reasonable, and not
unreasonably discriminatory? Could
regulation of these services be
supported through the use of the
Commission’s ancillary authority? For
example, the record shows that some
correctional institutions have
eliminated all in-person visitation and
replaced it with video visitation. What
if providers were to eliminate all
payphone calling in favor of video
calling and charged rates for those
services far in excess of the
Commission’s rate caps? Would such a
shift effectively void the section 276
requirement of fair compensation and
preclude the Commission from
discharging its statutory mandate?
J. Periodic Review
152. We seek comment on whether a
periodic review of how the reforms we
seek comment on above are impacting
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ICS rates, demand, ancillary charges and
site commission levels is essential to
ensure that our adopted reforms are
creating and maintaining the proper
incentives to drive end user rates to
competitive levels. We seek comment
on the benefits of establishing a periodic
review process.
153. In the Order the Commission
adopted an Annual Reporting and
Certification Requirement that included
the submission of interstate and
intrastate ICS rate and demand data as
well as the average duration of calls. In
the FNPRM the Commission sought
further comment on adjusting ICS rates
over time. In response, the Wright
Petitioners suggested that the
Commission ‘‘adopt rules to review the
interim rates no later than 180 days after
the ICS providers have submitted their
second round of data collected under
Section 64.6060 of the Commission’s
rules.’’
154. The ICS providers that signed on
to the Joint Provider Reform Proposal
suggest that ‘‘ICS providers should be
required to provide certain information
to the Commission annually for three (3)
years to ensure the caps on per-minute
rates and any admin-support payments
adopted are implemented as required.’’
Specifically, they suggest that ‘‘[s]uch
information should include a list of the
ICS provider’s current interstate and
intrastate per-minute ICS rates, the ICS
provider’s current fee amounts, the
locations where the ICS provider makes
admin-support payments, and the
amount of those admin-support
payments.’’ We seek comment on this
portion of the Proposal. In addition to
the information suggested by the ICS
providers, we suggest that providers
also be required to file demand and call
duration data. Finally, we seek
comment on whether any information
gathered for an annual review must be
certified as accurate by an officer of the
reporting company.
K. Enforcement
155. In the Order, the Commission
described its standard enforcement
authority as it relates to ICS. The
Commission also made clear, and we
remind interested parties, that the
Commission’s general section 208
complaint procedures apply.
156. The Commission also made clear
that penalties or failure to comply with
the Commission’s rules may result in
monetary forfeitures of up to ‘‘$160,000
for each violation or each day of a
continuing violation, up to a maximum
of $1,575,000 per continuing violation.’’
We seek comment on how to interpret
‘‘violation’’ for use in the ICS context in
light of the reforms discussed herein.
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For example, would each non-compliant
ICS rate charged by a provider be a
single violation? Would the continued
payment of site commissions to a
correctional facility constitute a single
violation? Would the imposition of one
ancillary charge over any cap or caps
ultimately adopted by the Commission
to one consumer constitute a single
violation?
157. Securus has urged the
Commission to require that the CEO,
CFO, and General Counsel of each ICS
provider all certify to the companies’
compliance with the Commission’s ICS
rules and regulations. In the Order, the
Commission also adopted an Annual
Reporting and Certification Requirement
that required ‘‘an officer or director of
each ICS provider annually to certify the
accuracy of the data and information in
the certification, and the provider’s
compliance with all portions of this
Order.’’ We note that this rule was
stayed by the D.C. Circuit so we have
not evaluated the effectiveness or
impact of such a certification. Should
the Commission adopt such a
requirement? How does such a
certification requirement function with
the proposed periodic review
requirement we seek comment on
above?
158. We seek comment on whether
states should continue to exercise
enforcement functions with respect to
any state requirements that are
consistent with the Commission’s
regulations. We seek comment on
whether states should continue to
exercise their enforcement functions
with respect to any final rules that the
Commission may adopt as part of
comprehensive ICS reform. Should the
Commission expressly allow states to
exercise such enforcement authority,
e.g., to be carried out through their
complaint resolution process, or some
other role in the oversight process of
state commissions? If the Commission
did so, what if any oversight role should
the Commission adopt with respect to
state proceedings involving the
enforcement of Commission rules?
Would our authority to provide for such
a state role apply regardless of whether
certain state laws have been found to be
inconsistent with any ICS rules
governing intrastate ICS?
L. Cost/Benefit Analysis of Proposals
159. Acknowledging the potential
difficulty of quantifying costs and
benefits, we seek to determine whether
each of the proposals above will provide
public benefits that outweigh their
costs. We also seek to maximize the net
benefits to the public from any
proposals we adopt. For example,
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commenters have argued that inmate
recidivism decreases with regular family
contact. This not only benefits the
public broadly by reducing crimes,
lessening the need for additional
correctional facilities and cutting overall
costs to society, but also likely has a
positive effect on the welfare of inmates’
children. On the other hand,
commenters have argued that
eliminating site commissions would
directly affect jail revenues and lead to
a reduction in recreational and
rehabilitation services provided to
inmates by facilities. Such a reduction
could produce its own wave of negative
aftereffects that offset some of the
purported benefits. Accordingly, we
seek specific comment on the costs and
benefits of the proposals above and any
additional proposals received in
response to this Second Further Notice.
We also seek any information or
analysis that would help us to quantify
these costs or benefits. We request that
interested parties discuss whether, how,
and by how much they will be impacted
in terms of costs and benefits of the
proposals included herein.
Additionally, we ask that parties
consider whether the above proposals
have multiplier effects beyond their
immediate impact that could affect their
interest or, more broadly, the public
interest. Further, we seek comment on
any considerations regarding the
manner in which the proposals could be
implemented that would increase the
number of people who benefit from
them, or otherwise increase their net
public benefit. We recognize that the
costs and benefits may vary based on
such factors as the correctional facility
served and the ICS provider. We request
that parties file specific analyses and
facts to support any claims of significant
costs or benefits associated with the
proposals herein.
IV. Procedural Matters
A. Filing Instructions
160. Pursuant to sections 1.415 and
1.419 of the Commission’s rules, 47 CFR
§§ 1.415, 1.419, interested parties may
file comments and reply comments on
or before the dates indicated on the first
page of this document. Comments may
be filed using the Commission’s
Electronic Comment Filing System
(ECFS). See Electronic Filing of
Documents in Rulemaking Proceedings,
63 FR 24121 (1998). Comments and
reply comments on this Second FNPRM
must be filed in WC Docket No. 12–375.
• Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://fjallfoss.fcc.
gov/ecfs2/.
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• Paper Filers: Parties who choose to
file by paper must file an original and
one copy of each filing. If more than one
docket or rulemaking number appears in
the caption of this proceeding, filers
must submit two additional copies for
each additional docket or rulemaking
number.
• Filings can be sent by hand or
messenger delivery, by commercial
overnight courier, or by first-class or
overnight U.S. Postal Service mail. All
filings must be addressed to the
Commission’s Secretary, Office of the
Secretary, Federal Communications
Commission.
• All hand-delivered or messengerdelivered paper filings for the
Commission’s Secretary must be
delivered to FCC Headquarters at 445
12th St. SW., Room TW–A325,
Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand
deliveries must be held together with
rubber bands or fasteners. Any
envelopes and boxes must be disposed
of before entering the building.
• Commercial overnight mail (other
than U.S. Postal Service Express Mail
and Priority Mail) must be sent to 9300
East Hampton Drive, Capitol Heights,
MD 20743.
• U.S. Postal Service first-class,
Express, and Priority mail must be
addressed to 445 12th Street SW.,
Washington, DC 20554.
People With Disabilities: To request
materials in accessible formats for
people with disabilities (Braille, large
print, electronic files, audio format),
send an email to fcc504@fcc.gov or call
the Consumer & Governmental Affairs
Bureau at 202–418–0530 (voice), 202–
418–0432 (tty).
B. Ex Parte Requirements
161. This proceeding shall be treated
as a ‘‘permit-but-disclose’’ proceeding in
accordance with the Commission’s ex
parte rules. Persons making ex parte
presentations must file a copy of any
written presentation or a memorandum
summarizing any oral presentation
within two business days after the
presentation (unless a different deadline
applicable to the Sunshine period
applies). Persons making oral ex parte
presentations are reminded that
memoranda summarizing the
presentation must (1) list all persons
attending or otherwise participating in
the meeting at which the ex parte
presentation was made, and (2)
summarize all data presented and
arguments made during the
presentation. Memoranda must contain
a summary of the substance of the ex
parte presentation and not merely a list
of the subjects discussed. More than a
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one or two sentence description of the
views arguments presented is generally
required. If the oral presentation
consisted in whole or in part of the
presentation of data or arguments
already reflected in the presenter’s
written comments, memoranda or other
filings in the proceeding, the presenter
may provide citations to such data or
arguments in his or her prior comments,
memoranda, or other filings (specifying
the relevant page and/or paragraph
numbers where such data or arguments
can be found) in lieu of summarizing
them in the memorandum. Documents
shown or given to Commission staff
during ex parte meetings are deemed to
be written ex parte presentations and
must be filed consistent with rule
1.1206(b). In proceedings governed by
rule 1.49(f) or for which the
Commission has made available a
method of electronic filing, written ex
parte presentations and memoranda
summarizing oral ex parte
presentations, and all attachments
thereto, must be filed through the
electronic comment filing system
available for that proceeding, and must
be filed in their native format (e.g., .doc,
.xml, .ppt, searchable .pdf). Participants
in this proceeding should familiarize
themselves with the Commission’s ex
parte rules.
C. Paperwork Reduction Act Analysis
162. This document does not contain
proposed information collection(s)
subject to the Paperwork Reduction Act
of 1995 (PRA), Public Law 104–13. In
addition, therefore, it does not contain
any new or modified information
collection burden for small business
concerns with fewer than 25 employees,
pursuant to the Small Business
Paperwork Relief Act of 2002, Public
Law 107–198, see 44 U.S.C. 3506(c)(4).
D. Initial Regulatory Flexibility Analysis
163. As required by the Regulatory
Flexibility Act of 1980 (RFA), the
Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA)
for this Second Further Notice, of the
possible significant economic impact on
small entities of the policies and rules
addressed in this document. The IRFA
is set forth as the Appendix. Written
public comments are requested on this
IRFA. Comments must be identified as
responses to the IRFA and must be filed
on or before the dates on the first page
of this Second Further Notice. The
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, will send a copy of
this Second Further Notice, including
the IRFA, to the Chief Counsel for
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Fmt 4701
Sfmt 4702
Advocacy of the Small Business
Administration (SBA).
V. Ordering Clauses
164. Accordingly, it is ordered that,
pursuant to sections 1, 2, 4(i)–(j), 201(b),
276, and 332 of the Communications
Act of 1934, as amended, 47 U.S.C. 151,
152, 154(i)–(j), 201(b), 276, and 332, this
Second Further Notice of Proposed
Rulemaking is adopted.
165. It is further ordered, that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Second Further Notice of Proposed
Rulemaking, including the Initial
Regulatory Flexibility Analysis, to the
Chief Counsel for Advocacy of the Small
Business Administration.
166. It is further ordered, that
pursuant to sections 1.4(b)(1) and
1.103(a) of the Commission’s rules, 47
CFR 1.4(b)(1) and 1.103(a), that this
Second Further Notice of Proposed
Rulemaking shall be effective 30 days
after publication of a summary thereof
in the Federal Register.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Appendix
Initial Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility
Act of 1980, as amended (RFA) the Federal
Communications Commission (Commission)
has prepared this Initial Regulatory
Flexibility Analysis (IRFA) of the possible
significant economic impact on a substantial
number of small entities by the policies and
rules proposed in this Second Further Notice
of Proposed Rulemaking (Second Further
Notice). Written comments are requested on
this IRFA. Comments must be identified as
responses to the IRFA and must be filed by
the deadlines for comments on the Second
Further Notice. The Commission will send a
copy of the Second Further Notice, including
this IRFA, to the Chief Counsel for Advocacy
of the Small Business Administration (SBA).
In addition, the Second Further Notice and
IRFA (or summaries thereof) will be
published in the Federal Register.
A. Need for, and Objectives of, the Notice
2. In today’s Second Further Notice the
Commission seeks comment on additional
measures it could take to ensure that
interstate and intrastate inmate calling
service (ICS) are provided consistent with the
statute and public interest and the
Commission’s authority to implement these
measures. The Commission believes that
additional action on ICS will help maintain
familial contacts stressed by confinement and
will better serve inmates with special needs
while still ensuring the critical security
needs of correctional facilities of various
sizes. Specifically, the Second Further Notice
seeks comment on:
• Limiting site commission payments;
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• Final interstate and intrastate ICS rate
cap reform;
• Limiting ancillary charges;
• Harmonizing inconsistent state
regulations pursuant to Section 276(c) of the
Communications Act of 1934, as amended;
• Treatment of existing ICS contracts;
• Appropriate transition period;
• Accessible inmate calling services;
• Advanced inmate communications
services;
• Periodic review of the industry;
• Enforcement; and
• Cost/Benefit analysis of proposals.
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B. Legal Basis
3. The legal basis for any action that may
be taken pursuant to the Second Further
Notice is contained in sections 1, 2, 4(i)–(j),
201(b) and 276 of the Communications Act
of 1934, as amended, 47 U.S.C. 151, 152,
154(i)–(j), 201(b) and 276.
C. Description and Estimate of the Number
of Small Entities to Which the Proposed
Rules Will Apply
4. The RFA directs agencies to provide a
description of, and where feasible, an
estimate of the number of small entities that
may be affected by the proposed rules, if
adopted. The RFA generally defines the term
‘‘small entity’’ as having the same meaning
as the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction.’’ In addition, the term ‘‘small
business’’ has the same meaning as the term
‘‘small-business concern’’ under the Small
Business Act. A ‘‘small-business concern’’ is
one which: (1) Is independently owned and
operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional
criteria established by the SBA.
5. Small Businesses. Nationwide, there are
a total of approximately 28.2 million small
businesses, according to the SBA.
6. Wired Telecommunications Carriers.
The SBA has developed a small business size
standard for Wired Telecommunications
Carriers, which consists of all such
companies having 1,500 or fewer employees.
According to Census Bureau data for 2007,
there were 3,188 firms in this category, total,
that operated for the entire year. Of this total,
3,144 firms had employment of 999 or fewer
employees, and 44 firms had employment of
1,000 employees or more. Thus, under this
size standard, the majority of firms can be
considered small.
7. Local Exchange Carriers (LECs). Neither
the Commission nor the SBA has developed
a size standard for small businesses
specifically applicable to local exchange
services. The closest applicable size standard
under SBA rules is for Wired
Telecommunications Carriers. Under that
size standard, such a business is small if it
has 1,500 or fewer employees. According to
Commission data, 1,307 carriers reported that
they were incumbent local exchange service
providers. Of these 1,307 carriers, an
estimated 1,006 have 1,500 or fewer
employees and 301 have more than 1,500
employees. Consequently, the Commission
estimates that most providers of local
exchange service are small entities that may
be affected by our action.
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8. Incumbent Local Exchange Carriers
(incumbent LECs). Neither the Commission
nor the SBA has developed a size standard
for small businesses specifically applicable to
incumbent local exchange services. The
closest applicable size standard under SBA
rules is for Wired Telecommunications
Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer
employees. According to Commission data,
1,307 carriers reported that they were
incumbent local exchange service providers.
Of these 1,307 carriers, an estimated 1,006
have 1,500 or fewer employees and 301 have
more than 1,500 employees. Consequently,
the Commission estimates that most
providers of incumbent local exchange
service are small businesses that may be
affected by our action.
9. We have included small incumbent
LECs in this present RFA analysis. As noted
above, a ‘‘small business’’ under the RFA is
one that, inter alia, meets the pertinent small
business size standard (e.g., a telephone
communications business having 1,500 or
fewer employees), and ‘‘is not dominant in
its field’’ of operation. The SBA’s Office of
Advocacy contends that, for RFA purposes,
small incumbent LECs are not dominant in
their field of operation because any such
dominance is not ‘‘national’’ in scope. We
have therefore included small incumbent
LECs in this RFA analysis, although we
emphasize that this RFA action has no effect
on Commission analyses and determinations
in other, non-RFA contexts.
10. Competitive Local Exchange Carriers
(competitive LECs), Competitive Access
Providers (CAPs), Shared-Tenant Service
Providers, and Other Local Service Providers.
Neither the Commission nor the SBA has
developed a small business size standard
specifically for these service providers. The
appropriate size standard under SBA rules is
for the category Wired Telecommunications
Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer
employees. According to Commission data,
1,442 carriers reported that they were
engaged in the provision of either
competitive local exchange services or
competitive access provider services. Of
these 1,442 carriers, an estimated 1,256 have
1,500 or fewer employees and 186 have more
than 1,500 employees. In addition, 17
carriers have reported that they are SharedTenant Service Providers, and all 17 are
estimated to have 1,500 or fewer employees.
In addition, 72 carriers have reported that
they are Other Local Service Providers. Of
the 72, 70 have 1,500 or fewer employees and
two have more than 1,500 employees.
Consequently, the Commission estimates that
most providers of competitive local exchange
service, competitive access providers,
Shared-Tenant Service Providers, and Other
Local Service Providers are small entities that
may be affected by our action.
11. Interexchange Carriers (IXCs). Neither
the Commission nor the SBA has developed
a size standard for small businesses
specifically applicable to interexchange
services. The closest applicable size standard
under SBA rules is for Wired
Telecommunications Carriers. Under that
size standard, such a business is small if it
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Fmt 4701
Sfmt 4702
69707
has 1,500 or fewer employees. According to
Commission data, 359 companies reported
that their primary telecommunications
service activity was the provision of
interexchange services. Of these 359
companies, an estimated 317 have 1,500 or
fewer employees and 42 have more than
1,500 employees. Consequently, the
Commission estimates that the majority of
interexchange service providers are small
entities that may be affected by our action.
12. Local Resellers. The SBA has
developed a small business size standard for
the category of Telecommunications
Resellers. Under that size standard, such a
business is small if it has 1,500 or fewer
employees. According to Commission data,
213 carriers have reported that they are
engaged in the provision of local resale
services. Of these, an estimated 211 have
1,500 or fewer employees and two have more
than 1,500 employees. Consequently, the
Commission estimates that the majority of
local resellers are small entities that may be
affected by our action.
13. Toll Resellers. The SBA has developed
a small business size standard for the
category of Telecommunications Resellers.
Under that size standard, such a business is
small if it has 1,500 or fewer employees.
According to Commission data, 881 carriers
have reported that they are engaged in the
provision of toll resale services. Of these, an
estimated 857 have 1,500 or fewer employees
and 24 have more than 1,500 employees.
Consequently, the Commission estimates that
the majority of toll resellers are small entities
that may be affected by our action.
14. Other Toll Carriers. Neither the
Commission nor the SBA has developed a
size standard for small businesses
specifically applicable to Other Toll Carriers.
This category includes toll carriers that do
not fall within the categories of
interexchange carriers, operator service
providers, prepaid calling card providers,
satellite service carriers, or toll resellers. The
closest applicable size standard under SBA
rules is for Wired Telecommunications
Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer
employees. According to Commission data,
284 companies reported that their primary
telecommunications service activity was the
provision of other toll carriage. Of these, an
estimated 279 have 1,500 or fewer employees
and five have more than 1,500 employees.
Consequently, the Commission estimates that
most Other Toll Carriers are small entities
that may be affected by our action.
15. Payphone Service Providers (PSPs).
Neither the Commission nor the SBA has
developed a small business size standard
specifically for payphone services providers.
The appropriate size standard under SBA
rules is for the category Wired
Telecommunications Carriers. Under that
size standard, such a business is small if it
has 1,500 or fewer employees. According to
Commission data, 535 carriers have reported
that they are engaged in the provision of
payphone services. Of these, an estimated
531 have 1,500 or fewer employees and four
have more than 1,500 employees.
Consequently, the Commission estimates that
the majority of payphone service providers
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are small entities that may be affected by our
action.
D. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements for Small Entities
16. In this Second Further Notice, the
Commission seeks public comment on
options to reform the inmate calling service
market. Possible new rules could affect all
ICS providers, including small entities. In
proposing these reforms, the Commission
seeks comment on various options discussed
and additional options for reforming the ICS
market.
mstockstill on DSK4VPTVN1PROD with PROPOSALS3
E. Steps Taken To Minimize the Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
17. The RFA requires an agency to describe
any significant, specifically small business,
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19:17 Nov 20, 2014
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alternatives that it has considered in reaching
its proposed approach, which may include
the following four alternatives (among
others): ‘‘(1) the establishment of differing
compliance or reporting requirements or
timetables that take into account the
resources available to small entities; (2) the
clarification, consolidation, or simplification
of compliance and reporting requirements
under the rules for such small entities; (3) the
use of performance rather than design
standards; and (4) an exemption from
coverage of the rule, or any part thereof, for
such small entities.’’
18. The Second Further Notice seeks
comment from all interested parties. The
Commission is aware that some of the
proposals under consideration may impact
small entities. Small entities are encouraged
to bring to the Commission’s attention any
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specific concerns they may have with the
proposals outlined in the Second Further
Notice.
19. The Commission expects to consider
the economic impact on small entities, as
identified in comments filed in response to
the Second Further Notice, in reaching its
final conclusions and taking action in this
proceeding. Specifically, the Commission
will conduct a cost/benefit analysis as part of
this Second Further Notice and consider the
public benefits of any such requirements it
might adopt, to ensure that they outweigh
their impacts on small businesses.
F. Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed Rules
20. None.
[FR Doc. 2014–26922 Filed 11–20–14; 8:45 am]
BILLING CODE 6712–01–P
E:\FR\FM\21NOP3.SGM
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Agencies
[Federal Register Volume 79, Number 225 (Friday, November 21, 2014)]
[Proposed Rules]
[Pages 69681-69708]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26922]
[[Page 69681]]
Vol. 79
Friday,
No. 225
November 21, 2014
Part III
Federal Communications Commission
-----------------------------------------------------------------------
47 CFR Part 64
Rates for Interstate Inmate Calling Services; Second Further Notice of
Proposed Rulemaking; Proposed Rule
Federal Register / Vol. 79 , No. 225 / Friday, November 21, 2014 /
Proposed Rules
[[Page 69682]]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 64
[WCB: WC Docket No. 12-375; FCC 14-158]
Rates for Interstate Inmate Calling Services; Second Further
Notice of Proposed Rulemaking
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Commission seeks comment on additional
measures it could take to ensure that interstate and intrastate inmate
calling services are provided consistent with the statute and the
public interest and the Commission's authority to implement these
measures. The Commission believes that additional action on inmate
calling service will help maintain familial contacts stressed by
confinement while still ensuring the critical security needs of
correction facilities of various sizes.
DATES: Comments are due on or before January 5, 2015. Reply comments
are due on or before January 20, 2015.
ADDRESSES: You may submit comments, identified by WC Docket 12-375, by
any of the following methods:
[ssquf] Federal Communications Commission's Web site: https://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting
comments.
[ssquf] People With Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
For detailed instructions for submitting comments and additional
information on the rulemaking process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: Lynne Engledow, Pricing Policy
Division, Wireline Competition Bureau, 202-418-1520 or
Lynne.Engledow@fcc.gov.
SUPPLEMENTARY INFORMATION: Pursuant to sections 1.415 and 1.419 of the
Commission's rules, 47 CFR 1.415, 1.419, interested parties may file
comments and reply comments on or before the dates indicated on the
first page of this document. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS). See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
[ssquf] Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
[ssquf] Paper Filers: Parties who choose to file by paper must file
an original and one copy of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by commercial
overnight courier, or by first-class or overnight U.S. Postal Service
mail. All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission.
[ssquf] All hand-delivered or messenger-delivered paper filings for
the Commission's Secretary must be delivered to FCC Headquarters at 445
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with
rubber bands or fasteners. Any envelopes and boxes must be disposed of
before entering the building.
[ssquf] Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
[ssquf] U.S. Postal Service first-class, Express, and Priority mail
must be addressed to 445 12th Street SW., Washington, DC 20554.
People With Disabilities: To request materials in accessible
formats for people with disabilities (braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
This is a summary of the Commission's Second Further Notice of
Proposed Rulemaking released on October 23, 2014. This document does
not contain information collection(s) subject to the Paperwork
Reduction Act of 1995 (PRA), Public Law 104-13. In addition, therefore,
it does not contain any new or modified ``information collection burden
for small business concerns with fewer than 25 employees,'' pursuant to
the Small Business Paperwork Relief Act of 2002. A full text of this
document is available at the following Internet address: https://www.fcc.gov/document/fcc-continues-push-rein-high-cost-inmate-calling-0. The complete text may be purchased from Best Copy and Printing,
Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554. Public
and agency comments are due January 5, 2015.
I. Introduction
1. In 2013, nearly ten years after Martha Wright, a grandmother
from Washington, DC, petitioned the Federal Communications Commission
(Commission or FCC) for relief from exorbitant long-distance calling
rates from correctional facilities, the Commission took long overdue
steps to provide relief to the millions of Americans paying unjust and
unreasonable interstate inmate phone rates. These exorbitantly high
rates discouraged phone calls and, at times, made it nearly impossible
for inmates to maintain contact with their families, friends and
communities, to society's detriment.
2. Reforming inmate calling service (ICS) benefits society by
making it easier for inmates to stay connected to their families and
friends. An April 2014 report from the Department of Justice found
that, of the 400,000 prisoners released over a five-year period, two-
thirds were rearrested within three years, and three-quarters were
rearrested within five years. As a nation, we need to take all actions
possible to reduce these recidivism rates. Studies have shown that
family contact during incarceration is associated with lower recidivism
rates. Lower recidivism means fewer crimes, decreases the need for
additional correctional facilities, and reduces the overall costs to
society. Reform also helps families and the estimated 2.7 million
children of incarcerated parents in our nation, an especially
vulnerable part of our society. In addition to coping with the anxiety
associated with a parent who is not present on a daily basis, these
young people are often suffering severe economic and personal hardships
and are often doing poorly in school, all of which are exacerbated by
the inability to maintain contact with their incarcerated parent due to
unaffordable inmate calling rates.
3. While the Commission prefers to promote competition to ensure
rates are just and reasonable, it remains clear that in the inmate
calling service market, as currently structured, competition is failing
to do so. Evidence in the record indicates that, as of 2013, interstate
ICS rates with comparable security features and protections varied from
as low as $0.046 per minute to as high as $0.89 per minute, plus a per
call charge as high as $3.95. Even worse, rates are as high as $2.26
per minute for a call placed by a deaf or hard of hearing prisoner.
Excessive rates are primarily caused by the widespread use of site
[[Page 69683]]
commission payments--fees paid by ICS providers to correctional
facilities or departments of corrections to win the exclusive right to
provide inmate calling service at a facility. These site commission
payments, which have recently been as high as 96% of gross revenues,
inflate rates and fees, as ICS providers must increase rates in order
to pay the site commissions. This forces inmates and their friends and
families, who use ICS and are forced to absorb the site commissions in
the rates they pay, to subsidize everything from inmate welfare
programs, to salaries and benefits of correctional facilities, states'
general revenue funds, and personnel training. The ICS market has been
characterized by some as subject to ``reverse competition,'' forcing
providers to compete not on price or service quality but on the size of
site commission payments--a dynamic that drives rates ever higher to
cover greater and greater site commission payments.
4. The 2013 Inmate Calling Report and Order and FNPRM tackled these
issues for the first time and took important initial steps for reform.
The Order adopted a cost-based approach with interim interstate rate
caps and a Mandatory Data Collection to allow the Commission to
evaluate ICS costs, including ancillary charge costs, in order to
develop reforms such as permanent rate caps and to address the use of
ancillary charges not reasonably related to the cost of providing
service. With regard to site commission payments, the Order reaffirmed
the Commission's previous holding that site commission payments are an
apportionment of profit. The Order also determined that site commission
payments and other provider expenditures not reasonably related to the
provision of interstate ICS are not recoverable through ICS rates.
5. Although the rate caps adopted in the Order were interim in
nature pending results of the Mandatory Data Collection, the reforms
have already had a significant impact on contact between inmates and
their families. Evidence indicates that as interstate rates have
declined, there has been a corresponding increase in call volumes. For
example, one provider indicates that, as a result of the Commissions'
reforms, its interstate ICS rates declined 39 percent and interstate
call volumes increased 20 to 30 percent. Praeses reports that it
tracked interstate ICS call volume for its clients and that in
comparing a four-month period prior to the Inmate Calling Report and
Order and FNPRM with another period one year later, post-adoption,
``call volume increased nearly seventy percent.'' But interstate rates
are only part of the ICS market. Although the Order set a framework for
states to follow, few have done so. Many intrastate rates remain high,
with some having even increased following the Order. There are
indications that ancillary fees have also increased in number, price,
or both, leading to further expense for ICS consumers in a manner that
is often unrelated to the cost of providing ICS. These developments
underscore the critical need for the Commission to move expeditiously
to adopt comprehensive, permanent reforms.
6. The Commission was unable to adopt comprehensive reform in the
Inmate Calling Report and Order and FNPRM due to the limited data in
the record and administrative notice limited only to interstate ICS.
Because we seek comment on a comprehensive solution--rather than just
reforming interstate rates--we seek comment on moving to a market-based
approach to encourage competition in order to reduce rates to just and
reasonable levels and to ensure fair but not excessive ICS
compensation. This approach was not feasible when the Commission
previously addressed interstate rates because new intrastate rates and
fees could circumvent such efforts. We therefore initiate this Second
Further Notice of Proposed Rulemaking (Second Further Notice) to
develop a record to adopt comprehensive, permanent ICS reforms as
expeditiously as possible. In this item, we seek comment on adopting a
simplified, market-based approach focused on aligning the interests of
ICS providers and facilities to deliver high quality ICS with advanced
security features at the lowest prices for end users. We seek comment
on whether such an approach will significantly limit competitive
distortions in the ICS marketplace. We seek comment on the Commission's
legal authority regarding site commissions and ask whether such
payments should be prohibited. We seek comment on whether facilities
incur costs in the provision of ICS and, if so, how facilities should
recover these costs, as well as appropriate transition periods to
enable facilities time to adjust. We seek comment on proposals in the
record to establish permanent rate caps for all intrastate and
interstate calls, limit ancillary charges, and adopt other measures to
ensure that ICS rates are just, reasonable, fair, and accessible to all
Americans. We believe that this market-based approach is only possible
through a comprehensive reform effort dealing with all of the major
portions of the ICS market, unlike when the Commission addressed only
interstate ICS in the Inmate Calling Report and Order and FNPRM. We
seek comment on alternative ways to promote competition in the ICS
market. We seek comment on whether eliminating site commissions and
capping rates and fees, on both interstate and intrastate ICS, better
aligns the interests of both ICS providers and correctional
institutions with the interests of consumers, allowing market forces to
drive rates to competitive levels.
II. Background
7. In 2003, Mrs. Wright and her fellow petitioners (Wright
Petitioners or Petitioners), who included current and former inmates at
Corrections Corporations of America-run confinement facilities, filed a
petition with the Commission seeking to initiate a rulemaking to
address high long-distance ICS rates. The petition sought to prohibit
exclusive ICS contracts and collect-call-only restrictions in
correctional facilities. In 2007, the same petitioners filed an
alternative rulemaking petition, asking the Commission to address high
ICS rates by requiring a debit-calling option in correctional
facilities, prohibiting per-call charges, and establishing rate caps
for interstate, interexchange ICS. The Commission sought and received
comment on both petitions.
8. In December 2012, the Commission adopted a notice of proposed
rulemaking seeking comment on, among other things, the proposals in the
Wright petitions. The 2012 ICS NPRM sought comment on the two petitions
and proposed ways to ``balance the goal of ensuring reasonable ICS
rates for end users with the security concerns and expense inherent to
ICS within the statutory guidelines of sections 201(b) and 276 of the
Act.'' The 2012 ICS NPRM sought comment on other issues affecting the
ICS market, including possible rate caps for interstate ICS; ancillary
charges; data in the record; collect, debit, and prepaid ICS calling
options; site commissions; issues regarding disability access; and the
Commission's statutory authority to regulate ICS.
9. On August 9, 2013, the Commission adopted the Inmate Calling
Report and Order and FNPRM, finding that interstate ICS rates were not
just and reasonable as required by section 201 of the Act, and did not
ensure fair, and not excessive, compensation for ICS providers as
required by section 276 of the Act. In response, the Commission adopted
reforms to ensure interstate rates were just, reasonable, and fair as
required by Sections 201 and 276 and
[[Page 69684]]
focused on reforming interstate site commission payments, rates, and
ancillary charges. The Commission concluded that, in the absence of
competitive pressures, the default of cost-based regulation should
apply to the ICS market. As discussed in the Order, this approach is
consistent with Commission practice that ``typically focuses on the
costs of providing the underlying service when ensuring that rates for
service are just and reasonable under section 201(b).'' In addition,
the Commission noted that ``the cost of providing payphone service
generally has been a key point of reference when [it] evaluates rules
implementing the fair compensation requirements of section
276(b)(1)(A).''
10. The Commission reaffirmed previous findings that site
commission payments were not costs but ``profit.'' As a result, the
Commission determined that site commission payments ``were not part of
the cost of providing ICS and therefore not compensable in interstate
ICS rates'' The Commission's previous request for ``updated data from
all interested parties and the public, but especially from ICS
providers . . . to aid . . . in developing a clearer understanding of
the ICS market,'' went largely unheeded. Therefore, the Commission
analyzed the limited data submitted by ICS providers, in addition to
publicly-available data, to establish interim per-minute interstate ICS
safe harbor caps of $0.12 and $0.14 and hard rate caps of $0.21 for
debit and prepaid calls and $0.25 for collect calls to ensure that all
rates were reduced, and provided guidance about the waiver process for
ICS providers that could show good cause. The Commission also required
that ancillary charges be cost based. Finally, the Commission chose not
to address intrastate ICS, noting instead that it had ``structured [its
reforms] in a manner to encourage . . . states to undertake reform.''
It noted, however, that in the absence of state reform of intrastate
ICS, unreasonably high rates would likely continue, which would require
the Commission to ``take action to reform unfair intrastate ICS
rates.''
11. The changes to interstate rates adopted by the Commission were
significant but interim. To enable the Commission to adopt permanent
ICS reform, the Commission adopted a Mandatory Data Collection for ICS
providers to report costs and an Annual Reporting and Certification
Requirement of ICS rates. In the FNPRM the Commission sought specific
comment on multiple aspects of permanent ICS reform regardless of
jurisdiction or call type.
12. Prior to the effective date of the Order, the DC Circuit stayed
three rules adopted by the Commission pending resolution of the appeal,
including the rule requiring rates to be based on costs, the rule
adopting an interim safe harbor, and the rule requiring ICS providers
to file annual reports and certifications. The court allowed other
aspects of the Order to take effect, including the interim interstate
rate caps.
13. Since the adoption of the Order, the Commission has continued
to monitor the effect of its reforms on the ICS industry and pursue
additional reform, including holding a workshop entitled ``Further
Reform of Inmate Calling Services'' on July 9, 2014. The workshop
evaluated options for additional ICS reforms, discussed the effects of
the Order, the role ancillary charges play in the ICS market, the
provision of ICS at different types of facilities, and communications
technologies beyond traditional payphone calling being deployed in
correctional facilities.
14. On June 11, 2014, the Commission received approval for its
Mandatory Data Collection from the Office of Management and Budget,
and, after publication in the Federal Register, announced in a Public
Notice that data responses were due on July 12, 2014, a date which was
subsequently extended until August 18, 2014. In response, the
Commission received significant cost and operational data, including
ancillary charge cost data, from the following ICS providers: ATN,
CenturyLink, Combined Public Communications, Correct Solutions, Custom
Teleconnect, Encartele, GTL, Lattice, ICSolutions, NCIC, Pay Tel
Communications, Protocall, Securus, and Telmate. Collectively, these
providers represent the vast majority, well over 85 percent, of the ICS
market. In this Second Further Notice, we seek comment on these data,
including some reporting and cost allocation inconsistencies among the
providers. We seek comment on these issues and generally on the data
received as we propose to move forward and adopt permanent interstate
and intrastate ICS reform.
15. Proposals for Reform in the Record. Since the Order, we have
received several proposals in the record urging comprehensive ICS
reform. On September 15, 2014, GTL, Securus, and Telmate, who claim to
be ``the primary providers of inmate calling services . . . in the
United States and representing 85% of the industry revenue in 2013,''
jointly filed a proposal to comprehensively reform all aspects of ICS.
First, the Joint Provider Reform Proposal urges the adoption of rate
caps of $0.20 per minute for debit and prepaid interstate and
intrastate ICS, and $0.24 per minute for all interstate and intrastate
collect ICS, effective 90 days after adoption of a final order. The
Joint Provider Reform Proposal supports ``reductions in site commission
payments'' but does not specify exactly what such reductions would
entail. The Proposal suggests the prohibition of ``in-kind payments,
exchanges, technology allowances, administrative, fees,'' or anything
``not directly related to, or integrated with, the provision of ICS.''
These three ICS providers contend that the Commission does not have
authority over ``ancillary fees for transactions other than the
provision of ICS'' but propose to eliminate some ancillary fees, limit
allowable ancillary fees to those specified in the document, and cap
other ancillary fees. Finally, these three ICS providers ``commit to
continue to comply with their existing obligations'' under the
Americans with Disabilities Act and other statutes for inmates with
disabilities, and suggest that the Commission require officers of ICS
providers to certify compliance with all adopted rules under penalty of
perjury. GTL, a signatory of the Proposal, later characterized the
Proposal as ``part of a new framework that is designed to respond to
market forces'' and noted that ``[t]he proposed rates and fees are
caps, which can vary by contract based on the correctional facility
needs and the bidding process.''
16. In addition to the Joint Provider Reform Proposal, several
individual ICS providers also submitted proposals for reform.
CenturyLink asserts that it could ``support a unified cap approximately
at the current interstate cap levels,'' which would apply ``for both
interstate and intrastate calls, with an additional allowance for
collect calling.'' CenturyLink supports a prohibition on ``all or all
but a very narrow class of ancillary fees.'' CenturyLink also asserts
that the Commission should ``allow reasonable commissions or
administrative fees,'' exempt from regulation high-cost facilities such
as secure mental health facilities, and grandfather existing contracts.
Pay Tel also submitted a proposal for reform, which it characterizes as
a ``comprehensive solution to ICS reform that attempts to be fair to
all affected parties, including inmates and their families, facilities,
and vendors.'' Pay Tel's Proposal suggests ``postalized'' per-minute
rate caps, at a rate to be determined, for both intrastate and
interstate calls, separated between
[[Page 69685]]
prisons and jails, with no per-call charges allowed. Specific ancillary
fees would be allowed, with some ``premium calling options'' for jails,
and all other ancillary fees prohibited. Pay Tel proposes that all
facilities would be required to comply with existing obligations and
laws regarding people with disabilities.
17. The Wright Petitioners, along with several public interest
groups, urge the Commission to adopt a $0.07 per minute rate cap for
all interstate debit, prepaid, and collect calls, with no per-minute
rate, and no other ancillary fees or taxes allowed. Prisoners' Legal
Service of MA (PLS) contends that the interim safe harbors and caps
that the Commission implemented in the Order are conservative and
``exceed cost data that any party submitted in the record.'' PLS
opposes extending the interim safe harbor rates and caps, and instead
proposes that the Commission adopt a flat all-distance rate of $0.07
per minute, regardless of the size of the facility or the call volume
generated from the facility. To justify this rate, PLS points to the
fact that ICS providers are charging as low as $0.04 and $0.05 per
minute absent commissions in some states.
18. A few states have undertaken ICS reform since the Commission's
Order. The Alabama Public Service Commission (Alabama PSC) recently
adopted comprehensive ICS reforms that include intrastate rate caps as
well as restrictions on the number and rates of ancillary charges it
authorized. The Minnesota Department of Corrections initiated a pilot
program in a limited number of correctional facilities in which a flat
rate of $0.07 per minute is charged for all local and long-distance
debit calls, bringing the cost of a 15-minute call to $1.05, plus
applicable tax. New Jersey recently lowered ICS rates to $0.15 a minute
for all interstate and intrastate calls from state prison facilities.
We applaud these efforts and seek comment below on what more the
Commission and states can do to enact comprehensive ICS reform.
III. Discussion
19. In this Second Further Notice, we take the following steps to
reform and modernize interstate and intrastate ICS regulations while
ensuring adequate security measures for correctional facilities. First,
we seek comment on eliminating all site commission payments on both
interstate and intrastate ICS to fulfill the Commission's statutory
obligations to promote competition and ensure just and reasonable rates
and fair compensation. We also seek comment on whether facilities incur
costs in the provision of ICS and, if so, how facilities should recover
these costs, as well as appropriate transition periods for reform to
allow correctional facilities time to adjust. We seek comment on
adopting intrastate and interstate rate caps. We seek comment on
reforming ancillary fees including adopting ancillary fee rate caps,
and prohibiting certain ancillary charges. We also seek comment on
alternative ways to promote competition in the ICS market. We seek
comment on whether we should periodically review the ongoing impact of
ICS rate reforms. Finally, we seek further comment on issues related to
enforcement, disability access, advanced communications in the
correctional setting, and the cost/benefit analysis of all of the
proposals herein.
A. Payments to Correctional Facilities
20. The record, including data from the 2014 ICS Workshop and the
Mandatory Data Collection, makes clear that the Order's interim rate
caps have significantly lowered the expense of interstate ICS calls to
end users. On the positive side, the interim interstate rate caps have
resulted in increased call volumes, evidence that unreasonable rates
were discouraging communications and that reasonable rates foster
communications between inmates and their families and friends. Yet
failures in the ICS market continue. Interstate reform in some cases
has been met by increased intrastate ICS rates and has not discouraged
other practices that also increase the costs of ICS to consumers, such
as excessive ancillary charges and an increase in the use of single
call services. The pressure to pay site commissions that exceed the
direct and reasonable costs incurred by the correctional facility in
connection with the provision of ICS continues to disrupt and even
invert the competitive dynamics of the industry. These and other market
failures demonstrate that the interstate-only reforms adopted in the
Order, while an important first step, did not completely address the
problems in the ICS marketplace. This highlights the need for more-
comprehensive reform of the ICS industry to address both interstate and
intrastate ICS.
1. Restrictions on Payments to Correctional Facilities
21. In this section, we seek comment on prohibiting site
commissions as a category, including all payments, whether in-kind
payments, exchanges, allowances, or other fees. The record is clear
that site commissions are the primary reason ICS rates are unjust and
unreasonable and ICS compensation is unfair, and that such payments
have continued to increase since our Order. Moreover, where states have
eliminated site commissions, rates have fallen dramatically. We
therefore predict that prohibiting such payments will enable the market
to perform properly and encourage selection of ICS providers based on
price, technology and services rather than on the highest site
commission payment. Although we seek comment on prohibiting site
commissions as a category, we seek comment on whether correctional
institutions incur any costs in the provision of ICS and, if so, how to
enable the facilities to recover such costs. We also seek comment on
how best to proceed if a state has already prohibited site commission
payments.
