Incarcerated People's Communication Services; Implementation of the Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services, 77244-77443 [2024-19037]
Download as PDF
77244
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 14, 64
[WC Docket Nos. 12–375, 23–62; FCC 24–
75; FR ID 237400]
Incarcerated People’s Communication
Services; Implementation of the Martha
Wright-Reed Act; Rates for Interstate
Inmate Calling Services
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission
(Commission) adopts rules addressing
all intrastate, interstate, and
international audio and video
incarcerated people’s communication
services (IPCS), including video
visitation services. The reforms include
adopting permanent rate caps for audio
IPCS and interim rate caps for video;
prohibiting IPCS providers from making
site commission payments associated
with IPCS and preempting state and
local laws and regulations requiring
such commissions; prohibiting IPCS
providers from imposing any separate
ancillary service charges on IPCS
consumers; strengthening the
Commission’s requirements for access to
IPCS by incarcerated people with
disabilities; permitting IPCS providers
to offer optional alternate pricing plans
that comply with the rate caps;
strengthening existing consumer
disclosure and inactive account
requirements; revising the existing
annual reporting and certification
requirements; facilitating enforcement
of the new IPCS rules; and delegating
authority to the Commission’s Wireline
Competition Bureau (WCB), Consumer
and Governmental Affairs Bureau
(CGB), and Office of Economics and
Analytics (OEA).
DATES:
Effective date: This rule is effective
November 19, 2024, except for
amendatory instruction 7
(§§ 64.611(l)(2), (3), (5), (6)); amendatory
instruction 15 (§ 64.6040(f));
amendatory instruction 17 (§ 64.6060);
amendatory instruction 20 (§ 64.6090);
amendatory instruction 22 (§ 64.6110);
amendatory instruction 23 (§ 64.6120);
amendatory instruction 25 (§ 64.6130(d)
through (f), and (h) through (k));
amendatory instruction 27 (§ 64.6140(c),
(d), (e)(2) through (4), (f)(2), and (f)(4)),
which are delayed indefinitely. The
Federal Communications Commission
will publish a document in the Federal
Register announcing the effective date
of these provisions.
ddrumheller on DSK120RN23PROD with RULES2
SUMMARY:
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Delegation of authority: The
delegations of authority to WCB, CGB,
and OEA are effective on November 19,
2024.
ADDRESSES: Federal Communications
Commission, 45 L Street NE,
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 and Governmental Affairs
Bureau at (202) 418–0530 (voice) or
(202) 418–0432 (TTY).
FOR FURTHER INFORMATION CONTACT:
Stephen Meil, Pricing Policy Division of
the Wireline Competition Bureau, at
(202) 418–7233 or via email at
stephen.meil@fcc.gov, regarding the
portions of this document relating to
matters other than communications
services for incarcerated people with
disabilities, and Michael Scott,
Disability Rights Office of the Consumer
and Governmental Affairs Bureau, at
(202) 418–1264 or via email at
michael.scott@fcc.gov, regarding the
portions of this document relating to
communications services for
incarcerated people with disabilities.
SUPPLEMENTARY INFORMATION: This is a
summary of the Federal
Communications Commission’s
(Commission’s) Report and Order,
document FCC 24–75, adopted on July
18, 2024 and released on July 22, 2024,
in WC Docket Nos. 12–375 and 23–62.
This summary is based on the public
redacted version of the document, the
full text of which can be obtained from
the Commission’s Electronic Document
Management System (EDOCS) website
at www.fcc.gov/edocs or via the
Commission’s Electronic Comment
Filing System (ECFS) website at
www.fcc.gov/ecfs, or is available at the
following internet address: https://
docs.fcc.gov/public/attachments/FCC24-75A1.pdf.
Synopsis
I. Introduction
1. Today we take the most significant
steps thus far to fulfill the dream of
Martha Wright-Reed, who advocated
tirelessly to ensure that incarcerated
people would be able to communicate
with family and loved ones at just and
reasonable rates. While this document
implements the requirements of the
Martha Wright-Reed Just and
Reasonable Communications Act of
2022 (Martha Wright-Reed Act or Act),
this proceeding began over twenty years
ago when a determined grandmother
petitioned the Federal Communications
Commission to take action against the
PO 00000
Frm 00002
Fmt 4701
Sfmt 4700
egregiously high telephone rates and
charges that were impeding incarcerated
people’s ability to stay connected with
their families and friends. Martha
Wright-Reed championed the idea of
easing the financial burdens imposed on
incarcerated people and their families
simply to make a phone call. As a blind
elderly woman, who could neither write
letters nor travel such long distances for
in-person visits, she often spent
hundreds of dollars a month in long
distance phone calls to stay in touch
with her incarcerated grandson. In her
honor, and in the face of years of
litigation frustrating the Commission’s
reform efforts in this area, Congress
passed the Martha Wright-Reed Act,
significantly expanding the
Commission’s jurisdiction over
incarcerated people’s communications
services (IPCS) and directing the
Commission to ‘‘establish a
compensation plan to . . . ensure just
and reasonable charges for telephone
and advanced communications services
in correctional and detention facilities.’’
2. In this item, we exercise the
authority granted the Commission by
Congress and adopt comprehensive
reforms that will significantly reduce
the financial burdens incarcerated
people face to communicate with their
loved ones. We first reduce existing rate
caps for all incarcerated people’s audio
communication services, by
implementing a methodology
specifically permitted by Congress in
the Act, and establish, for the first time,
interim rate caps for incarcerated
people’s video communications
services. We also materially reduce the
prices consumers pay for IPCS by
limiting the costs that can be recovered
through IPCS rates to only costs that the
Commission finds are used and useful
in the provision of IPCS. We also permit
states to maintain rates lower than the
Commission’s rate caps. We next end
IPCS providers’ long-standing practice
of making site commission payments to
carceral facilities, the costs of which
were passed through to consumers via
higher IPCS rates. We further strengthen
the requirements for access to IPCS by
incarcerated people with disabilities,
and adopt stronger consumer protection
rules. We also permit providers, for the
first time, to offer optional alternate
pricing plans, subject to conditions to
protect and benefit IPCS consumers.
A. Executive Summary
3. The Report and Order implements
the expanded authority granted to the
Commission by the Martha Wright-Reed
Act to establish a compensation plan
that ensures both just and reasonable
rates and charges for incarcerated
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
people’s audio and video
communications services and fair
compensation for incarcerated people’s
communications service providers. The
Report and Order fundamentally
reforms the regulation of IPCS in all
correctional facilities, regardless of the
technology used to deliver these
services, and significantly lowers the
IPCS rates that incarcerated people and
their loved ones will pay. These
comprehensive reforms:
• Utilize the expanded authority
Congress granted the Commission, in
conjunction with the FCC’s preexisting
statutory authority, to adopt just and
reasonable IPCS rates and charges for all
intrastate, interstate, and international
audio and video IPCS, including video
visitation services;
• Lower existing per-minute rate caps
for audio IPCS and establish initial
interim per-minute rate caps for video
IPCS, based on industry-wide cost data
submitted by IPCS providers, while
permitting states to maintain IPCS rates
lower than the Commission’s rate caps;
• Lower the overall prices consumers
pay for IPCS and simplify the pricing
structure by incorporating the costs of
ancillary services in the rate caps and
prohibiting providers from imposing
any separate ancillary service charges
on IPCS consumers;
• Prohibit IPCS providers from
making site commission payments for
IPCS and preempt state and local laws
and regulations requiring such
commissions;
77245
• Limit the costs associated with
safety and security measures that can be
recovered in the per-minute rates to
only those costs that the Commission
finds are used and useful in the
provision of IPCS;
• Allow, subject to conditions, IPCS
providers to offer alternate pricing plans
for IPCS that comply with the rate caps
we establish;
• Revise and strengthen accessibility
requirements for IPCS for incarcerated
people with disabilities;
• Revise and strengthen existing
consumer disclosure and inactive
account requirements; and
• Revise the existing annual reporting
and certification requirements.
4. We adopt the following rate caps:
TABLE ONE—NEW RATE CAPS BY TIER
Audio
(permanent)
(per minute)
Tier (ADP)
Current
caps
Prisons (any ADP) ...........................................................................................
Large Jails (1,000+) .........................................................................................
Med. Jails (350 to 999) ....................................................................................
Small Jails (100 to 349) ...................................................................................
Very Small Jails (0 to 99) ................................................................................
Video
(interim)
(per minute)
New
caps
* $0.14
* 0.16
0.21
0.21
0.21
Current
caps
$0.06
0.06
0.07
0.09
0.12
New
caps
N/A
N/A
N/A
N/A
N/A
$0.16
0.11
0.12
0.14
0.25
* Current cap figures that include a $0.02 additive for facility costs, which equates to the allowance made for facility-incurred IPCS costs reflected in contractually-prescribed site commissions, the closest available comparison.
II. Background
ddrumheller on DSK120RN23PROD with RULES2
A. The Martha Wright-Reed Just and
Reasonable Communications Act of
2022
5. The Martha Wright-Reed Just and
Reasonable Communications Act of
2022 (Martha Wright-Reed Act or Act),
was enacted on January 5, 2023. It
represents the culmination of a yearslong effort to comprehensively address
unreasonably high rates and charges
that incarcerated people and their
families pay for communications
services. The Act expands and clarifies
the scope of the Commission’s authority
over IPCS under section 276 of the
Communications Act of 1934, as
amended (Communications Act) by
modifying section 276 to require the
Commission to ensure that the rates and
charges for incarcerated people’s
intrastate and interstate
communications services be just and
reasonable. It also modifies the
requirement in section 276(b)(1)(A) that
providers be fairly compensated by
eliminating the requirement that
compensation occur on a ‘‘per call’’
basis and for ‘‘each and every [call].’’
Thus, with the new amendments,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
section 276(b)(1)(A) directs the
Commission to establish a
compensation plan to ‘‘ensure that all
payphone service providers are fairly
compensated and all rates and charges
are just and reasonable for completed
intrastate and interstate
communications using their payphone
or other calling device.’’ The Act further
augments the Commission’s jurisdiction
by modifying the Communications Act
to expand the definition of payphone
service in correctional institutions to
encompass advanced communications
services, including ‘‘any audio or video
communications service used by
inmates . . . regardless of technology
used.’’
6. The Martha Wright-Reed Act also
amends section 2(b) of the
Communications Act to reinforce that
the Commission’s jurisdiction extends
to intrastate, as well as interstate and
international, communications services
used by incarcerated people. The
Communications Act generally allocates
regulatory authority over intrastate,
interstate, and international
communications services between the
Commission and the states. It grants
authority to the Commission to ensure
PO 00000
Frm 00003
Fmt 4701
Sfmt 4700
that ‘‘[a]ll charges, practices,
classifications, and regulations for and
in connection with’’ interstate or
international common carrier
communications services are ‘‘just and
reasonable,’’ and directs the
Commission to ‘‘prescribe such rules
and regulations as may be necessary in
the public interest to carry out’’ this
mandate.
7. Section 2(b) of the Communications
Act generally preserves states’
jurisdiction over ‘‘charges,
classifications, practices, services,
facilities, or regulations for or in
connection with intrastate
communication service.’’ The
Commission is thus ‘‘generally
forbidden’’ from regulating ‘‘intrastate
communication service, which remains
the province of the states.’’ Stated
differently, section 2(b) ‘‘erects a
presumption against the Commission’s
assertion of regulatory authority over
intrastate communications.’’ But
Congress can enact statutory provisions
that overcome this presumption,
including by expressly excluding
provisions of the Communications Act
from section 2(b). Section 276 of the
Communications Act always has been
E:\FR\FM\20SER2.SGM
20SER2
77246
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
clear that the Commission has authority
to establish compensation plans for
‘‘intrastate and interstate’’ payphone
calls, and the Martha Wright-Reed Act
also specifically modified section 2(b) to
include section 276, as amended, in an
explicit exception. This amendment
makes abundantly clear that the
Commission’s authority under section
276 encompasses intrastate IPCS.
8. In direct response to the D.C.
Circuit’s decision in GTL v. FCC, the Act
expressly allows the Commission to
‘‘use industry-wide average costs,’’ as
well as the ‘‘average costs of service of
a communications service provider’’ in
setting just and reasonable rates and
charges. In implementing the Act, the
Commission is required to consider the
‘‘costs associated with any safety and
security measures necessary to provide’’
telephone service and advanced
communications services. Finally, the
statute directs the Commission to
promulgate regulations necessary to
implement the statutory provisions not
earlier than 18 months and not later
than 24 months after its January 5, 2023
enactment date.
B. Early Reform Efforts
9. Prior to the enactment of the
Martha Wright-Reed Act, the
Commission had previously taken a
number of steps to reform
communications services for
incarcerated people. In 2012, the
Commission initiated its inmate calling
services (ICS) rulemaking principally in
response to petitions filed by Martha
Wright and her fellow petitioners
seeking relief from ‘‘excessive’’ inmate
calling services rates. In the 2013 ICS
Order, the Commission found that rates
for calling services for incarcerated
people greatly exceeded the reasonable
costs of providing those services and
adopted interim interstate rate caps of
$0.21 per minute for debit and prepaid
calls, and $0.25 per minute for collect
calls. The Commission also launched its
First Mandatory Data Collection to
obtain industry cost data to help
develop permanent rate caps. In 2014,
the Commission sought comment on
establishing permanent rate caps for
both interstate and intrastate calls and
on reforming charges for services
ancillary to the provision of inmate
calling services.
10. In 2015, the Commission adopted
a comprehensive regulatory framework
for interstate and intrastate inmate
calling services that included
permanent rate caps for interstate and
intrastate inmate calling services calls,
and imposed limits on ancillary service
charges. Specifically, the 2015 ICS
Order set tiered rate caps for interstate
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
calls based on the type and size of
correctional facilities and calculated
these caps using industry-wide average
costs as reported in the First Mandatory
Data Collection. The Commission
excluded all site commission payments
from industry costs, having found such
payments were not reasonably related to
the provision of inmate calling services.
The Commission also extended the
interim interstate rate caps it had
adopted in 2013 to intrastate calls,
pending the effectiveness of the new
rate caps, and sought comment on rate
regulation of international inmate
calling services calls. Finally, the 2015
ICS Order established a Second
Mandatory Data Collection to guide
further reforms, and began an annual
filing obligation to collect information
on providers’ interstate, intrastate, and
international rates, as well as their
ancillary service charges, among other
information.
11. While an appeal of the 2015 ICS
Order was still pending, the
Commission reconsidered the full
exclusion of site commission payments
from its permanent rate cap
calculations. The Commission’s 2016
ICS Reconsideration Order increased the
permanent rate caps adopted in the
2015 ICS Order to account for claims
that certain correctional facility costs
reflected in site commission payments
are directly and reasonably related to
the provision of inmate calling services.
C. The GTL v. FCC Decision
12. The permanent rate caps adopted
in the 2015 ICS Order were vacated by
the D.C. Circuit in GTL v. FCC in 2017
on three principal grounds. First, the
panel majority held that the
Commission lacked the statutory
authority to cap intrastate calling
services rates because the Commission’s
authority over intrastate calls under
section 276 of the Communications Act
did not authorize it to impose intrastate
rate caps, and the Commission’s
authority under section 201(b) of the
Communications Act did not extend to
intrastate rates. Second, the D.C. Circuit
concluded that the Commission had
erred by categorically excluding site
commissions from inmate calling
services providers’ costs used to set rate
caps. Because some site commissions
were ‘‘mandated by state statute,’’ while
others were ‘‘required by state
correctional institutions,’’ the court
concluded that some portion of site
commissions might be legitimately
included in provider costs, and
remanded to the Commission to
determine what portion of site
commissions were directly related to the
provision of inmate calling services.
PO 00000
Frm 00004
Fmt 4701
Sfmt 4700
Third, the court found that the
Commission’s use of a weighted average
per-minute cost in setting rate caps, on
the existing record as analyzed in the
2015 ICS Order, was arbitrary and
capricious, in part because this
approach, as the Commission had
applied it, rendered calls with aboveaverage costs unprofitable and thus did
‘‘not fulfill the mandate of [section] 276
that ‘each and every’ ’’ call be fairly
compensated.
13. The D.C. Circuit also remanded
the Commission’s ancillary service
charge caps, finding that—on the
available record—the Commission ‘‘had
no authority to impose ancillary fee
caps with respect to intrastate calls.’’
Although the court found ancillary
service charge caps on interstate calls
‘‘justified,’’ it could not ‘‘discern from
the record whether ancillary fees [could]
be segregated between interstate and
intrastate calls,’’ and remanded the
issue for the Commission to determine
whether it could segregate ancillary
service fee caps between interstate calls
and intrastate calls. The court also
vacated the video visitation annual
reporting requirements adopted in the
2015 ICS Order as ‘‘beyond the statutory
authority of the Commission.’’
14. In a related case decided later that
year, the D.C. Circuit ‘‘summarily
vacated’’ the 2016 ICS Reconsideration
Order ‘‘insofar as it purports to set rate
caps on inmate calling service’’ because
the revised rate caps in that order were
‘‘premised on the same legal framework
and mathematical methodology’’
rejected by the court in GTL v. FCC. As
a result of the D.C. Circuit’s decisions in
GTL and Securus Techs. v. FCC, the
interim rate caps that the Commission
adopted in 2013 ($0.21 per minute for
debit/prepaid calls and $0.25 per
minute for collect calls) remained in
effect for interstate inmate calling
services calls.