22. As part of its reform of unreasonable and unjust interstate ICS
rates in the Inmate Calling Report and Order and FNPRM, the Commission
addressed site commissions and concluded that they were an
apportionment of profits between service providers and correctional
facilities and were not, in and of themselves, a cost of ICS. The
payment of site commissions distorts the ICS marketplace by creating
``reverse competition'' in which the financial interests of the entity
making the buying decision (the correctional institution) are aligned
with the seller (the ICS provider) and not the consumer (the
incarcerated person or a member of his or her family).
23. This ``reverse competition'' is reflected in data in the
record. Aggregated data from the Mandatory Data Collection from 14 ICS
providers show that over $460 million in site commission payments were
paid to facilities in 2013. This means that ICS users and their
families, friends and lawyers spent over $460 million to pay for
programs ranging from inmate welfare to roads to correctional
facilities' staff salaries to the state or county's general budget.
These are pass-through payments from the provider to the facility,
absent which, rates would be lower. Moreover, the magnitude of payments
is significantly higher than previous estimates in the record. For
example, using publicly available data in 2012, the Human Rights
Defense Center (HRDC) estimated ICS providers paid over $123 million in
site commissions to correctional facilities. To put the number in
context, however, the record and data from the Mandatory Data
Collection suggest that these payments represented just 0.3 percent of
prison facilities total budgets in 2012. Similarly, one ICS provider
estimated
[[Page 69686]]
that site commission payments represented 0.4 percent of total prison/
jail operating budgets in 2013. What appears to be of limited relative
importance to the combined budgets of correctional facilities has
potentially life-altering impacts on prisoners and their families.
24. Despite their limited overall budget impact, site commission
payments are the chief criterion many correctional institutions use to
select the ICS provider for their facilities and are thus the main
cause of the dysfunction of the ICS marketplace. The demand for site
commission payments generates pressure on ICS providers to raise rates
and assess additional ancillary charges, which are typically not
subject to site commissions. The existing contract proposal process
(RFP, or request for proposal) often focuses the competition between
bidding ICS providers on who can pay higher site commissions to
correctional institutions instead of creating incentives for ICS
providers to provide the lowest rates to consumers.
25. The Alabama PSC articulated an alternative perspective on the
cause of increased site commissions, stating that ``the proliferation
of excessive ancillary fees, not call rates, is the most significant
contributor toward escalating site commission offerings.'' It further
asserted that ``to effectively constrain excessive site commissions, it
is essential to first address the excessive revenue sources [from
ancillary fees].'' In this Second Further Notice we seek comment on
proposals to address both site commissions and ancillary fees. We also
seek comment on the Alabama PSC's perspective on the cause of increases
in site commissions.
26. At the time the Commission adopted the Inmate Calling Report
and Order and FNPRM, the highest commission amount in the record was 88
percent. Since the Order, despite the Commission's decision to not
permit site commission payments to be included in interstate rates, the
record indicates that site commissions have continued to increase, with
recent contracts including site commission payments as high as 96
percent of gross revenues. Moreover, there is evidence that site
commission payments on intrastate ICS revenue, which were not addressed
by the Order, have increased. Absent further action, we are concerned
that the market will continue to fail to promote competition and ensure
rates are just, reasonable and ensure fair compensation consistent with
the dictates of the Communications Act. Indeed, several commenters urge
the Commission to adopt an approach that ``will lead to lower, market-
based rates.'' Securus has suggested that if the Commission does
anything short of completely banning site commission payments, it will
allow gaming.
27. We seek comment on prohibiting all site commission payments for
interstate and intrastate ICS to enable market-based dynamics to ensure
just and reasonable ICS rates and fair ICS compensation. Eliminating
the competition-distorting role site commissions play in the
marketplace should enable correctional institutions to prioritize lower
rates and higher service quality as decisional criteria in their RFPs,
thereby giving ICS providers an incentive to offer the lowest end-user
rates. Indeed, when states such as Missouri, New York and New Mexico
eliminated site commission payments, ICS rates decreased significantly.
We therefore seek comment on such an approach and on whether it will
foster a competitive market that will ensure just and reasonable rates
and fair compensation for ICS while minimizing regulatory burdens on
ICS providers and the Commission. We also seek comment below on whether
the Commission should undertake periodic review to verify this.
28. We seek comment on a two-year transition away from site
commissions to avoid flash cuts and permit correctional institutions
time to adjust. In addition, we seek comment on whether correctional
facilities incur costs for provisioning ICS. We request data that
demonstrate the costs that facilities bear that are directly related to
the provision of ICS. We seek comment on the magnitude of these costs
and how to enable facilities to recover such demonstrated costs in a
manner that does not disrupt a market-based approach to lowering rates
for end users of ICS.
2. Legal Authority
29. We seek comment on the Commission's legal authority to restrict
the payment of site commissions in the ICS context pursuant to sections
276 and 201(b) of the Act. We begin with a review of the authority
accorded the Commission under section 276. In relevant part, section
276(b)(1) states:
In order to promote competition among payphone service providers
and promote the widespread deployment of payphone services to the
benefit of the general public, within 9 months after the date of
enactment of the Telecommunications Act of 1996, the Commission
shall take all actions necessary (including any reconsideration) to
prescribe regulations that--
(A) establish a per call compensation plan to ensure that all
payphone service providers are fairly compensated for each and every
completed intrastate and interstate call using their payphone. . . .
30. As discussed herein, the Commission has previously concluded
that site commission payments are a significant cause of ever
increasing rates. This fact was recently underscored by the Joint
Provider Reform Proposal, which stated that the rate caps they propose
``are feasible for the parties only if implemented in conjunction with
corresponding reductions in site commission payments.'' We seek comment
on the assertion that absent reform, achieving the statutory mandate of
just and reasonable ICS rates and fair ICS compensation would be
difficult, if not impossible, to achieve. At the same time, we are
mindful that ICS providers should receive ``fair'' but not excessive
compensation, and seek comment on implementation and transition below
to ensure that this occurs. We therefore seek comment on whether the
payment of site commissions would be an appropriate object of
regulation under this statutory provision. Would a prohibition on site
commission payments ensure ``fair compensation'' as that term is used
in section 276? While the Commission has previously found the phrase
``fairly compensated'' to be ambiguous, and acknowledged that a range
of compensation rates could be considered fair, it has treated the
concept of fairness as encompassing both the compensation received by
ICS providers and the cost of the call paid by the end user. As the
record continues to show that the payment of site commissions causes
ICS rates to be set at excessive levels, could the Commission under
section 276 find that site commissions result in unfair compensation
and therefore should be prohibited or otherwise restricted?
31. We seek comment on our prediction that a prohibition on the
payment of site commissions would foster a more competitive marketplace
for the provision of ICS. If site commissions hinder and distort
competition among ICS providers, hinder the widespread deployment of
payphone services, or both, would that support the Commission's
exercise of section 276 authority ``to prescribe regulations'' to
ensure that ICS providers are ``fairly compensated''? If so, would the
statutory duty to ensure fair compensation encompass an outright ban on
the payment of site commissions by ICS providers? We note, for example,
that if a correctional institution were to self-provision ICS and seek
to charge rates that include an amount that would be deemed a site
[[Page 69687]]
commission as part of its profits, above and beyond a normal return,
such conduct could be directly addressed by Commission regulation of
ICS rates to limit rates to a level that ensures fair compensation, but
no more. Does this approach support the view that Commission regulation
directly targeting site commissions likewise can be justified to the
extent providers ensure that ICS rates provide no more than fair
compensation?
32. If, as the record currently shows, the payment of site
commissions leads to ICS rates that are set at unreasonably high, even
exorbitant, levels, then, as has occurred in states that have
eliminated site commissions, we predict that a prohibition on making
these payments would lead to significantly lower ICS rates. We seek
comment on the reasonableness of this presumption and whether there are
criteria other than site commissions that might discourage correctional
institutions from prioritizing lower rates and better service quality
in their RFPs. If the elimination of site commissions does lead to
lower rates, we seek comment on whether lower ICS rates would lead to
greater ICS usage. How should we interpret the word ``deployment'' in
this context? For instance, is ``deployment'' limited to installation
of new physical infrastructure that would enable the provision of ICS,
or can ``deployment'' reasonably be construed to include new incentives
or opportunities for end users to access existing payphone services?
Similarly, can ``payphone service''--which section 276 defines to
include ``any ancillary services''--reasonably be construed to include
new features that might be offered to accommodate greater demand? We
seek comment on this analysis.
33. We seek comment on any other relevant language in section 276
that may bear upon our authority to prohibit site commissions. For
instance, what is the relevance of section 276(b)(1)(A)'s requirement
that regulations adopted by the Commission ensure that payphone service
providers are compensated ``per call'' and for ``each and every
completed intrastate and interstate call''? More generally, are there
alternative interpretations or theories for implementing section 276
that counsel for or against particular approaches to addressing site
commission payments?
34. We seek comment on the proposal that site commission payments
undermine the achievement of section 276's goals in the ICS context,
even though the Commission previously has permitted location rents in
the context of public payphones. For example, as to public payphones,
the Commission found that ``[p]ayphones in many locations are likely to
face a sufficient level of competition from payphones at nearby
locations to ensure that prices are at the competitive level,'' and
thus ``[a]s a result, we believe that payphones at such locations are
unlikely to need additional scrutiny.'' The Commission recognized, by
contrast, that there could be ``locations where . . . no `off premises'
payphone serves as an adequate substitute for an `on premises'
payphone.'' As the Commission observed:
In such locations, the location provider can contract
exclusively with one PSP [payphone service provider] to establish
that PSP as the monopoly provider of payphone service. Absent any
regulation, this could allow the PSP to charge supra-competitive
prices. The location provider would share in the resulting
``location rents'' through commissions paid by the PSPs. To the
extent that market forces cannot ensure competitive prices at such
locations, continued regulation may be necessary.
35. We seek comment on whether market conditions for ICS differ
sufficiently from those the Commission previously found in the case of
public payphones as to warrant different treatment under section 276.
Are ICS providers inherently ``monopoly providers of payphone service''
and therefore able ``to charge supra-competitive prices?'' Do inmates
have access to competing alternatives? One way to mitigate this problem
would be to require correctional institutions to enter into service
contracts with multiple ICS providers instead of awarding a monopoly to
a single provider, as the Wright Petitioners initially suggested.
However, the record suggests that requiring multiple providers at
correctional institutions, and thereby enabling competition, could
present significant practical challenges and potentially could increase
costs and therefore drive up rates. Further, it is unclear whether
allowing multiple providers at correctional institutions would
substantially lower ICS costs to consumers if facilities were still
able to receive site commission payments. We seek comment on these
views, and whether action on site commissions thus can be reconciled
with Commission precedent under section 276 for public payphones, or if
action to prohibit or restrict site commissions for ICS locations would
require the Commission to change course in any respect.
36. We also seek comment on any other sources of Commission
authority to regulate site commissions. For example, section 201(b) of
the Act requires all charges and practices ``for and in connection
with'' an interstate common carrier service to be ``just and
reasonable.'' We seek comment on whether section 201(b), independent of
any authority under section 276, gives us jurisdiction to prohibit the
payment of site commissions for interstate ICS. Is the payment of site
commissions a ``practice'' under section 201(b)? Conversely, could it
be viewed as a ``rate,'' or component of a ``rate,'' under section
201(b)? Under either alternative, is the payment of site commissions
``for and in connection with'' interstate ICS? To what extent would a
prohibition of site commissions under section 201(b) differ from a
prohibition under section 276? Are there circumstances under which
section 201(b) would support the regulation of site commissions in
connection with intrastate, as well as interstate, ICS? For example,
would declining to prohibit or restrict site commissions in connection
with intrastate ICS undermine the Commission's ability to ensure lawful
interstate ICS rates? Do other statutory provisions inform how the
Commission can or should approach the issue of site commissions in the
ICS context? The possible reforms that we seek comment on would apply
to site commissions on both interstate and intrastate ICS traffic. In
what ways would the Commission's legal basis for its actions differ
based on the jurisdiction of the traffic under particular legal
theories? In addition to regulating ICS providers' payment of site
commissions, does section 276 or other Commission authority enable us
to regulate the conduct of correctional institutions or other third
parties if they seek to induce ICS providers to make such payments? If
so, what is that authority?
3. Possible Reforms to Site Commissions
37. We seek comment on prohibiting site commission payments for all
ICS as part of comprehensive reform and whether transitioning away from
site commission payments is essential to achieving the statutory
requirements of just and reasonable ICS rates and fair ICS
compensation. We seek comment on a definition of site commission
payments that are subject to any prohibition or restriction to include
``payments in money or services from ICS providers to correctional
facilities or associated government agencies, regardless of the
terminology the parties to the agreement use to describe them.'' We
seek comment on interpreting this language to include any products or
any other thing of value such as, for example, so-called ``contract
administration'' fees. This is consistent with the approach in the
Order where
[[Page 69688]]
the Commission noted that it would treat in-kind payments as site
commissions.
38. The Joint Provider Reform Proposal supports the elimination of
site commissions and proposes a similar definition of impermissible
site commission payments to include a comprehensive range of ``in-kind
payments, exchanges, technology allowances, administrative fees, or the
like.'' It proposes that ``the Commission define as impermissible: Any
payment, service, or product offered to, or solicited by an agency (or
its agent) that is not directly related to, or integrated with, the
provision of communications service in a correctional facility.'' We
seek comment on these definitions and on any other ways to define ICS
provider payments to correctional institutions that would be subject to
any regulation discussed herein. We also seek comment on whether we
should prohibit gifts or charitable contributions from ICS providers to
correctional facilities to ensure they are not used to undermine a
potential site commission prohibition. In an analogous context, the
Commission included in its E-rate program rules a prohibition on gifts
by service providers to schools or libraries to ensure that such gifts
do not ``circumvent competitive bidding and other E-rate program
rules.'' Additionally, we seek comment on whether any certification
required of ICS providers should include a certification of compliance
with any prohibition on site commissions and gifts the Commission may
impose.
39. Costs Incurred by Correctional Facilities. Although we seek
comment on eliminating site commissions as a category, the Commission
acknowledged in the Order that some portion of payments to correctional
facilities ``may, in certain circumstances, reimburse correctional
facilities for . . . costs,'' such as security costs, that the
Commission would likely consider reasonably and directly related to the
provision of ICS. Consistent with the Order, we seek comment on whether
correctional institutions incur any costs in the provision of ICS and,
if so, how to quantify them and how the facilities should recover such
costs. We seek comment on the idea that any recovery by facilities for
costs reasonably and directly related to making ICS available be built
into any per-minute ICS rate caps set by the Commission.
40. We seek comment on any filings in the record attempting to
demonstrate ``legitimate costs incurred by correctional facilities . .
. related to the provision of inmate calling services.'' The Joint
Provider Reform Proposal states that ``[t]he parties recognize . . .
that correctional facilities may incur administrative and security
costs to provide inmates with access to ICS,'' referencing them as
``admin-support payments.'' Yet, the participating providers ``have not
reached agreement as to what amount or what percentage (if any) should
be required, or how such admin-support payments can accurately be
measured.'' Some parties suggest that costs to facilities may include
monitoring calls, submitting trouble tickets on equipment, handling
billing disputes that inmates may have with the provider, and
infrastructure and security costs. Praeses asserts that ``correctional
facilities incur real costs to enable inmate calling'' and lists a
number of functions they assert are related to such costs. However,
other parties question whether the facilities incur any additional
costs for the provision of ICS. Also, Securus notes that correctional
facilities benefit significantly from having ICS in terms of reduced
recidivism, solving and preventing crimes and inmate control and
satisfaction suggesting that any costs are far outweighed by the
benefits. Should the Commission be concerned that prohibiting or
restricting site commission payments or prohibiting rates that include
recovery of site commissions will lead correctional facilities to stop
allowing inmates access to ICS altogether, or else to restrict inmates'
access to ICS? We seek comment on whether correctional institutions in
states that have prohibited site commissions bear any costs and, if so,
whether such costs are recovered through ICS rates or are recovered
through the general budget of the correctional institution.
41. We note that because the Mandatory Data Collection applied to
ICS providers, not correctional institutions, the costs submitted by
the providers do not include any costs that may be incurred by
facilities. We seek comment on the actual costs, if any, incurred by
correctional facilities in providing ICS, the amounts associated with
these costs, and the appropriate vehicle for enabling facilities to
recover such costs. Is an allocation of a guard's time for walking a
prisoner to an ICS facility necessary and appropriate to include in ICS
costs? Do facilities monitor calls for security purposes or is such
monitoring done by ICS providers? If facilities monitor calls, should
such costs be considered a cost recoverable through ICS rates? The
Allegany County, NY Sheriff asserted that his facility ``does
experience real costs in administering these services,'' but did not
quantify or otherwise provide a context for understanding the relative
magnitude of these costs as compared to the county's correctional
budget.
42. The record is mixed on whether, and if so, how much facilities
spend on ICS. For example, GTL provides research that suggests
significant variations in how facilities apportion costs. For example,
one department of correction that GTL serves allocates 42 full time
employees to the provision of security for ICS, whereas a second,
similarly sized, department of correction allocates only 0.5 full time
employees to the provision of security for ICS. GTL estimates prisons'
ICS-related costs at $0.005 per minute of use and jails' costs at
$0.016 per minute of use, or 3.4 percent of total ICS revenue at
prisons and 7.6 percent in jails. In contrast, CenturyLink asserts that
to ``monitor just ten percent of the calls placed by inmates at either
a prison or a jail would cost the facility 5.28 cents per minute
applied to all calls placed by inmates at the facility.'' We seek
comment on these estimated costs, particularly on why they vary so
significantly, and the underlying assumptions, i.e., staffing costs and
time commitments. For example, CenturyLink provides a list of
``administrative and security functions'' that correctional facilities
commonly perform,'' such as ``responding to other law enforcement
requests for records/recordings,'' validating attorney or other
privileged numbers, ``blocking/unblocking numbers blocked for security
issues,'' and ``administration of debit purchase.'' We seek comment on
this list of functions and whether, in commenters' experiences, it
accurately represents costs that correctional facilities incur in the
provision of ICS. Other comments contend that ICS facilities do not
incur costs in the provision of ICS. For example, is it appropriate for
any portion of a salary of a full-time guard to be considered a cost of
ICS?
43. To the extent the record indicates that facilities incur costs
related to the provision of ICS, we seek comment on allowing cost
recovery through a per-minute rate cap included in any rate cap adopted
by the Commission, or some other approach. The per-minute approach
presumes that facilities' costs vary with usage. We seek comment on the
variable or fixed nature of correctional institutions' costs. GTL
estimates prisons' ICS-related costs at $0.005 per minute of use and
jails' costs at $0.016 per minute of use. We seek comment on whether a
per-minute amount between $0.005 and $0.016 or at
[[Page 69689]]
some other per minute amount would ensure that correctional facilities
recover their costs. Would allowing cost recovery based on a per-minute
amount give correctional facilities an incentive to increase ICS usage?
What would be the policy advantages or disadvantages of such an
approach? Would correctional facilities be likely to select ICS
providers with lower rates and fees, so as to increase usage and,
depending on the elasticity of demand, thereby increase cost recovery
to the facilities? We seek comment on whether any such cap should be
reevaluated and adjusted as minutes of use (MOU) change.
44. We seek comment on using a per-minute approach over one that
would set such payments at a capped percentage of ICS revenues. This
approach would promote simplicity and deter possible improper
incentives tied to a percentage of revenues approach, as occurs today.
If, however, we used a percentage-based approach, we seek comment on
the appropriate level of any recovery percentage. GTL estimates
prisons' ICS-related costs at 3.4 percent of total ICS revenue and
jails' costs at 7.6 percent. We seek comment on whether a percent of
gross revenues between 3.4 percent and 7.6 percent or some other
percent amount would ensure correctional facilities recover their
costs. Would basing cost recovery on a percentage of ICS revenues
encourage gaming and provide no or less incentive to facilities to
lower ICS rates? For example, would basing cost recovery amounts on a
percentage of revenues give ICS providers incentives to maintain rates
at the highest allowable level in order to maximize site commission
revenues? Will correctional facilities structure their RFPs so as to
require such an outcome? We seek comment below on a transition period
to achieve any cost recovery level. Praeses suggests that the
Commission should consider developing ``a safe harbor payment level in
addition to a payment cap--in much the same way that the Commission
regulated interstate ICS rates in the ICS Report and Order in light of
the varying ICS costs borne by ICS providers with respect to the
different types of correctional facilities served.'' We seek comment on
these and any other alternative regulations that could govern the
relationship between any restriction on site commissions and ICS rate
regulations.
45. To ensure our reforms produce just and reasonable rates and
fair compensation, we seek comment on whether state statutes or
regulations that require any site commission payment, as we sought
comment on defining here, are inconsistent with the possible regulation
herein and would therefore be preempted, pursuant to section 276(c) as
discussed below. What criteria should the Commission use to determine
which state actions are consistent? For example, should state actions
to eliminate or restrict site commissions be considered consistent with
any reforms that the Commission adopts? Should such an approach also
preempt state statutes that only mandate how site commissions are to be
used, but not require them in the first instance? Or would such
statutes simply be rendered moot to the extent that correctional
institutions elect not to seek, or ICS providers elect not to pay, site
commissions in those states?