D. More Recent Reform Efforts
15. Following the D.C. Circuit’s
remand in GTL v. FCC, the Commission
took additional actions to address
unreasonable rates and charges for
communications services for
incarcerated people. In February 2020,
the Wireline Competition Bureau
(Bureau or WCB) issued a document
seeking to refresh the record on issues
related to ancillary service charges to
respond to the D.C. Circuit’s remand.
The Bureau sought comment on
whether ancillary service charges may
be ‘‘segregated between interstate and
intrastate calls and, if so, how.’’ It also
sought comment on the definition of
jurisdictionally mixed services and how
the Commission should proceed if any
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
permitted ancillary service is deemed
jurisdictionally mixed.
16. In August 2020, the Commission
adopted the 2020 ICS Order on Remand
(85 FR 67450 (Oct. 23, 2020)), in which
it found that ancillary service charges
generally are jurisdictionally mixed and
cannot be practicably segregated
between the interstate and intrastate
jurisdictions, except in a limited
number of cases. The Commission
therefore concluded that inmate calling
services providers are generally
prohibited from imposing ancillary
service charges other than those
permitted by the Commission’s rules,
and from imposing charges in excess of
the Commission’s ancillary service fee
caps. In an accompanying document,
the Commission proposed reform of the
inmate calling services rates then within
its jurisdiction based on its analysis of
industry data collected in the Second
Mandatory Data Collection, as well as
information collected in the 2020
Annual Reports.
17. In May 2021, the Commission
adopted the 2021 ICS Order, which,
among other actions, set new interim
interstate rate caps for prisons and
larger jails, reformed the treatment of
site commissions, and capped
international calling rates. The
Commission first eliminated separate
rate caps for all collect calls and
retained the existing $0.21 per minute
interstate rate cap for debit and prepaid
calls for correctional facilities with
average daily populations below 1,000.
The Commission then lowered the
interstate interim rate caps from $0.21
per minute for debit and prepaid calls
to $0.12 per minute for prisons and
$0.14 per minute for jails with average
daily populations of 1,000 or more
incarcerated people. It allowed site
commission payments mandated by
federal, state, or local law, to be passed
through to consumers, without any
markup, and capped other site
commission payments that result from
contractual obligations or negotiations
with providers to no more than $0.02
per minute for prisons and jails with
average daily populations of 1,000 or
more. The Commission adopted a
modified waiver process that permits
providers to seek waivers of the rate and
ancillary services fee caps on a facilityby-facility or contract-by-contract basis.
The Commission also delegated
authority to WCB and the Office of
Economics and Analytics (OEA) to
conduct a Third Mandatory Data
Collection to collect uniform cost data
to use in setting permanent rate and
ancillary services fee caps that more
closely reflect inmate service providers’
costs of providing service.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
18. In 2021, the Commission sought
comment on, among other matters, the
provision of communications services to
incarcerated people with disabilities,
and the methodology to be employed in
setting permanent interstate and
international rate caps. It also sought
comment on general reform of the
treatment of site commission payments
in connection with interstate and
international calls, and additional
reforms to the Commission’s ancillary
service charges rules.
19. In September 2022, the
Commission issued the 2022 ICS Order,
which adopted requirements to improve
access to communications services for
incarcerated people with disabilities
and to reduce certain charges and
curtail abusive practices related to ICS.
The Commission required inmate
calling services providers to provide
access to substantially all relay services
eligible for Telecommunications Relay
Services (TRS) Fund support in any
correctional facility where broadband is
available and where the average daily
population incarcerated in that
jurisdiction (i.e., in that city, county,
state, or the United States) totals 50 or
more persons. It also required that
where inmate calling services providers
are required to provide access to
substantially all forms of TRS, they also
must provide access to American Sign
Language (ASL) direct, or point-topoint, video communication.
Additionally, the Commission lowered
its caps on certain provider charges and
barred certain abusive practices to
lessen the financial burden on
incarcerated people and their loved
ones when using calling services.
20. The Commission also issued 2022
seeking stakeholder input and evidence
relating to additional reforms
concerning incarcerated people with
disabilities. It sought further comment
on reforms concerning providers’ rates,
charges, and practices in connection
with interstate and international calling
services, including further refining the
Commission’s rules concerning the
treatment of balances in inactive
accounts, expanding the breadth and
scope of the Commission’s consumer
disclosure requirements, using the
Commission’s data collections to
establish just and reasonable permanent
caps on interstate and international
rates and associated ancillary service
charges, and allowing providers to offer
pilot programs for alternative pricing
structures.
E. Implementation of Martha WrightReed Act
21. Following the enactment of the
Martha Wright-Reed Act in January
PO 00000
Frm 00005
Fmt 4701
Sfmt 4700
77247
2023, the Commission issued 2023 and
2023 IPCS Order in March 2023 to begin
the process of implementing that Act. In
2023, the Commission sought comment
on how it should interpret the Martha
Wright-Reed Act’s provisions expanding
the Commission’s authority over
communications services for
incarcerated people, including the Act’s
requirement that rates and charges for
incarcerated people’s communications
services be just and reasonable, the
Act’s expansion of the Commission’s
authority to include advanced
communications services, including
video services, the expansion of the
Commission’s jurisdiction to include
intrastate communications services, and
other aspects of the Act. It also sought
comment on how the Martha WrightReed Act affects the Commission’s
ability to ensure that IPCS services and
associated equipment are accessible to
and usable by people with disabilities.
Finally, 2023 incorporated unresolved
issues previously raised in WC Docket
No. 12–375 into the current dualcaptioned proceeding.
22. In the 2023 IPCS Order, the
Commission reaffirmed its prior
delegation of data collection authority to
WCB and OEA, and directed them to
update and restructure their most recent
data collection as appropriate in light of
the requirements of the new statute. In
July 2023, WCB and OEA exercised this
delegated authority and adopted the
2023 Mandatory Data Collection Order
(88 FR 27850, May 3, 2023) to collect
information on the additional services
and providers subject to the
Commission’s newly expanded
authority and address the Act’s other
provisions where necessary.
III. Discussion
A. Unique Marketplace for Incarcerated
People’s Communications Services
23. The history of this proceeding
makes crystal clear that the IPCS
marketplace ‘‘is not a well functioning
market with competitive forces that
would drive prices towards costs.’’ Once
a provider successfully competes for a
contract to serve a facility, it has a
monopoly over the provision of IPCS at
that facility. Incarcerated people play no
role in the process of selecting IPCS
providers or the services they offer and
have no choice but to pay the rates and
charges imposed if they wish to call
their family or other loved ones.
Consumers have no means of switching
to another provider and no means of
redress even if the IPCS provider ‘‘raises
rates, imposes additional fees, adopts
unreasonable terms and conditions for
use of the service, or offers inferior
E:\FR\FM\20SER2.SGM
20SER2
77248
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
service.’’ As a result, there are no
competitive forces to constrain
providers from imposing rates and
charges that far exceed the costs
required to provide the services. This
absence of competitive alternatives to
discipline IPCS rates justifies rate
regulation independent of the
problematic role that site commissions
historically have played. We thus reject
arguments that the elimination of site
commission payments calls into
question the need for rate regulations. In
stating its preference for relying on
competition and market forces to
discipline prices, the Commission has
acknowledged ‘‘there is little dispute
that the [IPCS] market is a prime
example of market failure.’’ This market
failure persists today. Indeed, one
provider aptly summarizes the IPCS
market dynamics today as follows:
ddrumheller on DSK120RN23PROD with RULES2
Fundamentally, due to the inherent
structure of the [IPCS] marketplace, [IPCS]
providers’ rational economic incentive is to
entice confinement facilities to award the
provider a service contract as the facility, and
confinement facilities’ rational economic
incentive is to award contracts to [IPCS]
providers who provide the greatest payments
(monetary or otherwise) to the facility.
Notably absent from the foregoing calculus
are the [IPCS] consumers themselves, despite
the fact that they are the ones who ultimately
pay for [IPCS] service.
24. Despite Commission actions over
the years to constrain rates and charges
in the audio IPCS marketplace, the
monopolistic nature of the marketplace
has not changed, and remains
‘‘characterized by increasing rates, with
no competitive pressures to reduce
rates.’’ The ‘‘unusual market dynamics’’
of the IPCS marketplace and the
‘‘inability of market forces to constrain
IPCS rates’’ are also evident in a still
nascent portion of the marketplace—
video IPCS, making clear that ‘‘some
form of regulatory constraint . . . is
needed to ensure that end user rates are
just and reasonable.’’ The bipartisan
Martha Wright-Reed Act is a directive
that the Commission provide such
regulatory constraint on the IPCS
marketplace through ensuring ‘‘just and
reasonable charges for telephone and
advanced communications services in
correctional and detention facilities.’’