46. We also seek comment on possible state roles to address the
issues discussed above. Are there circumstances where states might be
better positioned to engage in oversight? Would states be limited to
oversight in the context of intrastate ICS or could they also play some
role in the context of interstate ICS? If so, what might that role be?
Finally, we seek comment on setting interstate and intrastate ICS rates
at levels that do not include the recovery of site commission payments
instead of prohibiting site commission payments directly. If the
Commission determines that it does not have authority over site
commission payments, does such an approach still allow for just and
reasonable ICS rates as well as fair compensation? Would such an
approach help satisfy the goals, provided in section 276 of the Act, of
promoting competition and widespread deployment of payphone services?
B. Interstate and Intrastate ICS Rate Reform
47. A goal of ICS reform is to move to a market-based solution to
reduce rates. While we continue to see the benefits of a the approach
adopted in the Order last year, now that we are seeking comment on
comprehensively reforming all aspects of ICS (including intrastate
rates and site commissions) this allows the Commission to ask about a
more market-based approach to promoting competition and just and
reasonable rates and to ensure fair compensation. Given the high rates,
excessive compensation and market failure we see today, we seek comment
on adopting permanent rate caps to ensure that ICS rates are just and
reasonable. These rate caps will serve as a backstop to the market-
based solution described above. We seek comment on how to set those
rate caps. Specifically, we seek comment below on the data submitted by
ICS providers pursuant to the Mandatory Data Collection. We also seek
comment on the proposals for rate reform filed in the record. In
addition, we seek comment on prohibiting per-connection or per-call
charges. Should any such expenses be collected through a per-minute
rate? We seek comment on the best ways to address flat-rate charges for
ICS.
48. We seek comment on adopting permanent rate caps for interstate
and intrastate debit/prepaid and collect ICS calls. In the Order, the
Commission adopted a requirement that rates be cost-based. At that
time, because reform was limited to interstate rates, market forces
alone would not bring all rates down to just and reasonable levels
because intrastate rates, ancillary charges and site commission
payments on intrastate rates would still thwart market forces. While we
continue to see the benefits of a cost-based approach as adopted in the
Order last year, the Commission prefers to allow market forces to
ensure that rates are just and reasonable. Now that we seek comment on
comprehensively reforming all aspects of ICS, including intrastate
rates, will the elimination of site commissions facilitate the market
moving to just and reasonable rates? We also seek comment on adopting
permanent rate caps to ensure that ICS rates are just and reasonable
and ICS compensation is fair, particularly while we transition away
from site commissions. We ask about the advantages and disadvantages of
this approach as compared to setting safe harbors or simply requiring
cost-based rates. We seek comment above on a possible cost recovery
amount for correctional facilities and seek comment on including an
amount for correctional facility cost recovery in any rate caps
ultimately adopted by the Commission.
49. Data Analysis. We seek comment on the data filed by the 14 ICS
providers in response to the Mandatory Data Collection. The data filed
by ICS providers include cost, site commission and ancillary services
data, which are informative and useful, and we take this opportunity to
remind all ICS providers of the filing requirement. These data include
the cost of the full spectrum of safety and security features,
including verification, monitoring and other advanced security
capabilities that ensure that correctional facilities have the security
necessary for the provision of ICS. We generally seek comment on the
data and invite parties to analyze the data and submit any analysis
consistent with the terms of the Protective Order. We also invite
parties to submit concerns or alternative proposals for the Commission
to consider as it evaluates further reforms. Throughout this section
[[Page 69690]]
we use 2012 and 2013 actual data filed by the responding ICS providers.
50. While the data are useful to the Commission's evaluation of
further ICS reforms, we seek comment on some apparent inconsistencies
and anomalies. For example, differing cost allocations by providers
were particularly notable and could affect the consistency and
reliability of the data as reported. The Wright Petitioners noted
several anomalies based on their analysis of the data, including the
fact that ``[t]he average cost per minute of use is substantially less
than the interim Interstate ICS hard rate caps adopted in August 2013;
[t]he ICS providers inconsistently allocated their costs among the four
cost categories (Telecom, Equipment, Security, Other); [t]he ICS
providers used different methodologies to allocate costs to facilities
and payment methods.'' We seek comment on these apparent
inconsistencies and how the data may be analyzed to make an allowance
for such variances.
51. A large proportion of costs reported by ICS providers are
common costs, which is consistent with the fact that ICS providers
typically use centralized calling platforms to process calls from the
different facilities they serve. The Commission's Mandatory Data
Collection did not dictate a particular methodology for allocating
common costs--and, indeed, doing so could have greatly increased the
administrative burden of providing the data. As a result, the providers
took varied and often inconsistent approaches to allocating common
costs among types of facilities and types of services. Given the
preponderance of common costs in ICS providers' data submissions,
analysis of the data is particularly sensitive to such varied and
inconsistent common cost allocation methodologies.
52. We note that, as a whole, ICS providers allocated common costs
among types of facilities and types of services differently as compared
to the volumes of traffic those facilities and services experienced.
Specifically, ICS providers that served both jails and prisons
generally allocated a higher proportion of their common costs to jails
than would otherwise be warranted given the minutes of use from those
jails. Although the exact allocation varied by provider, on average
about two thirds of common costs were allocated to jails, whereas only
about half the reported total traffic volume originated from jails. The
data evidence similar discrepancies between the allocation of common
costs to types of service and the volume of traffic for those services.
For example, ICS providers as a whole allocated about 16 percent of
their common costs to collect calls, whereas collect calls represented
only about eight percent of total traffic. It is not readily apparent
why common costs (as opposed to direct costs) would not follow usage
more closely. And the results of the data from these allocations show
costs for jails that are higher than proposals for comprehensive reform
that the providers themselves submitted, which raises concerns about
the accuracy of their methodology and whether alternative allocation
methods would more accurately represent costs.
53. One possible approach to addressing apparent inconsistencies in
the providers' common cost allocation methodologies would be to use
minutes of use for each provider as an alternative basis on which to
allocate providers' common costs. Given the high proportion of common
costs reported by the industry and the centralized nature of its
networks, using minutes of use to allocate common costs would seem
likely to reflect the providers' operational realities. We seek comment
on whether employing a usage-based allocation of common costs would
more closely reflect cost causation and provide more consistent and
reliable data. We further seek comment on how these data should inform
the rate cap levels for interstate and intrastate debit/prepaid and
collect calls. The following table shows the costs per minute for jails
and prisons when using three different methods to allocate common
costs: As submitted by ICS providers, as reallocated using total
minutes of use, and as reallocated using the providers' cost
allocations between jails and prisons prior to reallocating those costs
by minutes of use for each type of and facility.
Table One
--------------------------------------------------------------------------------------------------------------------------------------------------------
Common costs as allocated by Common costs allocated by MOU Common costs allocated by
providers (in cents) facility type (in cents)
Facility type -----------------------------------------------------------------------------------------------------
Average debit/ Average collect Average debit/ Average collect Average debit/ Average collect
prepaid cost cost prepaid cost cost prepaid cost cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jails............................................. 15.8 48.7 14.8 21.9 18.1 26.3
Prisons........................................... 10.0 13.7 14.0 17.2 9.9 14.3
All............................................... 13.3 28.3 14.5 19.2 N/A N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------
54. We seek comment on the two reallocation methodologies in Table
One, both of which use minutes of use in different ways as a means of
reallocating common costs in manner tied more closely to usage. We
initially examine and seek comment on the reallocation based on total
minutes of use. This method uses the ratio of total industry minutes of
use for jails to total minutes of use for all facilities to reallocate
all common costs among facility and service types. Minutes of use for
jails represent about 53 percent of all minutes of use, resulting in an
allocation of about 53 percent of common costs to jails instead of the
average of approximately 68 percent allocated to jails in the data as
reported by providers. The results of this reallocation methodology are
more consistent with provider proposals in the record, both from 2008
and more recently. For purposes of comparison, the 2008 ICS provider
proposal reported costs of $0.164 per minute for debit calls and $0.236
per minute for collect calls, whereas the providers' data reported
costs of $0.133 per minute for debit and prepaid and $0.283 per minute
for collect. Similarly, the Joint Provider Reform Proposal recommends a
single per-minute rate cap of $0.20 for debit and prepaid and $0.24 for
collect calling. CenturyLink's proposal advocates unified rate caps at
the current interstate caps ($0.21 for debit and prepaid and $0.25 for
collect). We seek comment on these apparent allocational discrepancies.
55. This alternative methodology would standardize common cost
allocations among the five providers that serve a mix of jails and
prisons. And the fact that providers that serve only jails have no
prison minutes of use would ensure that their common costs would not be
allocated to prisons. Does
[[Page 69691]]
this method more closely approximate the operational realities of the
providers? Is it more effective in replicating cost causation in the
industry? Does it have any disparate impacts on providers that only
serve jails?
56. We also examine and seek comment on a potential reallocation of
providers' common costs based on providers' allocation of common costs
to facility types (jails or prisons). This method accepts each
individual provider's allocation of common costs between jails and
prisons and then allocates those costs among facility and service types
based on total minutes of use for each type of facility. This method
shifts fewer costs to prisons and results in higher costs for jails
than the total minutes of use allocation due to the reliance on the 68
percent average allocation of common costs to jails by providers, as
noted above. Is this method more appropriate because providers' initial
allocations of common costs are more accurate? Alternatively, is this
method's greater reliance on the accuracy of those allocations a
potential vulnerability or flaw?
57. The data provided by ICS providers also allocated costs to
different subsets of facilities based on size of facility. This
allocation resulted in a wider range of per-minute costs with some
apparent anomalies, such as per-minute costs for certain facility size
groups being well above the range of rate cap proposals submitted by
any ICS provider, including those that exclusively serve purportedly
higher-cost facilities such as jails. The cost data generated by
facility size groups also resulted in some anomalies that raised
questions about whether smaller facilities have higher costs than
larger ones, and vice versa, as some commenters have asserted in this
proceeding. Given confidentiality of the data, we cannot disaggregate
all data for jails and prisons by size but we note that while the data
indicate that smaller jails are most costly and the largest jails are
less costly to serve, the data did not show the same correlation
between size and cost for prisons. This raises questions about whether
assumptions about facility size determining cost are accurate. Even if
size were the appropriate measure, would the administrative burden of
using rates tiered by size and type of facility outweigh the benefits
of multiple rate tiers? Can rate caps for different types of services
and facilities provide sufficient flexibility to ensure fair
compensation short of resorting to size-based tiers? Does the
Commission need to adopt such a regulatory approach?
58. To the extent that particular facilities are more costly to
serve than suggested by the rate cap proposals in the record, can the
Commission more effectively ensure fair compensation and reduce
administrative costs to providers by addressing such outliers through
the use of the waiver process? We note that the Commission already
granted a waiver of its interim rate caps to one ICS provider to
address unique circumstances. Would using a waiver process be easier to
manage than adopting and policing the multiple rate tiers the
Commission would otherwise have to adopt?
59. We also seek comment on other alternative methods of analyzing
the ICS providers' cost data. For example, would evaluating jail data
separately from prison data be useful? We seek comment on any other
methods of evaluating the data that commenters may want to propose that
may prove useful to the Commission in its analysis of this data to
ensure just and reasonable rates and fair, not excessive, compensation.
60. Previous Data Submissions in the Record. ICS providers have
previously filed data in the record throughout this proceeding. In
2008, seven ICS providers filed a cost study based on proprietary cost
data for certain correctional facilities with varying call cost and
call volume characteristics. The study indicated that the per-call cost
for debit calls was $0.16 per minute and $0.24 per minute for collect
calls. In response to the 2012 ICS NPRM, Securus filed data which
showed, as discussed in the Order, ``an average per-minute cost for
interstate calls from all facilities included in the report to be $0.12
per minute with commissions and $0.04 per minute without them.'' Pay
Tel filed financial and operational data for its ICS operations. The
non-confidential cost summary included in the filing reported actual
and projected 2012-2015 average total costs for collect and debit per-
minute calling of approximately $0.23 and $0.21, respectively
(including the cost of an advanced security feature known as continuous
voice biometric identification). Although CenturyLink did not file a
cost study at that time, it did file summary cost information for its
ICS operations. Specifically, CenturyLink reported that its per minute
costs to serve state departments of corrections facilities (excluding
site commission payments) averaged $0.116 and that its per-minute costs
to serve county correctional facilities (excluding site commission
payments) averaged $0.137. We seek comment on how to reconcile these
data submissions with the data filed in response to the Mandatory Data
Collection and the Commission's analysis of that data described above,
and how these data should inform our selection of rate caps. We also
seek comment on and updates to intrastate rate data currently in the
record. And we seek updated comment on international ICS and the need
for Commission reform focused on such services.
1. Proposals for a Unitary Rate
61. Throughout this proceeding interested parties have filed in
support of the Commission adopting unitary ICS rate caps for all
intrastate and interstate debit/prepaid and collect calls in all
facilities. We seek comment here on those proposals.
62. Joint Provider Reform Proposal. The Joint Provider Reform
Proposal supports a rate cap of $0.20 per minute for debit and prepaid
interstate and intrastate calls, and a rate cap of $0.24 per minute for
all interstate and intrastate collect calls exclusive of per-call or
per-connection charges, exclusive of any facility cost recovery, and
regardless of facility size. The providers that submitted this proposal
assert that this ``simplified rate structure'' ``will make ICS charges
more transparent for inmates and their friends and family,'' as well as
``easy for ICS providers and correctional facilities to implement
quickly, and will simplify oversight and enforcement.''
63. Pay Tel and the Alabama PSC have raised concerns about the
Joint Provider Reform Proposal for a unitary rate and urged the
adoption of different rates for jails and prisons. For example, Pay Tel
stated that the rate caps were ``excessively high for prisons.''
64. We generally seek comment on the rate caps proposed by the
Joint Provider Reform Proposal. We seek comment on how our data
analysis described above reconciles with the rate caps proposed by the
providers. As noted above, average debit and prepaid costs are lower
than $0.20 per minute. Should we adopt the Joint Provider Reform
Proposal's rate caps because any adopted rate caps will serve as a
backstop to ensure that rates are just and reasonable? Would these
rates enable the Commission to include a per-minute cost recovery of
$0.005 for correctional facilities' cost recovery? We also seek comment
on how ICS providers' earlier data filings reconcile with the rate caps
suggested in the Joint Provider Reform Proposal.
65. Current Interim Rate Caps. Some parties have supported making
the interim rate caps permanent for all interstate and intrastate ICS
calls.
[[Page 69692]]
CenturyLink asserts that it could ``support a unified cap approximately
at the current interstate cap levels.'' NCIC asserts that collect ICS
rates should be capped at $0.25 per minute and debit call rates at
$0.21 per minute. We seek comment on these proposals in light of the
data received in response to the Mandatory Data Collection.
66. Wright Petitioners' Proposal. The Wright Petitioners previously
proposed a $0.07/minute rate cap for all interstate ICS. We sought
comment on this proposal in the FNPRM, particularly as it related to
distance insensitive rate proposals. ICS providers suggested that the
rate may jeopardize ICS security. Other commenters suggested that the
Commission should adopt a $0.07/minute rate cap for all ICS and that
current rates in states like New Mexico ($0.043/minute) and New York
($0.048/minute) support this cap. We now seek comment on whether we
should adopt this proposal. If the Commission were to adopt this
proposal, would rate caps at this level preclude ICS providers from
paying site commissions and therefore negate the need for the
Commission to regulate site commission payments as discussed above?
What level of rate cap do commenters believe would change what
providers are able to offer correctional facilities? Do the data from
the Mandatory Data Collection support this rate cap? What are the
considerations associated with such an approach?
2. Tiered Rate Caps
67. While we see certain benefits to a single set of rate caps such
as administrative ease and avoidance of potential loopholes, some
commenters recommend rates tied to the size or type of facility. In the
FNPRM the Commission sought comment on the adoption of, and benefits
of, tiered rates based on a facility's volume of minutes, type (i.e.,
jail versus prison) or size. Responses centered on the distinction
between jails and prisons, with some commenters advocating for
different ICS rate tiers for jails and prisons. These same commenters
also point out that the differences between jails and prisons are not
absolute, and acknowledge that some prisons ``are more costly to serve
than jails and the range of costs of serving jails and prisons is very
wide.'' The record indicates that jail administrators support a tiered
rate instead of a flat rate because jails may face different costs than
prisons as a result of their smaller size, higher turnover rate, and
relative inability to take advantage of economies of scale. How do the
data collected and reported herein impact our evaluation of these
claims?
68. Pay Tel Proposal. In its proposal Pay Tel recommends separate
rates for jails and prisons. Pay Tel proposes an $0.08 per minute rate
for all prisons regardless of population. Pay Tel also estimated a
$0.067 per minute average rate for the eight state prison systems that
barred site commissions. Pay Tel suggests a rate of $0.26 per minute
for jails with 1-349 average daily population [ADP], a $0.22 per minute
rate for jails with 350 plus ADP, and a $0.08 per minute rate for all
prisons regardless of size. We seek comment on these proposed rate
caps.
69. Alabama recently adopted ICS rates tied to facility type. For
example, the Alabama PSC has adopted per-minute rates of $0.30,
decreasing to $0.25 over two years, for jails and $0.25, decreasing to
$0.21 over two years, for prisons. We seek comment on this approach.
70. Commenters suggest that rates tied to the type or size of
facility would open loopholes in ICS reform and allow for gaming. Is
this accurate? Recently, CenturyLink said it ``does not support complex
or tiered rate caps.'' Other commenters contend that an insufficient
record exists from which to develop rate tiers, and point to evidence
that many jails house long-term inmates, which may indicate that costly
account set-up fees are less of an issue than suggested. Do the data
received in response to the Mandatory Data Collection assuage the
concern regarding the sufficiency of the record? The data also suggest
that certain ICS providers reported a large proportion of the costs of
ICS as common costs, rather than direct or facility-specific costs.
Does this further call into question the cost allocation methods used
by providers in their data submissions to allocate common and direct
costs? Or does it suggest that ICS providers did not use uniform
standards to distinguish between direct and common costs? We seek
updated comment on interested parties' opinions on tiered rates for
different types of facilities. Specifically, if the Commission adopts a
market-based approach of addressing site commission payments and
allowing competition to drive rates closer to cost, should we consider
rate tiers, or should we instead adopt common rate caps for all
correctional institutions to accommodate any differences between jails
and prisons? Would the adoption of tiered rates help promote
competition among ICS providers and promote the widespread deployment
of ICS--a form of payphone service--consistent with the goals of
section 276? For example, would a lower rate cap for ICS in prison
facilities promote additional usage, a potential means of promoting
widespread deployment of payphone ICS service?
71. The Commission seeks comment above on prohibiting site
commissions to address the primary cause of the ICS market failure. If
the Commission does not prohibit site commissions should we focus more
on rates tied to facility size or type? If the Commission were to set
tiered rates, we seek comment on defining a jail facility as a
correctional facility operated by a political subdivision of a state or
its agent and defining a prison facility as a state-run or federally-
run correctional facility. How would differences in tiered rate caps be
administered? We seek comment on a simpler approach. Would a variety of
rate caps cause confusion? We also seek comment on the administrability
of cost on 4ICS providers on an approach that varies by size and type
of facility. CenturyLink urges the Commission to exclude from ICS rate
reform certain types of facilities that it considers high-cost, such as
juvenile detention centers and secure mental health facilities. Do
other commenters agree that these types of facilities are particularly
high cost? If so, why? Are there other categories of facilities that
the Commission should consider exempting because they are high cost?
Would doing so be in keeping with our statutory mandate? How should the
Commission regulate the provision of ICS at such facilities? Should it
exempt such facilities from ICS rate reform? We seek comment on the
appropriate definitions for juvenile detention facilities and secure
mental health facilities.
72. In the FNPRM, the Commission also sought comment on rate tiers
based on facility size as measured by the average daily population of
the facility. The Prison Policy Initiative suggested that the
Commission could use the Census of Jail Facilities population data to
capture facility size but could also use more recent data. Would
following the Census numbers result in too few or too many tiers? We
seek comment on what interested parties believe to be the appropriate
inflection points, in terms of ICS providers' scalability of costs,
with regard to possible tiered rates. Some states have recently adopted
ICS rate tiering. We seek comment on the jail and prison rates adopted
by the Alabama PSC or any other states.
3. Additional Considerations Related to ICS Rates
73. Debit/Prepaid and Collect Calling. In the Order the Commission
treated
[[Page 69693]]
debit and prepaid ICS alike and collect ICS separately because ``[t]he
record indicates that prepaid calling is generally less expensive than
collect calling but can be about equal in rates to debit calling.''
Data from the Mandatory Data Collection suggest a difference in cost
between collect ICS calling and debit/prepaid ICS calling. The data
also show, however, that debit and prepaid ICS costs are very similar.
Commenters have recommended higher rates for collect calls. The Alabama
PSC adopted different rate caps for different types of service from
prisons. Other commenters have opposed differentiated rate caps for
different types of ICS. We seek comment on retaining this distinction
and adopting a rate cap for debit and prepaid calls and a rate cap for
collect calls. We also seek comment on the appropriate differential, if
any, between the debit/prepaid cap and the collect cap.
74. Per-Call or Per-Connection Charges. Per-call or per-connection
charges are one-time fees often charged to ICS users at call
initiation. We seek comment on banning the imposition of per-call or
per-connection charges. In the Inmate Calling Report and Order and
FNPRM the Commission noted several problems with per-call or per-
connection charges, including the level of some of the charges, their
effect on the rate for short calls, and evidence of premature, non-
security related call terminations, and the assessment of multiple per-
call charges for what was, in effect, a single conversation. The
Commission, recognizing that many different ways to address per-call
charges exist, did not prohibit all per-call charges in the Order but
sought comment in the FNPRM. In the FNPRM the Commission noted the
flexibility it gave ICS providers to use a rate structure that included
per call charges and sought further comment on the risks and benefits
of allowing per call charges. Specifically, the Commission
``express[ed] serious concerns about such charges.'' Some commenters
suggested that the Commission eliminate per-call charges and that doing
so would be beneficial because it ``would lead to significant
reductions in customer complaints regarding charges associated with
dropped calls and in the amount of time providers are required to spend
analyzing and resolving such complaints.'' Is there continuing evidence
of premature, non-security related call terminations since the
Commission adopted the Order? The per-minute rate caps proposed by
Joint ICS Providers do not contemplate the continued charging of a per-
call or per-connection fee.
75. We seek comment on our legal authority to ban the imposition of
per-call or per-connection charges, for both interstate ICS calls and
intrastate ICS calls. More specifically, we seek comment on whether
such fees are part of the rate for ICS and therefore subject to the
section 276 mandate to ensure fair compensation. Alternatively, should
the Commission consider per-call or per-connection charges an ancillary
service as discussed in section 276(d)? Are there instances in which
the correctional facility or some other third party assesses a per-call
or per-connection fee? If so, we seek comment on our authority to ban
such charges. Would the elimination of per-call charges allow for just
and reasonable interstate and intrastate ICS rates and fair
compensation for providers? Would pure per-minute rate caps at an
appropriate level or levels ensure fair compensation for ICS providers?
Section 276 specifically requires us to ``establish a per call
compensation plan.'' We seek comment on whether section 276 gives the
Commission the legal authority to ban per-call compensation. We seek
comment on whether we should also rely on our section 201 authority to
ban per-call charges for interstate calls. The record has not shown
significant per-call costs that could not reasonably be recovered using
per-minute charges. With one exception, ICS providers have successfully
implemented the interim per-minute rate caps for interstate ICS
mandated by the Order. We seek comment below on transitions and whether
rate caps should be effective 90 days after the effective date of a
Commission order. If the Commission continues to allow per-call
charges, should it nonetheless disallow an additional per-call charge
when a call has been reinitiated within one or two minutes of having
been mistakenly disconnected? If states have conducted ICS reform, we
seek comment on whether we should review the effective rates for
consistency with the Commission's regulations based on the calculation
of the cost of a 15-minute ICS call. Are there other considerations
relating to per-call charges in the ICS context that the Commission
should consider?
76. Flat-Rate Charges. We seek comment on whether or not it is
necessary to ban flat-rated charges for calls of a fixed duration to
ensure rates are just and reasonable and fair. In the Order the
Commission stated that ``a rate will be considered consistent with our
rate cap for a 15-minute conversation if it does not exceed $3.75 for a
15-minute call using collect calling, or $3.15 for a 15-minute call
using debit, prepaid, or prepaid collect calling.'' Rule 64.6030
mirrors this language and was intended to illustrate that a five-minute
collect call would equal $1.25 and a five-minute debit or prepaid ICS
call would equal $1.05, while a 30-minute collect call could equal no
more than $7.50 and a 30-minute debit or prepaid ICS call could equal
no more than $6.30. In the FNPRM the Commission sought comment on
whether it should adopt an overall rate cap based on call duration, how
such a rate cap might ensure that ICS rates are just, reasonable, and
fair, and whether a per-minute cap is still necessary to ensure that
shorter calls are reasonably priced. Commenters expressed concern that
``consumers who make shorter calls would necessarily be penalized'' and
that ``there is no principled basis for capping the amount that can be
charged for a call.'' The Public Service Commission of the District of
Columbia discussed the benefits of its $1.75 per-call cap regardless of
call length.
77. Subsequent to the FNPRM comment deadline, Securus sought
additional guidance on whether the Order allows providers to use a
flat-rated charge based on the interim rate caps for a 15-minute call
regardless of call duration. We seek comment on this practice. Should
we allow ICS providers to charge fixed call duration pricing for all
interstate ICS usage regardless of call duration? Is this an
appropriate interpretation and application of rule 64.6030 and the
relevant discussion in the Order? We also seek comment on how we should
address the use of flat-rate charges for ICS going forward and our
legal authority to act on such charges. We seek comment on whether we
should revise the existing rules to prohibit flat-rate charges or
develop new rules prohibiting flat-rated charges. If not, how much
flexibility should the Commission allow if flat-rate charges are
permitted? How can we ensure that flat-rate charges allow for just and
reasonable ICS rates to end users as well as fair compensation to ICS
providers?
78. One commenter asserts that correctional facilities seek such
flat-rated charges. Is this the case and, if so, why? What impact would
allowing this level of flexibility have on the effective per-minute
rates end users pay? If the Commission adopted a lesser degree of
flexibility, how would it work? Should such a flat rate be used only
for calls 15 minutes in length? Will flat-rated charges, at the rate
caps discussed above, for a 15-minute call duration
[[Page 69694]]
allow for just and reasonable ICS rates and fair compensation? In the
Order, the Commission found that the record supported 15-minute average
call duration. Data from the Mandatory Data Collection show that the
average call length reported by respondents was below 13 minutes in
2013. Is 15 minutes still a useful average call duration for purposes
of discussing flat-rate charges? If not, what would be an appropriate
average call duration?
79. Waivers. The Order made clear that the Commission's standard
waiver process applies to ICS, specifically, that ICS providers seeking
a waiver of the interim rules must demonstrate good cause. The
Commission delegated to the Bureau the authority to seek additional
information necessary for evaluating waivers. Since release of the
Order, the Bureau has processed three waiver requests. CenturyLink
suggests that the Commission ``invite waivers where new rules conflict
with state statutes, or where they would force ICS providers to offer
service at a loss.'' The ICS providers that submitted the Joint
Provider Reform Proposal suggest that the Commission ``permit an ICS
provider to seek a waiver of the rate cap for a particular correctional
facility if the ICS provider can demonstrate that the proposed rate cap
does not allow the ICS provider to economically serve the correctional
facility. However, such waivers should be permissible only on a
facility-by-facility basis.'' We seek comment on these suggestions.
Specifically, is such action necessary if the Commission preempts
inconsistent state regulations pursuant to section 276(c) of the Act?
We seek comment on how the Commission would determine that rates are
below-cost in a waiver proceeding and how any adopted regulations
should address this issue. We further seek comment on what information
would be important for providers to demonstrate when seeking a waiver
in the ICS context. We also seek comment on whether exempting a
provider's highest-cost facilities from the final, adopted regulations
would be a suitable remedy to a waiver request. Conversely, would such
an exemption encourage ICS providers to focus on particular facilities
so as to arbitrage our rules?
C. Reforms to Ancillary Charges
1. Background
80. In addition to unreasonable rates, ICS providers typically
assess a wide range of separate charges for services ancillary to the
provision of ICS. These charges impose significant additional burdens
on consumers and considerably inflate the effective price they pay for
ICS. The record indicates that ancillary charges represent a
significant proportion of the total expense of ICS to consumers. The
Prison Policy Initiative estimated that ancillary charges represent 38
percent of all consumer payments for ICS. Others have suggested that
this estimate may be low. Fees to open, fund, maintain, close, and
refund an ICS account represent just a few of a variety of ancillary
charges assessed by ICS providers. The sheer number of ancillary
charges, their varying nomenclature, and the variability of the amounts
charged cause considerable customer confusion, let alone consternation.
81. In the Order, the Commission ``question[ed] whether such
charges are reasonable in and of themselves'' and noted that ``the
levels of such charges do not appear to be cost-based.'' The Commission
required that all interstate ancillary service charges be cost-based
and reasonably and directly related to provision of ICS. The Commission
concluded that it had the jurisdiction and authority to regulate
ancillary service charges. The Commission also required ICS providers
to file cost data about ancillary services as part of the Mandatory
Data Collection, and in the FNPRM sought comment on additional steps
the Commission could take to address ancillary service charges and
ensure that they are cost-based. We now seek further comment on issues
related to ICS ancillary charges.
82. Since the release of the Order, evidence indicates that
ancillary charges have increased, suggesting that any reforms limited
to ICS rates could be circumvented through increased and new ancillary
charges. As the Commission stated in the Order, ICS reform and ensuring
just and reasonable rates to end users ``could not be achieved if
ancillary charges were not also controlled.'' Given that ancillary
charges are typically shielded from site commission assessments in
correctional institutions' contracts with providers, ICS providers
appear to have an incentive to assess additional ancillary charges as
an alternative source of revenue to compensate for lowered ICS rates or
for increasingly high site commission payments. We seek comment on the
extent to which the proliferation of ancillary charges may be a result
of the market distorting effects of site commissions.
83. There is broad consensus in the record on the need for the
Commission to reform ancillary charges. The Wright Petitioners and
prisoner advocacy groups have recommended the regulation or elimination
of ancillary charges. A number of ICS providers have made similar
recommendations. For example, CenturyLink stated that ``the Commission
should prohibit all or all but a very narrow class of ancillary fees.
Ancillary fees are the chief source of consumer abuse and allow
circumvention of rate caps.'' NCIC stated ``[a]lthough telecom
companies don't normally welcome a regulation, we see the need for the
FCC and state regulators to set a standard rate and fee structure.''
Pay Tel stated ``you ought to get rid of all of them except the fees
where the consumer makes a choice.'' And Securus stated that it
``offered, however, to cease passing through several types of fees and
to cap its fees for optional, convenient payment methods for a period
of five years.''
84. Mandatory Data Collection. ICS providers submitted a
significant amount of ancillary service cost and usage data in response
to the Mandatory Data Collection. The ancillary services data provide
some useful insight into the costs of ancillary services. For example,
the data show that approximately 82 percent of total ancillary costs
incurred by ICS providers pertain to the provision of bill processing
services, particularly for the processing of credit and debit card
transactions. Conversely, only about 10 percent of providers' ancillary
costs pertain to ancillary services that are typically treated as
normal utility overhead. Even so, the data have some limitations given
providers' inconsistent approaches in assessing and labeling such fees,
different allocation methodologies, and different ways of reporting
those costs. The data, while mixed, also show that the per transaction
cost of processing financial transactions point to the reasonable
nature of the $3.00 caps for financial transaction processing fees set
by the Alabama PSC. We seek comment on these general observations and
on the ancillary charge data generally.
2. Legal Authority for Ancillary Charge Reform
85. In the Order, the Commission asserted jurisdiction over
interstate ICS ancillary charges, citing as sources of authority
sections 201(b) and 276 of the Act. Given section 276's mandate of fair
compensation ``for each and every completed intrastate and interstate
call,'' and its inclusion of ``inmate telephone service'' and ``any
ancillary services'' in the definition of ``payphone service,'' we seek
comment on whether section 276 gives the Commission authority to
regulate both interstate and intrastate charges for ICS ancillary
services. While the Commission has
[[Page 69695]]
previously adopted a definition of ancillary charges, we have not
adopted a definition for ``ancillary services'' and therefore seek
comment on such a definition. Additionally, given the absence of any
qualifying statutory language to the contrary, we seek comment on
whether section 276 gives the Commission jurisdiction over charges that
are ancillary to ICS to the extent such services are considered IP-
enabled services. Further, in the Order the Commission asserted in
regard to ICS generally that ``[o]ur exercise of authority under
sections 201 and 276 is further informed by the principles of Title I
of the Act.''
86. We seek comment on whether this assertion also encompasses the
Commission's regulation of services ancillary to the provision of ICS
to the extent that ICS may be considered an IP-enabled service.
Additionally, to the extent that ancillary charges are assessed in
connection with ICS provided through wireless phones, we seek comment
on whether sections 276 and 332(c) confer jurisdiction on the
Commission to reform such fees. We also seek comment on assertions that
charges for ancillary services are primarily related to billing and
collection and therefore may not be considered to be communications
services subject to Commission regulation. Finally, we seek comment on
whether regulation by the Commission of ICS ancillary services should
be treated as a default federal framework, with states encouraged to
adopt additional reforms to the extent they are consistent with the
Commission's regulations. Regarding the jurisdictional nature of
ancillary charges, the Alabama PSC stated that ``any schedule of
ancillary fees applies to both the interstate and intrastate
jurisdictions.'' Are ancillary charges inherently dual jurisdictional
in nature? We seek comment on this assertion and its impact on our
legal authority to regulate such charges.
3. Discussion
a. Prohibition of Certain Ancillary Charges
87. The FNPRM sought comment on whether certain ancillary charges
constituted unjust and unreasonable practices under section 201(b), or
practices that would result in providers being unfairly compensated
under section 276. We now seek comment on prohibiting separate charges
for certain ancillary services that are basic requirements for
consumers to gain access to ICS, and that are typically recovered
through rates as part of normal utility overhead costs. We also seek
comment on capping charges for certain other ancillary services such as
payment processing for credit and debit card payments that enhance
convenience for ICS consumers. We seek comment on whether this approach
will promote the Commission's mandate of ensuring just and reasonable
ICS rates and fair compensation for ICS providers, as well as promote
competition and deployment in the ICS market.
88. The record, including the discussion at the Commission's 2014
ICS Workshop, supports the notion that the Commission should prohibit
separate ancillary charges for services that represent normal utility
overhead but allow other charges for services that represent an
additional option or convenience for consumers. For example, the
Alabama PSC workshop participant stated that its approach ``is first,
establish a basic level of ICS service and what is included in that
basic service at no additional charge to the customer. . . . Beyond
that basic level, the Commission will consider fees.'' The Alabama PSC
participant described its goal to be to ``[m]ake the rates a true
reflection of cost for providing the service.'' Other commenters
support making a similar distinction. For example, Pay Tel's President
stated at the 2014 ICS Workshop ``what I characterize as ancillary fees
are all these extra things that really should be incorporated into the
cost of the call. . . . [T]he fees that should be separated are the
ones that are driven by consumer choice.'' Securus similarly proposed
``not to have any mandatory fees and to have only fees for optional,
convenience-related payment methods.'' The Minnesota Department of
Commerce stated that if an ancillary charge applies ``to all ICS end-
users at a facility, or cannot be avoided by a purchaser of ICS (e.g.,
in a situation in which a no-cost alternative is not offered), the
ancillary charge or line-item fee should be incorporated in the per-
minute rate, and should be subject to the per-minute rate cap.''
89. We seek comment on prohibiting separate ancillary charges for
functions that are typically a part of normal utility overhead and
should be included in the rate for any basic ICS offering. These
functions should include account establishment by check or bank account
debit; account maintenance; payment by cash, check or money order;
monthly electronic account statements; account closure; and refund of
remaining balances. Separate charges for such ancillary services can
often represent unreasonable practices and result in unfair
compensation. For example, the record indicates that GTL currently
requires a minimum deposit of $25 to create a prepaid collect account
for an inmate's family member. If the customer does not spend the $25
in the account, GTL charges a $5 refund charge that is only triggered
once the customer asks for a refund. If the account remains inactive
for 180 days, the remaining funds become the property of GTL. We seek
comment on prohibiting separate charges for these functions and on
whether separate charges for other services should also be prohibited.
Would such prohibitions help ensure just and reasonable ICS rates and
fair, not excessive, ICS compensation?
90. The Alabama PSC implemented such an approach to the regulation
of ancillary charges in its Further Order. It defined basic utility
overhead services as including account set-up, account maintenance,
account funding, payment by check or money order, monthly electronic
billing statements, and refunds, declining to authorize separate fees
for these services. The Alabama PSC took other steps to address fees
and practices, including barring payment limits for certain forms of
customer payments, barring wireless administration fees for linking
wireless numbers to an account, and requiring providers to include up
to five pre-approved numbers on the call list for prepaid ICS at no
charge. In contrast, it authorized, but capped, separate ancillary
charges for other services, including debit/credit card payment,
payment via live agent, bill processing for collect calls billed by a
call recipient's local telecommunications service provider, third party
payment services, inmate canteen/trust fund transfers, and paper
billing statements. We seek comment on whether the Alabama PSC's
approach to prohibiting certain fees and capping others is reasonable
and would lead to just and reasonable rates and fair ICS compensation.
We also seek comment on the approach taken by the New Mexico Public
Regulation Commission, which adopted a similar but more proscriptive
approach, barring all fees except payment processing fees for credit
card or check by phone payments and a refund fee.
91. We seek comment on other proposals in the record to reform ICS
ancillary charges. The Wright Petitioners recommend prohibiting all
ancillary charges but, if the Commission were to permit ancillary fees,
it suggests adopting an approach similar to Alabama's and New Mexico's.
The Prison Policy Initiative recommends ``ban[ning] all illegitimate
fees.'' Several ICS providers also recommend
[[Page 69696]]
reforming ancillary charges. Pay Tel recommends that ancillary charges
be ``generally prohibited, subject to a narrow list of clearly-defined
exemptions,'' particularly ``fees associated with the processing of
payments.'' CenturyLink suggests similar treatment. Securus proposes
eliminating all mandatory fees, bill statement fees, federal regulatory
recovery fees and state cost recovery fees, and capping all convenience
fees, including transaction funding fees, for five years.
92. We also seek comment on the Joint Provider Reform Proposal,
which includes a proposal ``that ancillary fees are limited to a
specified list of permissible fees,'' proposing to eliminate a number
of types of fees, including per call fees, account set-up fees, billing
statement fees, account close-out and refund fees, wireless
administration fees, voice biometrics and other technology fees, and
regulatory assessment fees and the capping of rates for remaining fees.
The Proposal also requires providers to offer free payment processing
options such as payment by check or money order when offering single
call payment options. The Alabama PSC raised concerns with the Joint
Proposal, including its treatment of site commissions, proposed rate
caps that purportedly overcompensate providers serving prisons, and
proposed ancillary fees that it asserted would result in substantial
net revenue increases for providers. Pay Tel also identified concerns
with the Proposal, stating that it ``lacked legitimacy from a number of
perspectives'' and ``would allow the Proposers . . . to continue to
burden inmates and their friends and family with excessive fees and
practices that significantly and unjustifiably increase the cost of
ICS.'' The Alabama PSC's and Pay Tel's concerns are addressed at
greater length below. Will the suggestions in the Joint Provider Reform
Proposal result in just and reasonable rates for consumers and fair,
not excessive, compensation? If the use of ancillary charges was driven
by pressure from increasingly high site commissions and the Commission
were to prohibit site commissions, is there continued justification for
allowing providers to assess ancillary fees generally?
93. If the Commission were to prohibit some ancillary charges,
should ICS providers be required to seek prior Commission approval
before assessing a new ancillary charge? If so, what should such an
approval process involve and what information should providers file?
Certain states already require prior approval of new ancillary charges.
Should states continue to play such a role even if the Commission
regulates ICS ancillary charges? In lieu of seeking approval, should
ICS providers file a notice about a change such as 60 days before? If
we take this approach, should the new fee be allowed to go into effect
absent Commission or a state action? We seek comment on these
approaches, including the administrability and relative burden
associated with each approach.
b. Rate Caps for Ancillary Charges
94. We seek further comment on whether the Commission should set
rate caps for ancillary charges that it finds permissible to ensure
those charges are just and reasonable and ensure fair compensation.
Commenters, including some ICS providers, support the use of rate caps.
Some commenters note with approval the Alabama PSC's Further Order that
capped rates for ancillary charges it allows. For example, the Wright
Petitioners support the use of rate caps for ancillary charges if the
Commission decides to authorize them, and cites with approval the two
states that already proposed taking such a step. Would either the
Alabama PSC's or the New Mexico PRC's approaches to capping ancillary
charges be appropriate models for the Commission to consider? If the
Commission were to establish rate caps for ancillary charges it did not
prohibit, what would be appropriate levels for such rate caps? We seek
comment specifically on the Alabama PSC's rate caps for debit and
credit card payment fees via the web, an IVR, or a kiosk ($3.00
maximum) and for live operator assisted payments ($5.95 maximum). NCIC
and Pay Tel expressly support ancillary charge rate caps at these
levels, as other ICS providers reportedly have. How do these rate caps
compare to providers' costs?
95. In the alternative, we seek comment on whether we should
prohibit separate ancillary fees and instead permit the recovery of
such costs using a per minute rate cap. The data submitted by ICS
providers on the cost of processing financial transactions yields a
wide range of per-minute costs. We seek comment on establishing a per-
minute ancillary charge rate cap or safe harbors. If so, how should
these charges be set and what level is appropriate? If so, what would
permanent rate caps inclusive of such charges be?
96. We also seek comment on the Joint Provider Reform Proposal
which proposes to (1) cap deposit fees to fund prepaid and debit ICS
accounts at $7.95 for three years, (2) allow providers to charge a
$2.50 administrative fee to process payments made through third party
payment processing companies such as Western Union and MoneyGram in
addition to the fees they charge, (3) allow providers to charge a per
call validation fee of eight percent to compensate providers for call-
specific security functions, and (4) cap fees for ``convenience or
premium payment options'' for single call services at current rates for
three years. The Alabama PSC generally opposes these fee proposals.
AmTel agrees and asserts that the ``Proposal is very misleading and
will not lower prices to inmate families.'' Pay Tel comments that the
consumer benefits of the proposed ancillary fees' `reduction' are
illusory. For example, Pay Tel suggested that ``[v]alidation is a
legitimate expense, but one that is included in Pay Tel's normal cost
of providing service. In no event does this expense rise to the level
of 8% of gross call revenue.'' We seek comment on whether these
proposals would ensure reasonable rates and fair compensation. How do
these proposed caps compare with providers' costs? How do they compare
with previous proposals made by ICS providers?