25. Some commenters argue that the
IPCS marketplace is competitive
because contracts are awarded based on
a bidding process, an argument that
appears challenging to square with
Congress’s enactment of the Martha
Wright-Reed Act. Independently, the
Commission has not been persuaded by
such arguments in the past, and we find
no further evidence in the record that
might warrant a departure from this
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
conclusion. Instead, we continue to find
that ‘‘because correctional officials
typically allow only one provider to
serve any given facility . . . there are no
competitive constraints on a provider’s
rates once it has entered into a contract
to serve a particular facility.’’ Indeed,
the Commission has found that
providers’ cost data reflect this lack of
competition in the industry. And the
Commission has explained how factors
such as site commissions ‘ ‘‘distort[ ] the
[IPCS] marketplace’ by creating
incentives for the facilities to select
providers that pay the highest site
commissions, even if those providers do
not offer the best service or lowest
rates.’’ Thus, even if there is
‘‘competition’’ in the bidding market as
some providers assert, it is not the type
of competition the Commission
recognizes as having an ability to ‘‘exert
downward pressure on rates for
consumers.’’
B. Impact on Consumers and Society
26. The Commission has long
recognized—and worked to combat—the
negative consequences that
unreasonable communications rates and
charges have on incarcerated people,
their families and loved ones, and
society at large. The record in this
proceeding provides overwhelming
evidence of the substantial burden
excessive communications rates have on
the ability of incarcerated people to stay
connected and maintain the vital,
human bonds that sustain families and
friends when a loved one is
incarcerated. In fact, ‘‘[t]he high costs of
keeping in contact drive more than 1 in
3 families, who are already financially
burdened, into debt for phone calls and
visits with their loved ones.’’ As the
Prison Policy Initiative explains, ‘‘[t]he
cost of everyday communication is
arguably the worst price-gouging that
people behind bars and their loved ones
face.’’ Color of Change highlights these
burdens through the story of Maria
Marshall, who, ‘‘after spending $120 in
just two weeks to maintain contact with
both her teenage son and her exhusband behind bars, was forced to
make the difficult choice between the
two, as she struggled to pay exorbitant
phone rates and could only afford one
of their accounts.’’ Brian Howard, a
formerly incarcerated person, speaks for
all too many in stating, ‘‘though we have
committed a crime and became
incarcerated, we incarcerate our family
as well.’’
27. The Commission held several
public listening sessions to learn
firsthand from individuals directly
impacted by unreasonable IPCS rates
and charges. In these sessions, witnesses
PO 00000
Frm 00006
Fmt 4701
Sfmt 4700
testified to the high cost of
communications as being the primary
barrier to keeping families connected—
despite the well documented benefits of
‘‘maintaining communication with
loved ones during incarceration.’’
Universally, testimony from formerly
incarcerated individuals stresses the
burden that unreasonable
communications rates and charges have
had on their ability to communicate
with their families. For example, Colette
Payne, both formerly incarcerated and
having an incarcerated son, relates how,
because of the cost of phone calls, ‘‘I
wasn’t always able to speak with my
own children during my incarceration.’’
Kim Thomas, a formerly incarcerated
person, explains the anguish of mothers
‘‘who gave birth while incarcerated and
did not get to see their child for 18
months, physically or in any other
way.’’ Other formerly incarcerated
people emphasize how the high cost of
communications prevents mothers from
regularly speaking to their children. One
grandmother, whose daughter is
incarcerated, details how her four young
grandchildren are only able to speak to
their mother every ‘‘week and a half and
two weeks if that’’ because
communications are so expensive. Jada
Cochran, who gave birth in prison and
whose mother raised her four young
children while she was incarcerated,
cried as she lamented that her mother
could not afford many calls, despite the
fact they were her ‘‘lifeline to my
family, to my children.’’ Brione Smith,
a teenager whose father is incarcerated,
describes being devastated when she
could not reach her father after her best
friend and grandfather died within a
few weeks of each other.
28. Participants at the Commission’s
listening sessions explain how the
unreasonably high communications
rates at times force incarcerated people
and their families to choose between
basic necessities, such as between food,
and communications. For example,
Deon Nowell reports at the Chicago
listening session how some incarcerated
people had to beg for food to reserve
enough money to call their families.
Ana Navarro describes how families
must choose between communication or
rent, food, or school supplies. Kim
Thomas, a formerly incarcerated person,
explains how incarcerated people earn
‘‘about 15 cents an hour. . . . So if you
calculate that out, it’s not very much
money, and you choose to make a phone
call or buy soap.’’ Incarcerated people
with disabilities that impact their ability
to communicate continually experience
barriers to access because ‘‘prison
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
administrators fail to understand their
communication needs.’’
29. The benefits of communications
between incarcerated people and their
families are wide-ranging and welldocumented. For decades, studies have
linked regular contact with family with
lowering rates of recidivism and
increasing likelihood of successful
reentry into society after release. During
the listening sessions, the formerly
incarcerated emphasized how
communication with family decreases
recidivism and sustains hope. Children
who have regular communications with
an incarcerated parent have ‘‘better
relationships with that parent.’’ Without
these connections, incarcerated people
tend to lose contact with the outside
world and can lose hope of reengaging
with society and their loved ones.
Others suggest that unlawful activities
within correctional facilities would
likely decrease if communications
services were affordable and accessible.
Rosalind Akins, whose grandson was
formerly incarcerated, describes how
‘‘[p]eople become induced mentally ill
because they can’t communicate.’’ Deon
Nowell explains that lower
communications rates will ‘‘help [the
incarcerated people] make the right
decision. That’s why it’s called
rehabilitation. Help [the incarcerated
people] to make the right decision,
especially when it deals with the costs
of communications.’’
30. The Martha Wright-Reed Act
charges us with evaluating and breaking
down the financial barriers to
communications between incarcerated
people and their families, consequently
lessening the burden of having to
choose between buying food and
communicating with their family
members, and helping facilitate a
successful transition to a life outside of
correctional facilities. The Act gives us
the tools we need to meet these
objectives. We anticipate that by
lessening the financial burdens of
staying connected, the reforms we adopt
today will promote increased
communication—allowing the
preservation of essential family ties,
keeping vital family connections alive
by enabling incarcerated people to
parent their children and connect with
their spouses, and helping families stay
intact.
C. Interpreting the Martha Wright-Reed
Act and the Commission’s Authority
Thereunder
1. Purpose and Scope of the Martha
Wright-Reed Act
31. In the Martha Wright-Reed Act,
Congress gave the Commission a clear
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
mandate to fix a ‘‘broken system,’’ one
in which the rates and charges that
incarcerated people pay to communicate
with those they love far exceed the
amounts other Americans pay. The 2023
IPCS Notice of Proposed Rulemaking
(NPRM) (88 FR 20804, April 7, 2023)
sought comment on the proper
interpretation of the scope and purpose
of the Martha Wright-Reed Act’s
amendments. We conclude that the
Martha Wright-Reed Act, taken as
whole, fundamentally validates the
Commission’s broad exercise of
authority over IPCS. The record reflects
widespread agreement that the Martha
Wright-Reed Act ‘‘confers plenary
authority on the Commission’’ to
regulate a wide range of
communications services, including
telephone and certain advanced
communications services, provided to
incarcerated people regardless of the
technology or device used or a
communication’s status as interstate or
intrastate. More specifically, as certain
commenters observe, the Martha
Wright-Reed Act’s amendments to
section 276 of the Communications Act
provide the Commission with authority
over all IPCS rates and charges,
complemented by the Commission’s
section 201(b) of the Communications
Act authority over interstate and
international IPCS. The Commission has
previously interpreted ‘‘interstate,’’ as
used in section 276 of the
Communications Act, to include
international calling services. Consistent
with our historical understanding of our
statutory authority—including in the
IPCS context in the near-term lead-up to
the enactment of the Martha WrightReed Act—we adopt that interpretation
today, a step that no commenter
opposes. Independently, insofar as our
rules treat international IPCS calls the
same as domestic IPCS calls, the record
does not persuade us that it would be
practicable to make the sort of real-time
jurisdictional determinations that would
enable our rules to distinguish
international calls from domestic calls
in those scenarios, in any event.
Congress’s directives guide our
implementation of the Commission’s
responsibilities as described in further
detail below.
32. IPCS providers, state and local
officials, and public interest advocates
broadly agree that this expanded
authority over communications services
provided to incarcerated people
includes not just audio services, but also
certain advanced communications
services that were previously outside
the Commission’s ratemaking authority.
No commenter challenges this overall
PO 00000
Frm 00007
Fmt 4701
Sfmt 4700
77249
interpretation of the purpose and scope
of the Martha Wright-Reed Act or
suggests a more limited view of the
Commission’s authority. We find no
basis for disagreeing with this
consensus view, and thus, we exercise
the full degree of our authority in this
regard to adopt a compensation plan
ensuring just and reasonable rates and
charges, as well as fair compensation for
providers of incarcerated people’s audio
and video communications services. We
analyze below the specific amendments
to section 276 of the Communications
Act included in the Martha Wright-Reed
Act that collectively expand our
jurisdiction over IPCS and interpret
each amendment, consistent with the
overarching goal of the Act—just and
reasonable rates for IPCS consumers and
fair compensation for IPCS providers.
2. Addition of ‘‘Other Calling Device[s]’’
33. At the outset of our analysis, we
address the fact that the Martha WrightReed Act extends the Commission’s
authority over IPCS to include not just
communications using traditional
payphones, but also communications
using ‘‘other calling device[s].’’ As
amended, section 276(b)(1)(A) of the
Communications Act directs the
Commission to establish a
compensation plan so all payphone
service providers are fairly compensated
for communications ‘‘using their
payphone or other calling device.’’
Based on the record and consistent with
the Commission’s proposal in 2023, we
interpret the term ‘‘other calling
device[s]’’ in the Martha Wright-Reed
Act broadly to encompass all devices
that incarcerated people either use
presently or may use in the future to
engage in covered communications with
individuals not confined within their
correctional institutions. Our
interpretation is further confirmed by
Congress’s expansion of our authority
over advanced communications services
in section 3(1)(E) of the
Communications Act, to include ‘‘any
audio or video communications service
used by inmates . . . regardless of
technology used.’’
34. There is support in the record for
this expansive interpretation. As the
Public Interest Parties explain,
‘‘Congress chose to use expansive
language covering ‘any technology used’
to grant the Commission authority as
broadly as possible, intending to cover
any and all technologies that an
incarcerated person may use to
communicate [by audio or video] today
or in the future.’’ The breadth of
Congress’s language and the ‘‘absence of
additional qualifying language’’ limiting
the scope of the term ‘‘other calling
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77250
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
device[s]’’ persuades us that a broad
reading of this term is intended. Under
this reading, the Commission’s authority
extends to ‘‘all types of calling devices’’
that incarcerated people may now or in
the future use to communicate by audio
or video with those not confined in the
incarcerated person’s correctional
institution. Furthermore, the
Commission has long understood
section 276(b)(1)(A) of the
Communications Act to set
requirements governing TRS
communications using TRS devices in
correctional facilities. Given that
backdrop, coupled with the fact that
TRS is designed to ensure service
functionally equivalent to telephone
service, we conclude that
‘‘payphone[s]’’ and ‘‘other calling
devices’’ under section 276(b)(1)(A)
include devices that people with
disabilities use for purposes of
‘‘communications’’ regardless of
whether the devices convey those
communications using audio and/or
video, or also (or instead) text, braille,
or another communications medium.
35. To be clear, as proposed in 2023,
the interpretation of ‘‘other calling
device[s]’’ we adopt today encompasses
all wireline and wireless phones,
computers, tablets, and other
communications equipment capable of
sending or receiving audio or video
communications described in section
276(d) of the Communications Act,
regardless of transmission format. And,
‘‘[c]onsistent with the Commission’s
mandate to provide
Telecommunications Relay Service
(‘TRS’) for incarcerated people with
disabilities,’’ this statutory phrase also
includes all wireline and wireless
equipment, whether audio, video, text,
other communications medium, or some
combination thereof that incarcerated
people with disabilities presently use to
communicate, through any payphone
service, with the non-incarcerated,
including but not limited to
videophones, captioned telephones, and
peripheral devices for accessibility,
such as braille display readers, screen
readers, and TTYs.
36. Finally, as proposed in 2023, our
interpretation of ‘‘other calling
device[s]’’ includes other potential
devices, not yet in use, to the extent
incarcerated people, including those
with disabilities, use them for covered
communications in the future. Such a
future-oriented interpretation is
necessary to ensure that IPCS rates and
charges remain just and reasonable, and
that providers continue to be fairly
compensated, as IPCS technology
evolves. It also will, to the extent
possible, keep IPCS providers from
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
shifting ‘‘exploitative practices to spaces
left unregulated’’ by our actions today.
3. The Requirement To Establish a
Compensation Plan
37. The Martha Wright-Reed Act
preserved the requirement in section
276(b) of the Communications Act that
the Commission ‘‘establish a
compensation plan’’ as a principal
means of achieving the statutory goals
with regard to IPCS. As amended,
section 276(b)(1)(A) requires that this
compensation plan ensure that ‘‘all
payphone service providers are fairly
compensated’’ for completed
communications and that ‘‘all rates and
charges [for those communications] are
just and reasonable.’’ The statute further
requires the Commission to implement
this statutory directive by rule. We now
turn to the legal framework envisioned
by the statute for establishing a
compensation plan that will realize
these statutory goals.
a. Addition of the ‘‘Just and Reasonable’’
Requirement to Section 276(b)(1)(A)
38. We adopt the Commission’s
proposal that the term ‘‘just and
reasonable,’’ added to section
276(b)(1)(A) of the Communications Act
by the Martha Wright-Reed Act, be
interpreted as having the same meaning
as the term ‘‘just and reasonable’’ in
section 201(b) of the Communications
Act. Prior to the Martha Wright-Reed
Act, section 276(b)(1)(A) contained no
‘‘just and reasonable’’ requirement.
Instead, that section required the
Commission to evaluate payphone rates
on a per-call basis and to ensure that
providers were fairly compensated for
each and every completed call.
Congress, however, modified this
approach in the Act by removing the
‘‘per call’’ and ‘‘each and every’’
completed call language from section
276(b)(1)(A), which instead now
requires that all payphone service
providers be fairly compensated, and
that all rates and charges imposed by
those providers be ‘‘just and
reasonable.’’ Not only is there strong
support in the record for the conclusion
that ‘‘just and reasonable’’ for the
purposes of revised section 276(b)(1)(A)
has the same meaning as ‘‘just and
reasonable’’ in section 201(b), but the
rules of statutory construction and
judicial precedent buttress this finding.
39. By way of example, the Public
Interest Parties explain, and we agree,
that ‘‘[t]racking the Section 201(b)
meaning is the most sound reading of
the statute and of congressional intent,’’
consistent with the understanding ‘‘that
Congress was aware of the Section
201(b) standard—and the Commission’s
PO 00000
Frm 00008
Fmt 4701
Sfmt 4700
decades of relevant precedent
interpreting it—when it chose to add the
identical term to Section 276.’’ The
Supreme Court likewise explained in
FCC v. AT&T that ‘‘identical words and
phrases within the same statute should
normally be given the same meaning.’’
Both of these tenets have particular
force here. The identical terms ‘‘just and
reasonable’’ appear in section 201(b)
and have now been added to section
276(b)(1)(A), both sections of Title II of
the Communications Act, to describe
the required end result of our
ratemaking. The Martha Wright-Reed
Act also was enacted against the
regulatory backdrop of—and in response
to—the GTL v. FCC decision, where the
D.C. Circuit found that the Commission
unreasonably relied on the ‘‘just and
reasonable’’ standard of section 201(b)
when implementing the differentlyworded language of section 276.
Further, in the wake of GTL v. FCC, the
Commission continued to regulate rates
and practices for interstate and
international IPCS services under its
section 201(b) ‘‘just and reasonable’’
authority, informed by the obligation to
ensure ‘‘fair’’ compensation under
section 276(b)(1)(B).
40. Nothing in the text of the Martha
Wright-Reed Act leads us to believe that
Congress intended to alter that general
regulatory approach in our
implementation of section 276(b)(1)(A)
in the case of services we previously
have regulated under section 201(b).
Instead, that regulatory backdrop
reinforces our conclusion that ‘‘just and
reasonable’’ is best interpreted in a
manner that harmonizes the application
of that standard in sections 201(b) and
276(b)(1)(A). The record also provides
no reason to interpret ‘‘just and
reasonable’’ differently in the two
sections of the Communications Act. We
thus find that ‘‘just and reasonable’’ has
the same meaning in both statutory
provisions and regardless of the services
to which the phrase is applied.