97. The following table is provided as a means of facilitating
comparison of several of the ancillary charge reform proposals
referenced herein. The fees included in this table represent a non-
exhaustive list of fees addressed in the various proposals.
Table Two
----------------------------------------------------------------------------------------------------------------
Ancillary charge proposals
--------------------------------------------------------------------------
Alabama PSC further ICS provider reform
order proposal Pay Tel proposal
----------------------------------------------------------------------------------------------------------------
Check/money order payment............ No charge.............. No charge.............. No charge.
Debit/credit card payment or deposit $3.00 cap (web/IVR).... $7.95 cap for 3 years.. $3.00 cap (web/IVR).
fees. $5.95 cap (live $5.95 cap (live
operator). operator).
[[Page 69697]]
Single call/single payment services.. Sum of $3.00 cap on Cap at existing fees Jails (ADP 1-349):
bill processing fee (as high as $14.99 $6.12.
plus capped per minute billed to card, $9.99 Jails (ADP 350+):
charge for a 12 minute billed to cell phone) $5.64.
call. for 3 years. Prisons: Prohibit
service.
Account set-up, maintenance, closure, Prohibited............. Prohibited............. Not addressed.
and refund fees.
Bill processing fee for collect calls $3.00 cap.............. Not addressed.......... Not addressed.
(by call recipient's carrier).
Bill statement fee................... No charge for Not addressed.......... No charge for
electronic bill. $2.00 electronic bill. $2.00
cap for paper bill. cap for paper bill.
Money transfer fees.................. Fees above $5.95 Existing fees (as high $5.95 cap (Western
require affidavit and as $11.95) plus an Union).
are subject to additional $5.65 cap (MoneyGram).
investigation. administrative fee No additional fee.
capped at $2.50.
Regulatory cost recovery fees........ State regulatory cost Various regulatory cost Not addressed (but pass
recovery fees recovery fees through government
prohibited. prohibited (but mandated taxes and
``federal and state fees).
regulatory fees''
allowed).
Security fees........................ Allow separate security Validation fee of up to $0.02 per minute voice
biometrics fee. 8% per call. biometric fee (only
Prohibited fees where deployed; lower
include VINE, location in prisons).
validation fees, voice Vendors may apply for
biometrics fees, and new technology fees.
technology fees.
----------------------------------------------------------------------------------------------------------------
c. Charges for Other Services
98. Single Call Services. ICS providers also make available so-
called single payment or single call services. These services enable
the billing of ICS collect calls through third party billing entities
on a call-by-call basis to parties whose carriers refuse to bill
collect calls. The Alabama PSC addressed single call services in its
Further Order, asserting jurisdiction over intrastate single call
services and capping the rates ICS providers may charge for them. By
some accounts, the use of single call services has increased
dramatically, particularly since the adoption of the Inmate Calling
Report and Order and FNPRM. One commenter stated that such services
have recently been estimated to account for as much as 40 percent of
provider revenues. We seek further comment on the prevalence of the use
of single call services in the ICS industry. Have such services become
more prevalent in the market since the Commission's Order? If so, why?
Are such services effectively an end run around the Commission's rate
caps or are customers fully apprised of the higher costs and select
such services for convenience or value? We also seek comment on how
significant a role such services play in the ICS market today and what
usage trends for such services are likely to be.
99. While ICS providers appear to offer single call services under
a variety of names, they appear to be generally two types. The first
involves a one-time credit or debit card payment to enable the
completion of a single collect call to a wireline phone. Examples of
this type of single call service include Securus' ``Pay Now'' and GTL's
``Collect2Card'' services, both of which are priced at a flat rate of
$14.99 per call, substantially higher than the Alabama PSC's proposed
interim intrastate rate caps. A second type of single call service
involves a similar payment arrangement for the completion of a single
collect call to a wireless phone, the charge for which is confirmed by
a text message to the called party's wireless phone. Examples of this
type of single call service include Securus' ``Text2Collect'' and GTL's
``collect2phone'' services, both of which are priced at a flat rate of
$9.99 per call, also well above the Alabama PSC's intrastate rate caps,
as well as the Commission's interstate rate caps. Do charges for such
services circumvent or violate either set of rate caps or are such
services sufficiently distinct from collect ICS to warrant separate
pricing? Both types of single call services are charged on a flat rate
basis, regardless of call duration, further distorting the effective
per-minute charge consumers pay and raising concerns about multiple
charges in the case of inadvertent call disconnection. Consumers using
these services may be unaware that they could dramatically reduce the
charges for ICS simply by establishing an account with an ICS provider.
Some ICS providers have been successful in educating consumers on lower
cost options. We seek comment on whether these rates are just and
reasonable and whether they ensure fair and not excessive compensation
for providers. We also seek comment on whether ICS providers incur
additional costs in providing single call services, and if so, what
they are.
100. Providers have challenged the Alabama PSC's jurisdiction over
both types of single call services. In the case of single call services
to wireline phones, ICS providers disputed the Alabama PSC's authority
to regulate such services, citing interference with their contractual
relationships with third party billing and payment processing entities
which typically contract with ICS providers to provide the service. The
Alabama PSC characterized these entities as ``third party billing
aggregators'' which performed the ``the billing and delivery functions
for ICS calls.'' We seek comment on the nature of these services and
the types of functions such entities provide. For example, do these
third parties perform functions analogous to those performed by third
party billing entities used by local exchange carriers? Do the third
parties actually contribute any facilities or services used to provide
these services? The Alabama PSC also noted that ICS providers advertise
and provide these services in their own name and bills refer consumers
to an ICS provider Web site. The Alabama PSC determined that it had
``jurisdiction over the charges for collect calls originating from
Alabama confinement facilities regardless of any intermediaries the ICS
provider chooses to include prior to call termination.'' We seek
comment on whether Commission regulation of single call services would
[[Page 69698]]
not impermissibly infringe on such contractual relationships.
101. In the case of single call services to wireless phones, ICS
providers have asserted that such services are not subject to state
commissions' authority since they entail the use of a text message to
confirm the source and charges for the call and involve calls to
wireless phones, the rates for which are not subject to state
jurisdiction. We seek comment on the concept that neither the fact that
such calls are preceded by a text message nor the fact that the called
party uses a wireless phone alters the nature of the ICS provided. If,
however, the Commission were to determine that either of these factors
is relevant to determining the nature of the ICS, we seek comment on
whether the Commission's section 276 jurisdiction over all forms of ICS
give it authority to regulate such services.
102. The Alabama PSC set a rate cap for single call services at a
flat rate amount that included a billing or payment charge capped at
$3.00 per call and a usage charge derived from its per-minute rate
caps. We seek comment on this approach. Should the Commission adopt a
rate cap for single call services? Should ICS providers be required to
charge a per-minute rate on the basis of actual call duration? Should
the rates for such calls reflect the per-minute charge for collect
calls along with an appropriate bill or payment processing fee? Should
there be a transition period to allow providers to adapt their single
call service offerings? Are ICS providers required to publish on their
Web sites their charges for single call services and notify consumers
of the option of establishing an account to obtain a more reasonable
rate? Alternatively, should these services be considered ancillary
services?
103. Money Transfer Services. The FNPRM sought comment on fees
assessed by third parties such as Western Union and MoneyGram to
process debit and prepaid account payments for ICS. The Prison Policy
Initiative previously noted that third party payment processing fees
for the provision of ICS are typically higher than such fees in other
industries and suggested that ICS providers were receiving compensation
from such third party service providers. We seek comment, data and
other evidence on how prevalent the use of third party money transfer
services is and what percent of account funding is accomplished through
such services. We also seek comment on the Alabama PSC Proposed Order
which acknowledges that money transfer ``fees are set by these
financial services but [the PSC] is also aware that agents hosting such
services are paid a portion of the fee.'' The Alabama PSC Proposed
Order states that ``ICS providers are prohibited from receiving any
portion of fees paid by their customers to third-party financial
services.'' It also proposed a rate cap of $5.95 per transaction, above
which providers would face an investigation of their rates and
potential refund liability. Similarly, CenturyLink suggests that
``[c]ertain consumer-optional third party fees such as Western Union
charges should be allowed, but without mark-ups, revenue sharing
arrangements or volume rebates.'' In contrast, the Joint Provider
Reform Proposal suggested adding an additional administrative fee of a
maximum of $2.50 per transaction on top of existing money transfer
fees. We seek further comment on these proposals and on whether ICS
providers' receipt of payments from payment processing companies in
connection with their provision of ICS represents an unreasonable
practice under section 201(b) or results in unfair compensation under
section 276.
104. We seek comment on how the Commission should ensure that money
transfer service fees paid by ICS consumers are just and reasonable and
represent fair compensation. Are money transfer services ancillary
services under section 276(d)? Are they a practice that causes unjust
rates or unfair compensation? Are such charges encompassed by the
definition of ``ancillary charges'' in the Commission's rules? To the
extent they involve charges placed by a third party on a call
recipients' phone bill, are they analogous to third party fees that are
the subject of our ``cramming'' rules? To ensure just and reasonable
rates and fair compensation, should the Commission prohibit ICS
providers from entering into revenue sharing arrangements with money
transfer services, receiving payments from such services, or including
the costs of such services in their rates? To enforce a similar
prohibition, the Alabama PSC proposes to require ICS providers
operating in the state to report the payment transfer fees third
parties charge their customers. It also proposes to require providers
to justify fees over $5.95, and subject such fees to investigation and
potential refund liability. Should the Commission adopt a similar
enforcement mechanism? Should it allow states to enforce such a
mechanism? What impact would any such requirements have on contracts
between ICS providers and third party money transfer services? The
Alabama PSC notes that, according to its research, contracts between
ICS providers and Western Union may be cancelled on 30 days' notice. It
also notes that Western Union contracts with providers include a
provision requiring vendor compliance with all regulatory requirements
and laws. Do commenters' experiences confirm the Alabama PSC's
observations? Are there other approaches to enforcement that the
Commission should consider?
105. Regulatory Recovery Fees. Commenters have previously
highlighted ICS providers' use of fees to recover the cost of
regulatory compliance. The amount of such fees industry-wide can be
quite substantial. The Alabama PSC noted that ``[s]everal ICS providers
presently absorb regulatory costs electing not to charge consumers a
separate recovery fee'' and barred separate intrastate regulatory fees,
stating that their rate caps were ``sufficient to recover reasonable
regulatory costs incurred by the provider.''
106. A number of ICS providers have also opposed the use of
regulatory recovery fees. The Joint Provider Reform Proposal recommends
eliminating various types of regulatory recovery fees and does not
include such a fee among the fees it proposes to retain. Pay Tel, in
its advocacy before the Alabama PSC, stated ``these expenses are a cost
of doing business reflected in the overall average cost per minute. Pay
Tel supports the prohibition of such fees.'' Securus proposes to
eliminate its Federal and State regulatory recovery fees. We seek
comment on whether the cost of regulatory compliance should be
considered a normal cost of doing business and as such should be
recovered through basic ICS rates, not additional ancillary fees. In
the alternative, if the Commission permits the separate recovery of
regulatory fees, should it require that they be broken out as a line
item on an ICS end users' billing statement?
107. Security Fees. Some ICS providers suggest that the Commission
allow fees to recover new security technology expenses for correctional
institutions. The Joint Provider Reform Proposal proposed the
elimination of three or four types of fees likely related to security
and the retention of a single technology-related fee. However, as part
of its comprehensive proposal, Securus suggests that providers be
allowed to charge ``incremental product pricing above rate caps if
necessary'' for ``safety and security features'' and proposes such
charges ``be filed with [the] FCC for approval.''
[[Page 69699]]
108. We seek comment on whether security costs represent a core
function in the provision of ICS, the costs of which should be included
in rates and not as ancillary fees. The Commission's interim interstate
rate caps were based on ICS providers' cost data that included the
costs incurred in developing, deploying and provisioning security
features. The Order also expressly accounted for the cost of continuous
voice biometrics in its debit and prepaid rate cap it adopted. Pay
Tel's Proposal suggests that a voice biometric fee of $0.02 per minute
be applied to its proposed rates. If the Commission were to allow
providers to assess customers separate ancillary charges for such
services, how would it evaluate providers' claims regarding the need
for such functions or their cost? How would it ensure that ICS
providers were not recovering the cost of security features twice--once
through their rates and again through an ancillary charge--short of a
full analysis of the provider's costs? If the Commission were to allow
separate fees to recover security costs, should it require prior
approval or 60 days' notice for such charges?
d. Consumer Disclosures
109. We also seek comment on how to ensure that rates and fees are
more transparent to consumers. We therefore seek comment on the
requirement that ICS providers notify their customers regarding the ICS
options available to them and the cost of those options. One ICS
provider underscores the importance of ``educating the consumer, giving
them the choice, what's the most economical way if they want to get
money on an account and do it quickly.'' The same provider states that
when it advertises on its Web site the most economical way to fund ICS
calls, a substantial percent of its customer base uses that method,
reducing consumer expense significantly. ICS providers that offer
interstate toll service are already required to post their rates on
their Web sites and, to the extent they offer inmate operator services,
their live agents are already required to make certain notifications to
customers. Should providers' Web sites, automated IVRs, and live agents
be required to offer in a more prominent fashion no-cost or lower-cost
options available to consumers before offering other, higher-priced
optional services? To what extent would any such regulation implicate
the First Amendment? Should the Commission take other steps to ensure
consumers are aware of lower-priced service options?
110. The Joint Provider Reform Proposal acknowledged existing
requirements to publish ancillary fee rates on providers' Web sites and
offered a detailed proposal regarding notification requirements for
financial transactions, including:
The ICS provider shall fully inform customers of all
payment methods available (including the no-charge option), the payment
processing charges associated with each payment method, and the
estimated time required to establish service applicable to each payment
option.
The ICS provider shall clearly and conspicuously identify
the required information. The information should be presented clearly
and prominently so that it is actually noticed and understood by the
customer.
[cir] The ICS provider shall provide a brief, clear, non-
misleading, plain language description of the required information. The
description must be sufficiently clear in presentation and specific
enough in content so that the customer can accurately assess each of
the available payment methods.
[cir] An ICS provider shall clearly and conspicuously disclose any
information the customer may need to make inquiries about the available
payment methods, such as a toll-free number, email address, or Web site
address by which customers may inquire or dispute any charges. An ICS
provider shall include any restrictions or limitation applicable to
each payment method available.
In its proposal Pay Tel suggests that:
Vendors must post facility-specific rates and fees for all
services, to be visible to inmates on-site and to consumers on the
Vendor Web site prior to setting up an account.
Vendor Web sites must provide a link to the FCC
Enforcement Bureau Web site and the applicable State Regulatory Agency
Web site.
Posting/Notice Must Include:
[cir] Call rates and transaction fees (at time of call, printed
material available at facility, Automated IVR, Live Agent & Web site).
[cir] Refund instructions (Web site).
[cir] Terms and conditions for service (Web site).
[cir] Cost information for calls, email and messaging services,
video visitation and any other communication services offered (Web
site).
We seek comment on these proposals as they relate to ICS financial
transactions and more generally to ICS practices in general. We also
seek comment on alternative proposals to make rates and fees more
transparent to inmates, their families, friends and other users of
inmate calling services.
e. Other Issues
111. Some ICS providers impose additional policies beyond their
assessment of ancillary fees that further restrict consumers' access to
ICS. In regard to such policies, CenturyLink expresses the concern that
``policies such as funding minimums and maximums, prepaid account
refund requirements, and account expiration policies must be tightly
controlled to avoid gaming.'' We seek comment on whether we should
prohibit ICS providers from these and similar practices that
effectively limit end users' ability to access and use ICS. What other
types of limiting practices should we prohibit or restrict to preclude
such gaming?
112. GTL asserts that the Commission's Truth-in-Billing rules give
providers flexibility to recover their costs either through rates or
other line item charges. The Minnesota Department of Commerce asserts
that ancillary charges that exceed a provider's costs are inherently
deceptive and violate the Commission's Truth-in-Billing rules. We seek
comment on whether it would be necessary to harmonize Commission
regulation of ICS ancillary charges with its Truth-in-Billing rules. To
the extent that such fees are not commensurate with providers' costs,
does existing precedent support the view that those fees violate the
Truth-in-Billing rules, or should we clarify that the fees are
considered misleading and a violation of the Commission's Truth-in-
Billing rules, unreasonable under section 201(b) or unfairly
compensatory under section 276? Should the Commission clarify that
pursuant to section 276, Truth-in-Billing rules apply to all ICS
providers, including any that may claim they provide VoIP services?
D. Additional Ways To Promote Competition
113. Over the last 30 years, real competition, as opposed to rate
regulation, has been the preferred method to advance consumer
protection, lower rates, increase feature and functionality of
equipment and services, reduce the government involvement and costs,
and improve the overall consumer experience. To date, however,
correctional facilities generally have not permitted competition for
consumers within the ICS market.
114. As an alternative to the ideas explored in this item to reduce
inmate calling rates, we continue to explore whether the advent of
competition within the inmate facilities may provide
[[Page 69700]]
a different course of action. The 2013 Inmate Calling Report and Order
and FNPRM sought comment on how to promote competition within the
correctional facilities, but the Commission received insufficient
information in response to the questions posed, so we seek to provide
more targeted questions in order to solicit further responses.
Accordingly, we seek further comment on ways to remove barriers to
entry and promote competition in the ICS market. Aspects of the current
ICS market appear to contribute to the market failure. One is the
practice of site commission payments, and we seek comment above on
whether, and under what authority, the Commission should restrict such
payments. Another is the fact that correctional facilities award ICS
providers exclusive contracts and therefore do not permit competition
within the facilities. The Commission previously sought comment on the
impact of exclusive contracts and whether they should be prohibited.
While some commenters opposed the idea due to security and cost
concerns, another commenter suggested that the Commission revisit
whether those concerns continue to justify exclusive contracts in light
of technological advances. We seek additional comment on these views.
Moreover, some commenters have questioned whether facilities incur any
additional costs for the provision of ICS and we seek comment above on
quantifying these costs. If facilities do not incur costs when there is
one provider, what additional costs are incurred by introducing
multiple providers? We ask commenters to specify and quantify any
additional costs.
115. We also seek comment on whether there are other barriers and,
if so, what steps we should take to address them and under what
authority. For example, are there ways to allow greater competition
within ICS without banning exclusive contracts? Are providers willing
to compete on price, quality of voice and/or video service, service
disruption and outage rates, and other factors that would be applicable
with multiple providers? Would multiple providers be willing to serve
an inmate facility if there is already an established provider? What
impact could new technologies have on competition within inmate
facilities?
E. Harmonization of State Regulations Under Section 276(c)
116. In this section, we seek comment on how state reform of ICS
may be harmonized with any federal framework we may adopt and on the
continuing roles states should play in advancing ICS reform. In the
FNPRM, the Commission ``tentatively conclude[d]'' that section 276
``affords the Commission broad discretion to . . . preempt inconsistent
state requirements.'' In response, some commenters opposed state
preemption, while others supported it as crucial to the Commission's
reform efforts. While we seek comment on whether it is necessary to
have a comprehensive framework for interstate and intrastate ICS, we
nonetheless seek comment on how consistent state regulation of ICS
could be harmonized with our framework. For example, should we
establish guidelines regarding what a state would have to do on ICS
reform to not be preempted? What would those guidelines include? Should
we include reform of site commission payments, rate caps, actions
addressing state prisons, as well as county or city jails?
117. We recognize the substantial ICS reform already accomplished
in a handful of states such as Alabama, New Jersey, New York, and New
Mexico. Such states have provided important leadership in the effort to
reform ICS. In the FNPRM, the Commission commended such states and
``encourage[d] more states to eliminate site commissions, adopt rate
caps, disallow or reduce per-call charges, or take other steps to
reform ICS rates.'' In her opening remarks at the 2014 ICS Workshop,
Commissioner Clyburn urged states to ``follow the FCC's lead, grab the
baton, and enact their own reforms.'' Some states have taken steps to
advance ICS reform since the release of the Order. New Jersey, for
example, has set lower rates for ICS. Alabama has recently proposed
comprehensive regulation of intrastate ICS. However, the vast majority
of states have not taken up our repeated calls for ICS reform. In
addition, states have inconsistently addressed site commission
payments. For example, while the Order noted seven states that had
eliminated site commissions for intrastate ICS, by implication the vast
majority have not. We again encourage states to act on ICS in their
jurisdictions and note that state action that is consistent with the
regulations that the Commission ultimately adopts would not be subject
to preemption. We also recognize, however, that most states either
cannot or will not act and the Commission must adopt a nationwide
framework to apply in these states to ensure that ICS rates are just,
reasonable and fair.
118. We seek more focused comment on section 276(c), which states
in reference to payphone regulation that ``[t]o the extent that any
State requirements are inconsistent with the Commission's regulations,
the Commission's regulations on such matters shall preempt such State
requirements.'' We believe that the Commission has broad discretion to
find that a particular state requirement, or category of state
requirements, is either consistent or inconsistent with Commission ICS
regulations under section 276(c). We also seek comment on the whether
preemption is self-effectuating under section 276(c) and will occur
automatically as a consequence of the inconsistency.
119. If preemption is not self-effectuating, and there is no
Commission decision defining the scope of any inconsistency between
federal and state requirements, how would states and other parties know
that a particular state requirement had been preempted because it was
inconsistent under section 276(c)? In the absence of a prior Commission
decision, should any disputes regarding the inconsistency of a state
requirement be resolved by the Commission on a case-by-case basis:
e.g., through declaratory ruling or the section 208 complaint process?
Are certain types of state requirements inherently ``inconsistent''?
Other preemption provisions in Title II of the Act require the
Commission to make certain decisions before a state law can be
preempted, whereas section 276(c) does not directly address the issue.
120. Exemptions to Preemption. To encourage states to reform ICS,
the FNPRM also sought comment on possible exemptions to preemption,
asking whether ``the Commission [should] only take action to reform
intrastate ICS rates in states that have not reformed rates to levels
that are at or below our interim safe harbor.'' We expand on this
concept here. What specific types of state actions to reform ICS should
the Commission interpret as consistent with its regulations? Should,
for example, the Commission list scenarios in which state regulations
would be presumed to be consistent with the federal framework, such as
when states address site commissions and reform ancillary charges? If
so, what should the Commission consider ``reform'' or ``partial
reform'' in this context? For example, we note that the Alabama PSC
proposes capping ancillary fees but maintaining site commission
payments. If the state regulates ICS rates in a manner that is
consistent with Commission regulations, but regulates ancillary
services in a manner inconsistent with Commission regulations, would
all state regulations be viewed as preempted, or
[[Page 69701]]
would just the regulation of ancillary services be treated as
preempted? To the extent the question would depend on how the
Commission crafts its regulations, should the Commission design them in
a way that makes inconsistency regarding one dimension severable from
consistency regarding other dimensions? If so, how?
121. One FNPRM commenter suggests a ``cooperative federalism''
approach that would allow ``states to regulate intrastate rates
provided that the regulatory framework complies with the core
principles contained in the Order.'' We seek further comment on this
and other approaches to harmonizing federal and state ICS reform. Some
states have adopted laws that effectively require intrastate ICS rates
to be provided at below-cost rates, with the difference presumably to
be recouped by charging interstate rates that are set significantly
above costs. Would any such state laws that require below-cost
intrastate ICS rates be consistent with a Commission cap on intrastate
ICS rates, even if the state rate was more ``aggressive'' than the
Commission cap? For example, if the Commission adopts a per-minute cap
on ICS rates, should states be free to regulate the level of per-call
and per-minute charges for intrastate ICS so long as the resulting
charge for a call of a particular duration is within the Commission's
cap? Should states have other flexibility as it relates to site
commission payments, ICS rates, charges for ancillary services, or
other ICS regulation? If so, how can the Commission craft its
regulations so that such state ICS reforms are interpreted as being
consistent with its regulations? Should the Commission be concerned
that some state reform actions could undercut the market-based approach
that we seek comment on herein? How would the Commission then balance
the benefits of encouraging state reform efforts with the need to
ensure just and reasonable rates and fair compensation for ICS, as
required by sections 201 and 276 of the Act?
122. If the Commission's final ICS rules are silent on certain
issues (for example, arguendo, quality of service regulation), we seek
comment on how the Commission should interpret state rules. Does the
Commission have broad authority to enforce section 276(c) on a case-by-
case basis even in situations where it has not previously adopted an
applicable rule or provided relevant guidance? If a state commission
has an active ICS proceeding, is it consistent with section 276(c) to
permit the state commission a reasonable period of time to complete its
proceeding prior to a Commission determination of whether such state
reform is consistent with Commission reform? What might constitute such
a reasonable period of time?
F. Existing Contracts
123. Background. The Wright Petitioners previously discussed the
possibility of a one-year fresh look period, essentially a one-year
period during which existing ICS contracts may be revised regardless of
terms within the contracts that may prohibit such action. The
Commission sought comment on this proposal in the 2012 ICS NPRM.
124. In the Order, the Commission did not directly override
existing contracts between correctional facilities and ICS providers.
Rather, the Commission noted that if ``any particular agreement needs
to be revisited or amended . . . such result would only occur because
agreements cannot supersede the Commission's authority to ensure that
the rates paid by individuals who are not parties to those agreements
are fair, just, and reasonable.'' The Commission acknowledged that
``[t]o the extent that the contracts contain `change of law'
provisions, those may well be triggered by the Commission's action
today.''
125. Discussion. We seek comment on the implementation of the
requirements adopted in the Order and their impact, if any, on ICS
contracts. The record indicates that the interim rates were implemented
with little to no contract renegotiation. The record also indicates
that several ICS providers have unilaterally made decisions about site
commission payments without initiating contract renegotiations or
cancellations. Is this accurate? We seek comment on any challenges
associated with these practices. To the extent that commenters suggest
alternatives to the regulatory approaches discussed above that could
modify or otherwise affect existing agreements, we seek comment on the
Commission's authority to take such action, why it should exercise such
authority, and how any modification or other effect on existing
agreements should be implemented.
126. We seek comment on a transition period for comprehensive ICS
reform. Given the transition that we seek comment on herein, we seek
comment on whether we should retain the approach in the Order and allow
for change-of-law provisions to govern changes or whether we should
take an alternative approach with respect to existing contracts. Should
we allow for a ``fresh look'' to enable providers to renegotiate
contracts or do most contracts include change-in-law provisions so a
fresh look is not warranted? If the Commission adopts a transition
period for existing ICS contracts, should it stagger the transition
period as previously suggested by Telmate? Specifically, Telmate
suggests that ``[s]taggering the fresh look window among the many
thousands of ICS contracts nationwide . . . [is] the only practical way
to harmonize the existence of long-term contracts and the unreasonable
burden on smaller ICS providers in competing for correctional facility
business at thousands of locations at the same time nationwide.'' If
so, should the Commission stagger any transition period based on
contract expiration dates or some other metric?
127. Alternatively, we seek comment on whether we should abrogate
ICS contracts or modify particular terms of such contracts. Will
abrogation of contracts that are focused on site commission payments
better enable the market-based approach described herein to be
implemented? In the Order the Commission concluded that it has the
authority to abrogate or modify contracts. We seek comment on our legal
authority to do so. In the alternative, should the Commission
grandfather existing ICS contracts for some period of time and then
allow them to expire? Given that ICS contracts are often multiple years
in duration, is it consistent with the statute's requirement that ICS
rates be just, reasonable and fair if we allow such rates to continue
for an extended period of time? Are there ways the Commission could
mitigate the possible disadvantages of a grandfathering approach? We
seek comment on these issues, including our legal authority for each
approach.
G. Transition Periods
128. In the Order, the Commission delayed the effective date of the
new rules until 90 days following publication in the Federal Register
to give parties ``time to renegotiate contracts or take other
appropriate steps.'' The FNPRM sought further comment on ``how the
Commission should proceed in establishing ICS rates for interstate and
intrastate ICS.'' Comments were mixed. Several commenters requested
that, if the Commission takes further steps toward ICS reform, it
implement a transition period ``that is sufficiently long to enable
correctional facilities to revise budgets and find replacement sources
of funding.'' Conversely, one commenter opined that rate changes
pursuant to the interim Order may have been accomplished through a
simple notification letter from ICS providers to correctional
facilities.
[[Page 69702]]
129. Discussion. The ICS providers that submitted the Joint
Provider Reform Proposal suggest that ``[t]he new rate caps should
become effective 90 days after adoption, along with any site commission
reductions and ancillary fee changes outlined below.'' The providers
that submitted the Proposal assert that ``[t]his period for
implementation should ensure ICS providers and correctional facilities
have adequate time to implement the new rate caps and any corresponding
reductions in site commissions, including any contract amendments or
adjustments that may be necessary.'' Pay Tel suggests a 90-day, after
final order publication transition period for transaction fees, third
party money transfer service fees, and ancillary fees and an 18-month
transition period for jail and prison rate caps. Commenters advocating
for a transition to the new rate caps should identify the appropriate
transition and the justification for doing so.
130. We seek comment on whether 90 days after the effective date of
the order is the appropriate transition to comply with all new
requirements, including any rate caps, elimination of per-call charges,
and ancillary fee changes for existing contracts. We also seek comment
on whether any new ICS contracts entered into after adoption of an ICS
reform order must comply with the terms of the order immediately after
the effective date of the order.
131. In addition, we seek comment on a two-year transition period
or at least one state or state subdivision budget cycle to transition
away from site commission payments to allow facilities and states time
to adjust. If we adopt a cost recovery amount for facilities, how
should the transition be implemented in a manner that does not delay
comprehensive reform? How would the transition work if the Commission
gave a 90-day transition for rates to be at or below the cap, while
allowing two years for site commissions to be eliminated? Would a
period of two years allow sufficient time for correctional facilities
to prepare for forthcoming ICS reform and its effect on their budgets?
Or should we consider a longer transition such as a three year
transition? Should the transition be shorter to minimize the potential
for abuse? If so, should the transition be one year, the same as the
90-day transition to rate caps, or something else? The record suggests
that site commission payments make up less than five-tenths of a
percent of facilities' operating budgets. Securus suggests that site
commissions should be completely eliminated by January 1, 2016 and rate
reform should also be accomplished by that date. We seek comment on
these proposals.
132. If the Commission adopts a two-year transition to the
elimination of site commission payments, how should the payments be
reduced? Should they be reduced in equal increments over two years, or
should we align the reductions to state or state subdivision budget
cycles? How have other states that reduced or eliminated site
commissions implemented this change? Did they adopt a transition plan
or implement the change immediately? We seek comment on whether any new
contracts that include any potential cost recovery payments to
facilities and a ban on site commissions that are entered into after
the adoption of the final order be required to comply with the order.
Should there be exceptions to a transition period based on whether
interstate or intrastate rates are already below the prescribed rate
level?
H. Accessible Inmate Calling Services
133. Our goal with ICS reform is to ensure that ICS is accessible
to all inmates and their families at just and reasonable rates that
represent fair compensation to ICS providers. Below, we seek focused
comment on several disability access issues raised in the Inmate
Calling Report and Order and FNPRM that merit further inquiry.
134. Background. In the Order, the Commission highlighted the
telecommunications challenges faced by inmates who are deaf and hard of
hearing, as well as by inmates communicating with family members or
friends who are deaf and hard of hearing, such as extremely high rates
for calls placed via the Telecommunications Relay Service (TRS). In the
Order, the Commission ``clarif[ied] that ICS providers may not levy or
collect an additional charge for any form of'' telecommunications relay
services (TRS) call because ``such charges would be inconsistent with
section 225 of the Act.'' However, the record indicates continuing
problems, such as, for example, ``nearly half of deaf inmates surveyed
did not have access to TTY at their facilities.''
135. In the FNPRM, the Commission sought comment on a number of
questions to ensure that ICS is accessible. The Commission also
tentatively concluded that inmate calling service rates per-minute for
TTY calls should be set at 25 percent of the safe harbor rate for
inmate calls, and sought comment on this proposal. The Commission
sought comment on how ICS providers should recover the costs of
providing such discounted TTY calls, and on the possibility of allowing
ICS providers to recover the cost of a TTY call from the
Telecommunications Relay Service Fund. In the Joint Provider Reform
Proposal, the providers ``commit to continue to comply with their
existing obligations'' under applicable laws, and ``also will work
closely with correction facilities `to ensure that deaf and hard of
hearing inmates are afforded access to telecommunications that is
equivalent to the access available to hearing inmates.' '' Pay Tel's
Proposal states that ``ICS Vendors will work with confinement
facilities where requested to enable video relay services,'' ``[c]omply
with all existing obligations and laws regarding service people with
disabilities,'' and ``[r]equire that deaf and hard of hearing inmates
will have full access to TDD/TTY services at no additional charge.'' We
seek comment on these proposals.
136. Discussion. In the Order, the Commission noted commenters'
general agreement with the Commission's statement in the 2012 ICS NPRM
that TTY-to-voice calls take at least three to four times longer than
voice-to-voice conversations to deliver the same conversational
content, not including the time it takes to connect to the operator. In
the FNPRM, the Commission tentatively concluded that ICS per-minute
rates for TTY calls should be set at 25 percent of the interim safe
harbor rate for standard ICS calls, and sought comment on this
proposal. CenturyLink asserts that ``a discounted rate of 25% of the
interstate safe harbor rate for TTY calls . . . is far too low. In
CenturyLink's experience, TTY calls can take up to two times as long as
regular calls, not the three or four times suggested by some
commenters.'' HEARD, however, asserts that the proposed discounted rate
is insufficient, as it ``does not account for varying literacy rates of
deaf prisoners many of whom use sign language as their primary or only
method of communication.'' HEARD urges a greater discount, based on the
assertion that ``prison TTY telephone calls are typically at least six
to eight times longer than a hearing phone call.'' We seek specific
comment on the actual relative length of TTY-to-TTY and TTY-to-voice
calls as compared to voice-to-voice calls. Given the wide range of
assertions in the record, we request that comments be backed by data on
the actual lengths of TTY-to-TTY, TTY-to-voice, and voice-to-voice
conversations. Commenters should describe the methodology they used to
collect the information with specificity.
137. The Commission has observed that, in implementing section 276
of the Act, section 276(b)(1)(A) exempts TRS
[[Page 69703]]
calls from the per-call compensation requirement, and it requires
payphone service providers to provide free access to connect to TRS.
However, if the outgoing portion of a TRS call is a long distance call,
a caller is required to pay for that portion. Is it the case that no
ICS provider charges inmates for voice-to-TTY or TTY-to-voice calls
because the ``interexchange company holding the [state] TRS contract
carries the call to the called party?'' If so, should final reduced ICS
per-minute rates for TTY calls be applicable only to TTY-to-TTY calls,
as those calls are indistinguishable from standard voice calls because
the inmate is dialing the called party directly, using the called
party's terminating phone number, and thus the call data looks
identical to the call data from a typical voice call?
138. With respect to TTY-to-voice and voice-to-TTY calls, we seek
comment on AT&T's request for clarification that the ``manner in which
it handles operator-assisted collect calls from inmates via TRS'' is
``subject to the rate requirements set out in the order in WC Docket
No. 12-375.'' AT&T describes the issue as follows:
Pursuant to contract with state authorities, AT&T provides TRS
service in eight states plus the District of Columbia. Often times,
but not always, the TRS Communications Assistant (CA) can see that
the call has originated from a detention facility. For security,
operator services practices limit inmate calling to collect calls.
Upon receiving the call, the inmate can direct the CA to forward the
call to any interexchange carrier on the carrier of choice list. The
CA in the states where AT&T provides the service is an AT&T
employee. If the inmate selects AT&T as the IXC for the call, the CA
then functions as the operator service provider and the called party
will be charged at the tariffed rate for the call, which is higher
than the rate cap for a collect call specified in the ICS order.
AT&T interexchange collect calling toll services are not limited to
inmates only; anyone making the same type of TRS collect call will
be treated and charged in the same manner.
139. Section 64.6000 of our rules defines ICS as ``the offering of
interstate calling capabilities from an Inmate Telephone;'' and Inmate
Telephone as ``a telephone instrument or other device capable of
initiating telephone calls set aside by authorities of a correctional
institution for use by Inmates.'' We seek comment on whether AT&T and
other entities that provide TRS are providing ICS for TRS calls placed
by inmates. Is it relevant that ``TRS [communications] assistants may
place only [operator assisted] collect calls on behalf of inmates using
TRS?'' Would it be relevant if inmates are not charged for calling TRS,
but only for the long distance component of a TRS call?
140. We seek further comment as to whether the rates and charges
levied for operator-assisted collect calls from inmates via TRS are
subject to the rate requirements set out in the Order. Does the fact
that an inmate ``can direct the CA to forward the call to any
interexchange carrier on the carrier of choice list'' indicate that the
interexchange portion of the call is no longer ICS, and therefore not
subject to our rate requirements?
141. TTYs are only one form of accessible equipment, and TTY relay
is only one form of TRS, and commenters to the FNPRM, as well as some
2014 ICS Workshop participants, decry correctional facilities'
continued reliance on TTY equipment, as well as their failure to make
newer equipment technology such as videophones for Video Relay Service
(VRS) and point-to-point video communications, devices for Internet
Protocol Relay Service (IP Relay) and Internet Protocol Captioned
Telephone Services (IP CTS), available to inmates. We seek comment on
the availability of these technologies as well as any other advanced
technologies that meet persons with disabilities communication needs in
correctional facilities. Should all correctional facilities be required
to install a certain type or types of equipment for inmates with
disabilities, such as videophone equipment, IP CTS devices or other
assistive technologies? Should they do so upon the request of an inmate
with a disability? We seek comment on our authority to regulate
correctional facilities in this manner. If correctional facilities are
required to provide such equipment, how should the facilities recover
the costs of purchasing and installing the necessary equipment, and how
should ICS providers recover the costs of the calls? In the
alternative, are ICS providers responsible for providing any
communications equipment needed to meet the communications demands of
all inmates regardless of ability? How would such a requirement fit
into the Commission's section 225 authority? Do ICS providers meet
criteria as a common carrier for offering telecommunications relay
service eligible for cost recovery from the TRS Fund? Why or why not?
And, if not, is there a justification for different treatment in this
industry? Will ICS providers or facilities incur costs to install
equipment for use by any inmate with a disability? What is the impact
of such approaches on ICS providers? Should providers be able to
recover any additional costs if they are unable to do so through the
TRS Fund?
142. The Commission has imposed differing registration requirements
for users of the various types of TRS. We seek comment on how the
Commission's evolving relay service registration requirements can be
met in an institutional setting where more than one user will be
utilizing equipment. We also seek comment about security issues related
to IP telephone technologies, such as VRS, IP-captioned telephone
service, and IP Relay. Do these types of advanced technologies pose a
security risk in a correctional setting? If so, what is the nature of
such risk? Is the risk greater or lesser than that associated with
traditional telecommunications and interconnected VoIP services
utilized by ICS providers?
143. What are just, reasonable and fair per-minute rates for end
users and ICS providers for forms of TRS other than traditional TTY TRS
that will allow service to be accessible to all inmates regardless of
ability? HRDC suggests that, consistent with section 225 of the Act,
the rates for accessible communications technology from correctional
facilities should be no more than calls made from traditional
telephones. Would it be appropriate to discount the per-minute rate for
ICS calls made using other accessible equipment or other forms of TRS,
such as Speech to Speech relay services or Captioned Telephone Service,
as previously proposed for TTY calls? Would different rate setting
methodologies be appropriate given the differing nature of TTY and
other forms of TRS?
144. TRS Reporting Requirements. In the FNPRM the Commission asked
whether ICS providers should be required to submit TRS usage data and
report on user complaints. Commenter HEARD asserts that ``nearly half
of deaf inmates surveyed did not have access to TTY at their
facilities'' and suggests that correctional facilities begin to track
and report to the Commission the number of relay calls being made. We
seek further comment on this proposal. Should ICS providers be required
to report to the Commission the number of disability-related calls they
provide, the number of problems they experience with such calls, or
related complaints they receive? Or should any such data collection be
more narrowly tailored as suggested by the Federal Bureau of Prisons?
Should such data be part of the periodic review we seek comment on
below?
I. Advanced Inmate Communications Services
145. We seek comment on newer technologies and services available
for
[[Page 69704]]
inmate communications. We believe that our core goals for inmates and
their families remain the same regardless of the technologies used--
ensure competition and continued widespread deployment of ICS and the
societal benefits that they bring. We expect that new technologies
available in correctional settings--like new technologies available to
consumers in the general public--should offer improvements and
innovations that benefit users and thus serve our goals for ICS reform.
In this section we seek comment on these newer technologies, on whether
there are any pertinent differences that justify any differences in
rules, and on the legal considerations that may need to be addressed.
146. Background. In the FNPRM, the Commission sought comment on
``the impact of technological advancements on the ICS industry.'' The
Commission also invited comment on the Commission's legal authority to
regulate the rates for services provided over newer technologies. In
response, Pay Tel states that ``[t]here is no question that new
technologies will continue to emerge that will affect and improve
provision and quality of, and security related to, ICS.'' The Prison
Policy Initiative suggests that there are benefits to advanced
technologies in correctional settings such as video visitation systems
(VVS), but cautions that there is ``clear evidence that the video
communications market is currently driven by the same perverse
incentives that caused market failure in the correctional telephone
industry.''
147. At the Commission's 2014 ICS Workshop, MeshIP discussed its
``secure prison cell phone solution that gives detainees highly
customized cell phones with all the security and control features of
prison payphones.'' JLG Technologies described for the audience voice
biometrics technology, the second generation of voice biometrics, known
as continuous voice identification, and next generation voice
biometrics technology currently under development. GTL believes the
biggest technological trends in inmate communications will be access to
wall-mounted, multiservice kiosks, which offer more frequent and better
contacts with the inmates' families and friends and then a shift to
hand-held devices.
148. Discussion. We seek a greater factual understanding of the
availability of these and other services. What kinds of services are
available? Are they available commonly in most facilities, or only in
certain ones? What is the demand for these services and what rates and
fees are charged? What additional functionalities do they offer? Do
they provide any greater benefits to inmates, their families, or
others, than traditional services? What are ICS providers' rates for
other services such as email, voicemail or text messaging? The record
indicates that some ICS providers offer tablet computers and kiosks
that allow inmates to access games, music, educational tools, law
library tools and commissary ordering. What is the compensation
mechanism for access to these offerings?
149. Are there additional costs to ICS providers in developing,
provisioning, or offering these services? Participants at the 2014 ICS
Workshop suggest that there are ``huge challenges in anticipating and
funding costs associated with developing, implementing, and maintaining
these new systems and services.'' GTL noted that ICS providers bear the
costs of the ``development for the kiosk, to put that device on the
wall . . . to provide the additional bandwidth, to develop and do the
software development research for the applications that go in that
device, for the additional maintenance and support to support the
device once it's on the wall.'' We seek comment on the costs of these
services in general. We also seek comment on the rates and fees charged
for their use.