41. The Used and Useful Framework.
As Congress has imported section
201(b)’s ‘‘just and reasonable’’ standard
into section 276(b)(1)(A), we next find
that the standard the Commission has
used to determine just and reasonable
rates under 201(b) should also apply to
our ratemaking under section
276(b)(1)(A). Historically, the ‘‘used and
useful’’ framework has ‘‘both informed
the Commission’s regulatory cost
accounting and ratemaking rules and
operated to protect the interests of
ratepayers and carriers.’’ The record
supports our conclusion that this
framework provides the most
appropriate mechanism for ensuring just
and reasonable rates and charges for
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
IPCS, and therefore applies to all IPCS
over which we now have authority.
42. Accordingly, we rely on ‘‘the
‘used and useful’ doctrine and its
associated prudent expenditure
standard’’ to assess the costs that should
either be included or excluded from our
rate cap calculations to ensure just and
reasonable rates and charges for IPCS.
Under this framework, the
determination of just and reasonable
rates focuses on affording regulated
entities an opportunity to recover their
‘‘prudently incurred investments and
expenses that are ‘used and useful’ in
the provision of the regulated service for
which rates are being set.’’ The used and
useful framework permits regulated
entities to earn a reasonable return on
their resources dedicated to public use
but it does not allow them to include a
markup for profit beyond that. This
‘‘used and useful’’ framework, which ‘‘is
rooted in American legal theory and
particularly in the constitutional
limitations on the taking of private
property for public use,’’ balances the
‘‘equitable principle that public utilities
must be compensated for the use of their
property in providing service to the
public’’ with the ‘‘[e]qually central . . .
equitable principle that the ratepayers
may not fairly be forced to pay a return
except on investment which can be
shown directly to benefit them.’’ In this
Order, we use the term ‘‘used and useful
framework’’ to refer collectively to the
‘‘used and useful’’ standard and the
‘‘prudent expenditure’’ standard. In
applying these principles, ‘‘the
Commission considers whether the
investment or expense ‘promotes
customer benefits, or is primarily for the
benefit of the carrier.’ ’’ There are
several elements of the Commission’s
used and useful analysis. First, the
Commission considers the need to
compensate providers ‘‘for the use of
their property and expenses incurred in
providing the regulated service.’’
Second, the Commission looks to the
‘‘equitable principle that ratepayers
should not be forced to pay a return
except on investments that can be
shown to benefit them.’’ In this regard,
the Commission considers ‘‘whether the
expense was necessary to the provision
of’’ the services subject to the ‘‘just and
reasonable’’. And third, the Commission
considers ‘‘whether a carrier’s
investments and expenses were prudent
(rather than excessive).’’ As the
Commission has explained, ‘‘[t]he used
and useful and prudent investment
standards allow into the rate base
portions of plant that directly benefit
the ratepayer, and exclude any
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
imprudent, fraudulent, or extravagant
outlays.’’
43. As one commenter suggests, the
used and useful framework allows us to
recognize all IPCS costs that benefit
IPCS users, including any such costs
incurred by correctional facilities, as
costs that should be recovered though
IPCS rates and charges. Conversely, that
framework allows us to exclude from
that recovery any costs that do not
benefit IPCS users, either because they
were imprudent or because they were
for non-IPCS products or services,
regardless of whether the provider or
the facility incurred them. In short, the
used and useful framework functions as
an ‘‘equitable principle’’ that prevents
ratepayers from having to pay for costs
that are ‘‘primarily for the benefit of the
carrier,’’ while allowing regulated
entities to be compensated for providing
service.
44. Some commenters express
concerns over our reliance on the used
and useful framework in the IPCS
context, describing the framework as
being ‘‘a vestige of rate-of-return
regulation.’’ To the contrary, we find
that the framework remains the most
practical and effective method for
determining the costs providers and
facilities reasonably incur in providing
IPCS. As historically applied by the
Commission, the used and useful
framework limits the costs recoverable
through regulated rates and charges to
‘‘prudently incurred investments and
expenses that are ‘used and useful’ in
the provision of the regulated service.’’
Contrary to Pay Tel’s and Securus’s
representations, our application of the
used and useful standard is not ‘‘novel’’
or otherwise inappropriate as applied in
the Report and Order. The used and
useful standard is ‘‘a standard
regulatory agencies have been using for
decades’’ to ‘‘determine whether a
regulated company’s expenses are
justified. Nothing about the
Commission’s approach here is novel.
Instead, it reflects the familiar
ratemaking exercise the Commission
routinely undertakes to determine those
capital costs and expenses that may be
recovered through regulated rates. To
the extent Pay Tel’s argument is
premised on the notion that the used
and useful standard ‘‘is nowhere
specified in the Martha Wright-Reed Act
or in Section 276,’’ we explain above
that as Congress has imported section
201(b)’s ‘‘just and reasonable’’ standard
into section 276(b)(1)(A), the used and
useful framework that the Commission’s
has used to determine just and
reasonable rates under section 201(b)
provides the most appropriate
mechanism for determining just and
PO 00000
Frm 00009
Fmt 4701
Sfmt 4700
77251
reasonable rates under section
276(b)(1)(A). And, in any event, section
201(b) is similarly silent on the
applicability of the used and useful
standard. Further, we do not, as Pay Tel
suggests, rely on the used and useful
framework ‘‘to the exclusion of ‘fair
compensation.’ ’’ As we explain below,
the text of section 276(b)(1)(A), as
amended by the Martha Wright-Reed
Act, requires the Commission to
implement both provisions in tandem,
which we do in setting rate caps using
a zone of reasonableness approach. We
disagree with those commenters who
argue that competition in the IPCS
market makes application of the used
and useful standard unnecessary. That
argument conflates the bidding market
(i.e., the market in which IPCS providers
compete against each other to win
contracts with correctional facilities)
with the retail market (i.e., the market in
which IPCS consumers pay rates and
charges for the communications services
that we must ensure are just and
reasonable). Indeed, the Commission
has previously determined that ‘‘even if
there is competition in the bidding
market . . . it is not the type of
competition the Commission recognizes
as having an ability to exert downward
pressure on rates for consumers.’’ Pay
Tel and ViaPath contend that ‘‘IPCS
providers [should be] free to best
determine how to manage their
investments and expenses.’’ Allowing
providers such complete flexibility
would run contrary to the plain text in
the Martha Wright-Reed Act and
congressional directive to the
Commission. Moreover, this type of
behavior has thus far resulted in
unreasonable IPCS rates and charges for
consumers, underscoring the need for us
to apply the used and useful (or a
similar) framework to prevent the
inclusion of imprudent and non-IPCS
costs in IPCS rates and charges.
45. We also find unpersuasive
arguments that we should allow all
prudently incurred ‘‘operating
expenses’’ to be recovered through IPCS
rates and charges even if those expenses
are not used and useful in the provision
of IPCS and related ancillary services.
The National Sheriffs’ Association, in
particular, expresses concern that the
costs of some expenditures that
correctional officials find prudent,
including expenditures for certain safety
and security measures, will be excluded
from our ratemaking calculus. It claims
that relying on the used and useful
standard is inconsistent with section 4
of Martha Wright-Reed Act, which
specifies that ‘‘[n]othing in the Act shall
be construed to . . . prohibit the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77252
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
implementation of any safety and
security measures’’ related to IPCS ‘‘at a
State or local prison, jail, or detention
facility.’’
46. The National Sheriffs’
Association’s reasoning, however, does
not fully comport with the language of
the Martha Wright-Reed Act addressing
safety and security measures. Section
3(b)(2) of that Act requires that we
‘‘consider costs associated with any
safety and security measures necessary
to provide’’ IPCS in promulgating
implementing rules and in ‘‘determining
just and reasonable rates’’ for IPCS. But
neither section 3(b)(2) nor any other
provision of the Martha Wright-Reed
Act concludes or requires that every
safety and security measure that a
correctional institution chooses to
implement in connection with IPCS is
‘‘necessary to provide’’ IPCS, or
mandate that we require consumers to
pay for all those measures through IPCS
rates.
47. Rather, when read in conjunction
with section 3(b)(2) and the other
provisions of the Martha Wright-Reed
Act, section 4 simply makes clear that,
in directing the Commission to develop
a compensation plan to ensure just and
reasonable IPCS rates and charges,
Congress did not intend to intrude on
the ability of correctional institutions to
‘‘adopt policies that, in their judgment,
are needed to preserve safety and
security.’’ Our actions in this Order
make no such intrusion. We do not
prohibit any correctional institution
from implementing any safety and
security measure that it deems
appropriate or desirable. We do,
however, ensure that IPCS consumers
do not bear the costs of those safety and
security measures that are not necessary
to provide IPCS regardless of how
desirable these measures may be to
correctional institutions. Section 4 does
not preclude such an outcome.
48. The Commission has relied on the
used and useful framework to ensure
just and reasonable rates for decades.
Our decision to apply that framework in
determining which costs should be
recoverable from consumers through
IPCS rates and charges is fully
consistent with the Communications
Act, as amended by the Martha WrightReed Act, as well as with Commission
precedent, including Commission
regulation of IPCS rates that formed the
regulatory backdrop to the enactment of
the Martha Wright-Reed Act. The used
and useful framework, including its
prudent expenditure component,
embodies core ratemaking principles
that the Commission has long used to
separate the costs that captive
ratepayers should pay for regulated
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
services from those that are either
properly attributable to other products
or services or excessive. In applying that
framework, along with the ‘‘necessary’’
standard that section 3(b)(2) of the
Martha Wright-Reed Act specifies for
the costs of safety and security measures
and the other standards set forth in that
Act, we discharge our statutory duties,
consistent with record support, without
intruding into matters outside our
authority.
b. Effect on Other Laws
49. Section 4 of the Martha WrightReed Act provides additional direction
regarding the effect of the Act on
existing laws. Section 4 consists of two
clauses that are meant to guide the
interpretation of the remainder of the
Act. The first clause of section 4 of the
Act specifies that ‘‘[n]othing in this Act
shall be construed to modify or affect
any Federal, State or local law to require
telephone service or advanced
communications services at a State or
local prison, jail, or detention facility.’’
We interpret ‘‘this Act,’’ as used in
section 4 of the Martha Wright-Reed
Act, as referring the Martha Wright-Reed
Act, rather than the Communications
Act. All parties commenting on the
meaning of section 4 accept this
interpretation. In 2023, the Commission
sought comment on the meaning of this
statutory language. The Commission
asked whether ‘‘the language of this
clause simply mean[s] that the Martha
Wright-Reed Act does not create any
new obligation for state or local
facilities to provide any form of
incarcerated people’s calling services.’’
The National Sheriffs’ Association
supports this interpretation, adding that
the language of the Martha Wright-Reed
Act would not support ‘‘any new
requirement to make IPCS available.’’
The United Church of Christ and Public
Knowledge likewise agree that ‘‘this
provision demonstrates that the Act
does not affirmatively require any
additional service offerings’’ at
correctional institutions. No commenter
disputes this interpretation of the first
clause of section 4. We conclude that
this clause means that the Martha
Wright-Reed Act neither expressly nor
by implication modifies any federal,
state or local law in a manner that
would require the provision of any new
or additional incarcerated people’s
communications services at any state or
local correctional institution.
50. The second clause of section 4
specifies that nothing in the Martha
Wright-Reed Act ‘‘shall be construed to
. . . prohibit the implementation of any
safety and security measures related to’’
telephone service or advanced
PO 00000
Frm 00010
Fmt 4701
Sfmt 4700
communications services at a State or
local prison, jail, or detention facility. In
2023, the Commission sought comment
on how to interpret this clause and
asked, in particular, whether the clause
means that the Martha Wright-Reed Act,
with its focus on ‘‘just and reasonable
ratemaking’’ was ‘‘not intended to
interfere with any correctional official’s
decision on whether to implement any
type of safety or security measure that
the official desires in conjunction with
audio or video communications
services.’’ Two commenters support this
interpretation of the second clause of
section 4. In contrast, the United Church
of Christ and Public Knowledge contend
more narrowly that ‘‘this provision
demonstrates that the Act does not . . .
prohibit safety and security measures.’’
51. While the Commission’s initial
request for comment seems to suggest
the more expansive reading of the
second clause of section 4 that the
National Sheriffs’ Association supports,
we now conclude that a narrower
reading of that clause will more closely
reflect the limited scope of the statutory
language. We find that the National
Sheriffs’ Association’s interpretation is
overbroad and would expand the reach
of the second clause beyond its
intended scope. When read in
conjunction with the other provisions of
the Martha Wright-Reed Act, the second
clause of section 4 of that Act simply
makes clear that, in directing the
Commission to develop a compensation
plan to ensure just and reasonable IPCS
rates and charges, Congress did not
intend to prohibit correctional
institutions from implementing policies
that, in their judgment, are needed to
preserve safety and security. Consistent
with that interpretation and the specific
language of section 4, we interpret the
second clause of section 4 as precluding
us from construing any provision of that
Act as making such a prohibition
regarding the implementation of any
safety and security measures at any
federal, state, or local correctional
institution.
51. The National Sheriffs’ Association
expresses concern that the costs of some
expenditures for certain safety and
security measures will be excluded from
our ratemaking calculus. The National
Sheriffs’ Association relies on its
broader interpretation of section 4 to
assert that the Commission must not
‘‘interfere with the operation of jails by
eliminating their ability to recover
[safety and security] costs’’ through
IPCS rates. Although the National
Sheriffs’ Association admits that
excluding certain safety and security
costs from IPCS rates ‘‘is not a
prohibition per se,’’ it claims that, in
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
practice, disallowing any costs
associated with safety and security
measures that law enforcement officials
have approved effectively prohibits the
measures from being implemented.
53. The National Sheriffs’
Association’s reasoning, however, does
not comport with the broader statutory
context of the Martha Wright-Reed Act
addressing safety and security measures.
In particular, section 3(b)(2) of that Act
requires that we ‘‘consider costs
associated with any safety and security
measures necessary to provide’’ IPCS in
promulgating implementing rules and in
‘‘determining just and reasonable rates’’
for IPCS. The best interpretation of the
Martha Wright-Reed Act will ensure a
meaningful role for both section 3(b)(2)
and section 4.
54. If section 3(b)(2), of its own force,
required the Commission to allow
recovery of all costs identified by
providers or correctional facilities as
safety and security costs in regulated
rates, as some commenters suggest, then
there would seem to be little to no
possible risk that such safety and
security measures could be ‘‘prohibited’’
because they would, instead, be
affirmatively funded by IPCS ratepayers.
That would leave section 4 with little or
no risk to address in that regard, and
thus the relevant language of section 4
would be of substantially diminished
significance. We reject Securus’
suggestion that failure to find all safety
and security measures ‘‘necessary’’ and
recoverable would violate the
Administrative Procedure Act (APA). As
revealed by our consideration of the
relevant issues and the record before us
on safety and security issues below, we
fully ensure that we have ‘‘acted within
a zone of reasonableness and, in
particular, ha[ve] reasonably considered
the relevant issues and reasonably
explained the decision.’’ We recognize
that section 3(b)(2) is focused on ‘‘costs
associated with any safety and security
measures necessary to provide’’ IPCS,
Martha Wright-Reed Act § 3(b)(2)
(emphasis added), while section 4 is
focused on ‘‘safety and security
measures related to’’ IPCS. Martha
Wright-Reed Act § 4 (emphasis added).
Despite the potential that ‘‘necessary’’ in
section 3(b)(2) is a narrower standard
than ‘‘related to’’ in section 4, it is not
clear how much practical significance
that would have if, as some commenters
contend, the Commission is required to
simply defer to providers’ and/or
correctional facilities’ on what safety
and security costs must be recoverable
in IPCS rates. But even under a stricter
standard, we are persuaded that
mandatory recovery through IPCS rates
of all ‘‘costs associated with any safety
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
and security measures necessary to
provide’’ IPCS would leave the relevant
proviso of section 4 of substantially
diminished significance.
55. Conversely, if section 4 were read
to require recovery of the full array of
safety and security costs—deferring to
the correctional facilities’ decision to
approve the use of particular measures
when doing so—there would seem to be
little meaningful left for the
Commission to ‘‘consider’’ in that regard
under section 3(b)(2). Matters such as
identifying the magnitude of such costs
and how they should be allocated
already would be necessitated by the
‘‘just and reasonable’’ requirement in
section 276(b)(1)(A) of the
Communications Act, as amended by
the Martha Wright-Reed Act, if section
4 were interpreted to require such
recovery. That, in turn, would leave
section 3(b)(2) of substantially
diminished significance.