150. We seek comment on whether there is a similar market failure
for service provided by new technology as described above for existing
ICS. For instance, in response to evidence of unreasonable rates, the
Alabama PSC capped VVS rates at $0.50 per minute and VVS recorded
message download at ``$1.00 for the first minute and $0.50 for each
additional recorded minute.'' Do commenters consider these just and
reasonable rates and fair compensation for VVS? We seek comment on Pay
Tel's proposal that the Commission establish a discrete mechanism by
which providers may seek approval for a separate ancillary charge
related to some type of advanced technology. How would such a charge
function in the context of the proposed reform of ancillary charges
discussed above? Securus also suggests that the Commission allow for
``incremental product pricing above rate caps if necessary'' for
``[p]roduct [e]xceptions.'' Is such a separate mechanism necessary? If
so, how do proponents of such a mechanism suggest that it function?
Will advanced ICS technologies continue to be developed and deployed
without a separate and discrete recovery mechanism? Finally, if the
Commission were to adopt regulations for advanced technologies like
video visitation and video calling, what is the best way to harmonize
our approach with that of the states?
151. In the Order, the Commission found that the application of
section 276 is not restricted to any one form of communications
technology and made clear that reforms apply to ICS regardless of
technology used to provision the service, such as IP-based and TDM-
based provisioning. Some ICS providers are developing wireless options.
We therefore seek comment on whether ICS provisioned through wireless
technology will also be subject to any final reforms adopted by the
Commission under section 276. We also seek comment on whether advanced
services like video visitation service and video calling services
constitute ``inmate telephone service'' within the meaning of the term
in section 276. Given the technologically neutral nature of section 276
and the fact that video calling shares many of the attributes of
traditional ICS, including the fact that it is a pay per use service
involving real time, two-way voice communications, are these services
``inmate telephone service''? Does the Commission's recognition of
video relay service as a reimbursable relay service under section 225
of the Act (defining the video service as ``functionally equivalent''
to traditional TRS) provide analogous support for including video
calling as an inmate telephone service? To the extent any
communications services available to inmates fall outside the statutory
definition of ``inmate telephone service,'' what other sources of
authority provide the Commission with the ability to ensure that rates
are just and reasonable? Could such services be regulated pursuant to
sections 201 and 202 to ensure the rates, charges, and practices
associated with those services are just, reasonable, and not
unreasonably discriminatory? Could regulation of these services be
supported through the use of the Commission's ancillary authority? For
example, the record shows that some correctional institutions have
eliminated all in-person visitation and replaced it with video
visitation. What if providers were to eliminate all payphone calling in
favor of video calling and charged rates for those services far in
excess of the Commission's rate caps? Would such a shift effectively
void the section 276 requirement of fair compensation and preclude the
Commission from discharging its statutory mandate?
J. Periodic Review
152. We seek comment on whether a periodic review of how the
reforms we seek comment on above are impacting
[[Page 69705]]
ICS rates, demand, ancillary charges and site commission levels is
essential to ensure that our adopted reforms are creating and
maintaining the proper incentives to drive end user rates to
competitive levels. We seek comment on the benefits of establishing a
periodic review process.
153. In the Order the Commission adopted an Annual Reporting and
Certification Requirement that included the submission of interstate
and intrastate ICS rate and demand data as well as the average duration
of calls. In the FNPRM the Commission sought further comment on
adjusting ICS rates over time. In response, the Wright Petitioners
suggested that the Commission ``adopt rules to review the interim rates
no later than 180 days after the ICS providers have submitted their
second round of data collected under Section 64.6060 of the
Commission's rules.''
154. The ICS providers that signed on to the Joint Provider Reform
Proposal suggest that ``ICS providers should be required to provide
certain information to the Commission annually for three (3) years to
ensure the caps on per-minute rates and any admin-support payments
adopted are implemented as required.'' Specifically, they suggest that
``[s]uch information should include a list of the ICS provider's
current interstate and intrastate per-minute ICS rates, the ICS
provider's current fee amounts, the locations where the ICS provider
makes admin-support payments, and the amount of those admin-support
payments.'' We seek comment on this portion of the Proposal. In
addition to the information suggested by the ICS providers, we suggest
that providers also be required to file demand and call duration data.
Finally, we seek comment on whether any information gathered for an
annual review must be certified as accurate by an officer of the
reporting company.
K. Enforcement
155. In the Order, the Commission described its standard
enforcement authority as it relates to ICS. The Commission also made
clear, and we remind interested parties, that the Commission's general
section 208 complaint procedures apply.
156. The Commission also made clear that penalties or failure to
comply with the Commission's rules may result in monetary forfeitures
of up to ``$160,000 for each violation or each day of a continuing
violation, up to a maximum of $1,575,000 per continuing violation.'' We
seek comment on how to interpret ``violation'' for use in the ICS
context in light of the reforms discussed herein. For example, would
each non-compliant ICS rate charged by a provider be a single
violation? Would the continued payment of site commissions to a
correctional facility constitute a single violation? Would the
imposition of one ancillary charge over any cap or caps ultimately
adopted by the Commission to one consumer constitute a single
violation?
157. Securus has urged the Commission to require that the CEO, CFO,
and General Counsel of each ICS provider all certify to the companies'
compliance with the Commission's ICS rules and regulations. In the
Order, the Commission also adopted an Annual Reporting and
Certification Requirement that required ``an officer or director of
each ICS provider annually to certify the accuracy of the data and
information in the certification, and the provider's compliance with
all portions of this Order.'' We note that this rule was stayed by the
D.C. Circuit so we have not evaluated the effectiveness or impact of
such a certification. Should the Commission adopt such a requirement?
How does such a certification requirement function with the proposed
periodic review requirement we seek comment on above?
158. We seek comment on whether states should continue to exercise
enforcement functions with respect to any state requirements that are
consistent with the Commission's regulations. We seek comment on
whether states should continue to exercise their enforcement functions
with respect to any final rules that the Commission may adopt as part
of comprehensive ICS reform. Should the Commission expressly allow
states to exercise such enforcement authority, e.g., to be carried out
through their complaint resolution process, or some other role in the
oversight process of state commissions? If the Commission did so, what
if any oversight role should the Commission adopt with respect to state
proceedings involving the enforcement of Commission rules? Would our
authority to provide for such a state role apply regardless of whether
certain state laws have been found to be inconsistent with any ICS
rules governing intrastate ICS?
L. Cost/Benefit Analysis of Proposals
159. Acknowledging the potential difficulty of quantifying costs
and benefits, we seek to determine whether each of the proposals above
will provide public benefits that outweigh their costs. We also seek to
maximize the net benefits to the public from any proposals we adopt.
For example, commenters have argued that inmate recidivism decreases
with regular family contact. This not only benefits the public broadly
by reducing crimes, lessening the need for additional correctional
facilities and cutting overall costs to society, but also likely has a
positive effect on the welfare of inmates' children. On the other hand,
commenters have argued that eliminating site commissions would directly
affect jail revenues and lead to a reduction in recreational and
rehabilitation services provided to inmates by facilities. Such a
reduction could produce its own wave of negative aftereffects that
offset some of the purported benefits. Accordingly, we seek specific
comment on the costs and benefits of the proposals above and any
additional proposals received in response to this Second Further
Notice. We also seek any information or analysis that would help us to
quantify these costs or benefits. We request that interested parties
discuss whether, how, and by how much they will be impacted in terms of
costs and benefits of the proposals included herein. Additionally, we
ask that parties consider whether the above proposals have multiplier
effects beyond their immediate impact that could affect their interest
or, more broadly, the public interest. Further, we seek comment on any
considerations regarding the manner in which the proposals could be
implemented that would increase the number of people who benefit from
them, or otherwise increase their net public benefit. We recognize that
the costs and benefits may vary based on such factors as the
correctional facility served and the ICS provider. We request that
parties file specific analyses and facts to support any claims of
significant costs or benefits associated with the proposals herein.
IV. Procedural Matters
A. Filing Instructions
160. Pursuant to sections 1.415 and 1.419 of the Commission's
rules, 47 CFR Sec. Sec. 1.415, 1.419, interested parties may file
comments and reply comments on or before the dates indicated on the
first page of this document. Comments may be filed using the
Commission's Electronic Comment Filing System (ECFS). See Electronic
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
Comments and reply comments on this Second FNPRM must be filed in WC
Docket No. 12-375.
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://fjallfoss.fcc.gov/ecfs2/.
[[Page 69706]]
Paper Filers: Parties who choose to file by paper must
file an original and one copy of each filing. If more than one docket
or rulemaking number appears in the caption of this proceeding, filers
must submit two additional copies for each additional docket or
rulemaking number.
Filings can be sent by hand or messenger delivery, by
commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail. All filings must be addressed to the Commission's
Secretary, Office of the Secretary, Federal Communications Commission.
All hand-delivered or messenger-delivered paper filings
for the Commission's Secretary must be delivered to FCC Headquarters at
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together
with rubber bands or fasteners. Any envelopes and boxes must be
disposed of before entering the building.
Commercial overnight mail (other than U.S. Postal Service
Express Mail and Priority Mail) must be sent to 9300 East Hampton
Drive, Capitol Heights, MD 20743.
U.S. Postal Service first-class, Express, and Priority
mail must be addressed to 445 12th Street SW., Washington, DC 20554.
People With Disabilities: To request materials in accessible
formats for people with disabilities (Braille, large print, electronic
files, audio format), send an email to fcc504@fcc.gov or call the
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
B. Ex Parte Requirements
161. This proceeding shall be treated as a ``permit-but-disclose''
proceeding in accordance with the Commission's ex parte rules. Persons
making ex parte presentations must file a copy of any written
presentation or a memorandum summarizing any oral presentation within
two business days after the presentation (unless a different deadline
applicable to the Sunshine period applies). Persons making oral ex
parte presentations are reminded that memoranda summarizing the
presentation must (1) list all persons attending or otherwise
participating in the meeting at which the ex parte presentation was
made, and (2) summarize all data presented and arguments made during
the presentation. Memoranda must contain a summary of the substance of
the ex parte presentation and not merely a list of the subjects
discussed. More than a one or two sentence description of the views
arguments presented is generally required. If the oral presentation
consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter's written comments, memoranda or
other filings in the proceeding, the presenter may provide citations to
such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers
where such data or arguments can be found) in lieu of summarizing them
in the memorandum. Documents shown or given to Commission staff during
ex parte meetings are deemed to be written ex parte presentations and
must be filed consistent with rule 1.1206(b). In proceedings governed
by rule 1.49(f) or for which the Commission has made available a method
of electronic filing, written ex parte presentations and memoranda
summarizing oral ex parte presentations, and all attachments thereto,
must be filed through the electronic comment filing system available
for that proceeding, and must be filed in their native format (e.g.,
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding
should familiarize themselves with the Commission's ex parte rules.
C. Paperwork Reduction Act Analysis
162. This document does not contain proposed information
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. In addition, therefore, it does not contain any new
or modified information collection burden for small business concerns
with fewer than 25 employees, pursuant to the Small Business Paperwork
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).
D. Initial Regulatory Flexibility Analysis
163. As required by the Regulatory Flexibility Act of 1980 (RFA),
the Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) for this Second Further Notice, of the possible significant
economic impact on small entities of the policies and rules addressed
in this document. The IRFA is set forth as the Appendix. Written public
comments are requested on this IRFA. Comments must be identified as
responses to the IRFA and must be filed on or before the dates on the
first page of this Second Further Notice. The Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, will send a
copy of this Second Further Notice, including the IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration (SBA).
V. Ordering Clauses
164. Accordingly, it is ordered that, pursuant to sections 1, 2,
4(i)-(j), 201(b), 276, and 332 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i)-(j), 201(b), 276, and 332, this
Second Further Notice of Proposed Rulemaking is adopted.
165. It is further ordered, that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Second Further Notice of Proposed Rulemaking, including
the Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
166. It is further ordered, that pursuant to sections 1.4(b)(1) and
1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1) and 1.103(a), that
this Second Further Notice of Proposed Rulemaking shall be effective 30
days after publication of a summary thereof in the Federal Register.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
Appendix
Initial Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA) the Federal Communications Commission (Commission) has
prepared this Initial Regulatory Flexibility Analysis (IRFA) of the
possible significant economic impact on a substantial number of
small entities by the policies and rules proposed in this Second
Further Notice of Proposed Rulemaking (Second Further Notice).
Written comments are requested on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the
deadlines for comments on the Second Further Notice. The Commission
will send a copy of the Second Further Notice, including this IRFA,
to the Chief Counsel for Advocacy of the Small Business
Administration (SBA). In addition, the Second Further Notice and
IRFA (or summaries thereof) will be published in the Federal
Register.
A. Need for, and Objectives of, the Notice
2. In today's Second Further Notice the Commission seeks comment
on additional measures it could take to ensure that interstate and
intrastate inmate calling service (ICS) are provided consistent with
the statute and public interest and the Commission's authority to
implement these measures. The Commission believes that additional
action on ICS will help maintain familial contacts stressed by
confinement and will better serve inmates with special needs while
still ensuring the critical security needs of correctional
facilities of various sizes. Specifically, the Second Further Notice
seeks comment on:
Limiting site commission payments;
[[Page 69707]]
Final interstate and intrastate ICS rate cap reform;
Limiting ancillary charges;
Harmonizing inconsistent state regulations pursuant to
Section 276(c) of the Communications Act of 1934, as amended;
Treatment of existing ICS contracts;
Appropriate transition period;
Accessible inmate calling services;
Advanced inmate communications services;
Periodic review of the industry;
Enforcement; and
Cost/Benefit analysis of proposals.
B. Legal Basis
3. The legal basis for any action that may be taken pursuant to
the Second Further Notice is contained in sections 1, 2, 4(i)-(j),
201(b) and 276 of the Communications Act of 1934, as amended, 47
U.S.C. 151, 152, 154(i)-(j), 201(b) and 276.
C. Description and Estimate of the Number of Small Entities to
Which the Proposed Rules Will Apply
4. The RFA directs agencies to provide a description of, and
where feasible, an estimate of the number of small entities that may
be affected by the proposed rules, if adopted. The RFA generally
defines the term ``small entity'' as having the same meaning as the
terms ``small business,'' ``small organization,'' and ``small
governmental jurisdiction.'' In addition, the term ``small
business'' has the same meaning as the term ``small-business
concern'' under the Small Business Act. A ``small-business concern''
is one which: (1) Is independently owned and operated; (2) is not
dominant in its field of operation; and (3) satisfies any additional
criteria established by the SBA.
5. Small Businesses. Nationwide, there are a total of
approximately 28.2 million small businesses, according to the SBA.
6. Wired Telecommunications Carriers. The SBA has developed a
small business size standard for Wired Telecommunications Carriers,
which consists of all such companies having 1,500 or fewer
employees. According to Census Bureau data for 2007, there were
3,188 firms in this category, total, that operated for the entire
year. Of this total, 3,144 firms had employment of 999 or fewer
employees, and 44 firms had employment of 1,000 employees or more.
Thus, under this size standard, the majority of firms can be
considered small.
7. Local Exchange Carriers (LECs). Neither the Commission nor
the SBA has developed a size standard for small businesses
specifically applicable to local exchange services. The closest
applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 1,307 carriers reported that they were incumbent
local exchange service providers. Of these 1,307 carriers, an
estimated 1,006 have 1,500 or fewer employees and 301 have more than
1,500 employees. Consequently, the Commission estimates that most
providers of local exchange service are small entities that may be
affected by our action.
8. Incumbent Local Exchange Carriers (incumbent LECs). Neither
the Commission nor the SBA has developed a size standard for small
businesses specifically applicable to incumbent local exchange
services. The closest applicable size standard under SBA rules is
for Wired Telecommunications Carriers. Under that size standard,
such a business is small if it has 1,500 or fewer employees.
According to Commission data, 1,307 carriers reported that they were
incumbent local exchange service providers. Of these 1,307 carriers,
an estimated 1,006 have 1,500 or fewer employees and 301 have more
than 1,500 employees. Consequently, the Commission estimates that
most providers of incumbent local exchange service are small
businesses that may be affected by our action.
9. We have included small incumbent LECs in this present RFA
analysis. As noted above, a ``small business'' under the RFA is one
that, inter alia, meets the pertinent small business size standard
(e.g., a telephone communications business having 1,500 or fewer
employees), and ``is not dominant in its field'' of operation. The
SBA's Office of Advocacy contends that, for RFA purposes, small
incumbent LECs are not dominant in their field of operation because
any such dominance is not ``national'' in scope. We have therefore
included small incumbent LECs in this RFA analysis, although we
emphasize that this RFA action has no effect on Commission analyses
and determinations in other, non-RFA contexts.
10. Competitive Local Exchange Carriers (competitive LECs),
Competitive Access Providers (CAPs), Shared-Tenant Service
Providers, and Other Local Service Providers. Neither the Commission
nor the SBA has developed a small business size standard
specifically for these service providers. The appropriate size
standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 1,442 carriers reported that they were engaged in
the provision of either competitive local exchange services or
competitive access provider services. Of these 1,442 carriers, an
estimated 1,256 have 1,500 or fewer employees and 186 have more than
1,500 employees. In addition, 17 carriers have reported that they
are Shared-Tenant Service Providers, and all 17 are estimated to
have 1,500 or fewer employees. In addition, 72 carriers have
reported that they are Other Local Service Providers. Of the 72, 70
have 1,500 or fewer employees and two have more than 1,500
employees. Consequently, the Commission estimates that most
providers of competitive local exchange service, competitive access
providers, Shared-Tenant Service Providers, and Other Local Service
Providers are small entities that may be affected by our action.
11. Interexchange Carriers (IXCs). Neither the Commission nor
the SBA has developed a size standard for small businesses
specifically applicable to interexchange services. The closest
applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 359 companies reported that their primary
telecommunications service activity was the provision of
interexchange services. Of these 359 companies, an estimated 317
have 1,500 or fewer employees and 42 have more than 1,500 employees.
Consequently, the Commission estimates that the majority of
interexchange service providers are small entities that may be
affected by our action.
12. Local Resellers. The SBA has developed a small business size
standard for the category of Telecommunications Resellers. Under
that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 213 carriers have
reported that they are engaged in the provision of local resale
services. Of these, an estimated 211 have 1,500 or fewer employees
and two have more than 1,500 employees. Consequently, the Commission
estimates that the majority of local resellers are small entities
that may be affected by our action.
13. Toll Resellers. The SBA has developed a small business size
standard for the category of Telecommunications Resellers. Under
that size standard, such a business is small if it has 1,500 or
fewer employees. According to Commission data, 881 carriers have
reported that they are engaged in the provision of toll resale
services. Of these, an estimated 857 have 1,500 or fewer employees
and 24 have more than 1,500 employees. Consequently, the Commission
estimates that the majority of toll resellers are small entities
that may be affected by our action.
14. Other Toll Carriers. Neither the Commission nor the SBA has
developed a size standard for small businesses specifically
applicable to Other Toll Carriers. This category includes toll
carriers that do not fall within the categories of interexchange
carriers, operator service providers, prepaid calling card
providers, satellite service carriers, or toll resellers. The
closest applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 284 companies reported that their primary
telecommunications service activity was the provision of other toll
carriage. Of these, an estimated 279 have 1,500 or fewer employees
and five have more than 1,500 employees. Consequently, the
Commission estimates that most Other Toll Carriers are small
entities that may be affected by our action.
15. Payphone Service Providers (PSPs). Neither the Commission
nor the SBA has developed a small business size standard
specifically for payphone services providers. The appropriate size
standard under SBA rules is for the category Wired
Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. According to
Commission data, 535 carriers have reported that they are engaged in
the provision of payphone services. Of these, an estimated 531 have
1,500 or fewer employees and four have more than 1,500 employees.
Consequently, the Commission estimates that the majority of payphone
service providers
[[Page 69708]]
are small entities that may be affected by our action.
D. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
16. In this Second Further Notice, the Commission seeks public
comment on options to reform the inmate calling service market.
Possible new rules could affect all ICS providers, including small
entities. In proposing these reforms, the Commission seeks comment
on various options discussed and additional options for reforming
the ICS market.
E. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
17. The RFA requires an agency to describe any significant,
specifically small business, alternatives that it has considered in
reaching its proposed approach, which may include the following four
alternatives (among others): ``(1) the establishment of differing
compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the
clarification, consolidation, or simplification of compliance and
reporting requirements under the rules for such small entities; (3)
the use of performance rather than design standards; and (4) an
exemption from coverage of the rule, or any part thereof, for such
small entities.''
18. The Second Further Notice seeks comment from all interested
parties. The Commission is aware that some of the proposals under
consideration may impact small entities. Small entities are
encouraged to bring to the Commission's attention any specific
concerns they may have with the proposals outlined in the Second
Further Notice.
19. The Commission expects to consider the economic impact on
small entities, as identified in comments filed in response to the
Second Further Notice, in reaching its final conclusions and taking
action in this proceeding. Specifically, the Commission will conduct
a cost/benefit analysis as part of this Second Further Notice and
consider the public benefits of any such requirements it might
adopt, to ensure that they outweigh their impacts on small
businesses.
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
20. None.
[FR Doc. 2014-26922 Filed 11-20-14; 8:45 am]
BILLING CODE 6712-01-P