56. Our interpretation of those
provisions, by contrast, preserves a
meaningful role for each, particularly
when understood in light of the relevant
regulatory backdrop. In the years
leading up to the enactment of the
Martha Wright-Reed Act, one of the
most-debated issues was the recovery
through IPCS rates of payments
providers made to correctional facilities,
ostensibly—at least in some instances—
associated with safety and security
measures. Some parties argued for a
categorical prohibition on any such
recovery, while other parties advocated
for full recovery through IPCS rates of
virtually any such asserted costs or
payments. For its part, the Commission
sought to navigate these competing
claims by seeking to use the best
available evidence to assess whether
there were costs—such as safety and
security costs—with a sufficient nexus
to IPCS to potentially warrant recovery
of those costs in IPCS rates; using the
best available data to seek to quantify
those costs; and continuing to evaluate
additional tools it might use to address
the continued concerns about such cost
recovery, including possible
preemption. Our reading of section
3(b)(2) reflects an approach to safety and
security costs analogous to the middle
path the Commission historically has
sought to take. By requiring that such
costs be ‘‘considered’’—but only that
they be ‘‘considered’’—the Martha
Wright-Reed Act makes clear that it is
not putting a thumb on the scale of
either extreme position by categorically
precluding or categorically allowing
recovery of claimed safety and security
costs through regulated IPCS rates. At
the same time, section 4 of the Martha
Wright-Reed Act makes clear that the
PO 00000
Frm 00011
Fmt 4701
Sfmt 4700
77253
Commission cannot use that Act as a
basis to go so far as outright
‘‘prohibit[ing] the implementation of
any safety and security measures related
to’’ IPCS—such as by preempting even
the implementation of such measures—
while not foreclosing the possibility that
correctional facilities ultimately must
look elsewhere besides IPCS provider
payments passed through in IPCS rates
to fund some (or many) of those
measures.
57. Our actions in this Order do not
prohibit any correctional institution
from implementing any safety and
security measure that it deems
appropriate or desirable. We do,
however, ensure that IPCS consumers
do not bear the costs of those safety and
security measures that are not used and
useful or necessary to provide IPCS
regardless of how desirable these
measures may be to correctional
institutions. Section 4 does not preclude
such an outcome.
58. In addition, without conceding the
factual merits of the National Sheriffs’
Association’s claim regarding our ability
to exclude costs of safety and security
measures that are neither used and
useful nor necessary from our
ratemaking analysis, as a statutory
matter we observe that in other contexts
where Congress wanted to prevent not
only the prohibition of certain conduct,
but even things that effectively prohibit
such conduct, it has done so explicitly.
Particularly because our interpretation
best reconciles sections 3(b)(2) and 4 of
the Martha Wright-Reed Act, we are not
persuaded to infer a de facto
prohibition—a prohibition in fact—from
the language of section 4 as the National
Sheriffs’ Association suggests. With
respect to the factual merits of the
National Sheriffs’ Association claims,
we have provided for the recovery
generally of used and useful costs,
including costs for necessary safety and
security measures, through the rate caps
we adopt today. We find our actions
adequately address concerns about a de
facto prohibition of safety and security
measures in this context.
c. Implementation of the ‘‘Fairly
Compensated’’ Standard in Section
276(b)(1)(A)
59. We now turn to the requirement
that we establish a compensation plan
to ensure IPCS providers are fairly
compensated. We conclude that, in
addition to ensuring ‘‘just and
reasonable’’ rates and charges, our
compensation plan for IPCS must
accord meaning to the ‘‘fairly
compensated’’ clause in section
276(b)(1)(A) and its relationship to the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77254
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
‘‘just and reasonable’’ rates and charges
mandate.
60. Meaning of the Fair Compensation
Standard. We conclude that our
compensation plan for IPCS must give
full effect to both the ‘‘just and
reasonable’’ and the ‘‘fairly
compensated’’ clauses in section
276(b)(1)(A). In 2023, the Commission
sought comment on how it should
balance the interests of both consumers
and industry in giving effect to both
clauses. As proposed in 2023, we
determine that giving effect to both
standards requires a balanced approach
that ‘‘emphas[izes] consumers’
(particularly incarcerated people’s) and
providers’ right to just and reasonable
rates and charges for each audio and
video communications service now
encompassed within the statutory
definition of ‘payphone service,’ ’’ as
well as ensuring that such rates ensure
that ‘‘all payphone providers are fairly
compensated.’’ We thus reject Securus’s
claim that the Order ‘‘simply collapses
the fair compensation standard into the
just and reasonable standard.’’ As we
explain, our rate-making methodology
and statutory interpretation of the
Martha Wright-Reed Act ensure that
both standards are given full effect.
61. We view these clauses as
imposing two interdependent statutory
mandates, each of which we must seek
to fully implement. As discussed below,
as a general matter a range of possible
outcomes potentially can be found ‘‘just
and reasonable’’ and a range of possible
outcomes potentially can be found to
‘‘fairly compensate’’ IPCS providers.
Because of that, we anticipate being able
to find areas of overlap in those two
ranges that will satisfy both statutory
mandates. We find this expectation
particularly reasonable given that the
‘‘just and reasonable’’ precedent under
section 201(b)—which we carry into our
application of section 276(b)(1)(A)—
already involves a balancing that
accounts for the service provider’s
interests.
62. With respect to the ‘‘just and
reasonable’’ mandate, as discussed
above, that directive leads us to balance
the ‘‘equitable principle that public
utilities must be compensated for the
use of their property in providing
service to the public’’ with the
‘‘[e]qually central . . . equitable
principle that the ratepayers may not
fairly be forced to pay a return except
on investment which can be shown
directly to benefit them,’’ drawing on
Commission precedent under section
201(b). In determining rates that are
‘‘just and reasonable’’ we look to
whether costs to be recovered were
prudently incurred and used and useful
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
in the provision of the services at issue.
That framework does not inevitably lead
to a single ‘‘just and reasonable’’ rate,
however, but allows for a range of rates
with the agency potentially able to find
any rate with that zone to be ‘‘just and
reasonable.’’
63. There also is a body of precedent
regarding the interpretation of the
‘‘fairly compensated’’ mandate
historically present in section
276(b)(1)(A)—but our approach here
must account for certain ways in which
the Martha Wright-Reed Act altered the
operative statutory approach,
necessitating related departures from
that historical precedent. Under that
precedent, regulated rate levels
historically were viewed as in
accordance with the ‘‘fairly
compensated’’ standard if they ‘‘allow
providers to generate sufficient revenue
from each interstate and international
call—including any ancillary service
fees attributable to that call—(1) to
recover the direct costs of that call; and
(2) to make a reasonable contribution to
the provider’s indirect costs related to
inmate calling services.’’ As the
Commission recognized in the 2002 Pay
Telephone Order—and recognized again
in the 2021 ICS Order—the ‘‘lion’s share
of payphone costs are those that are
‘shared’ or ‘common’ to all services,’’
and there are ‘‘no logical or economic
rules that assign these common costs to
‘each and every call.’ ’’ As a result, ‘‘a
wide range of compensation amounts
may be considered ‘fair.’ ’’ Securus
argues that we have departed from the
2002 Pay Telephone Order’s fair
compensation determination based on
overall profitability to determine fair
compensation evaluating ‘‘profitability
on a call-by-call basis.’’ We disagree.
Further, Securus has not explained the
difference between these two views of
profitability, and has not articulated
why a provider would not be profitable
overall if it were profitable on a call-bycall basis.
64. The Continued Role of the Fair
Compensation Standard. Prior to the
enactment of the Martha Wright-Reed
Act, section 276(b)(1)(A) of the
Communications Act required that the
Commission ‘‘establish a per call
compensation plan’’ ensuring that
service providers be ‘‘fairly
compensated for each and every
completed’’ call. The Martha WrightReed Act eliminated the ‘‘per call’’ and
‘‘each and every’’ call requirements and
added a new dimension to section 276
by requiring that our compensation plan
for IPCS ‘‘ensure that . . . all rates and
charges’’ for incarcerated people’s
communications services ‘‘are just and
reasonable.’’ We disagree with UCC’s
PO 00000
Frm 00012
Fmt 4701
Sfmt 4700
argument that it would be ‘‘arbitrary and
capricious’’ to require fair compensation
for providers. This is contrary to the
explicit statutory text of section
276(b)(1)(A) that requires fair
compensation. In 2023, the Commission
sought comment on how the Martha
Wright-Reed Act’s amendments to
section 276(b)(1)(A) affect the ‘‘fairly
compensated’’ requirement in that
section. In particular, the Commission
sought comment on Congress’s intent in
striking the ‘‘per call’’ and ‘‘each and
every [call]’’ language from section
276(b)(1)(A) and the effect of its removal
on the ‘‘fairly compensated’’
requirement, particularly in light of the
Martha Wright-Reed Act’s new
requirement that all IPCS rates and
charges be just and reasonable.
65. The record persuades us that in
striking the ‘‘per call’’ and ‘‘each and
every [call]’’ language, Congress
modified but did not eliminate the
requirement that providers be fairly
compensated for completed intrastate
and interstate communications. Instead,
as Pay Tel explains, the fair
compensation requirement ‘‘was left as
an independent requirement by the
Martha Wright-Reed Act, reflecting a
purposeful decision by Congress to
retain the requirement as an essential
component of [IPCS] reform.’’ We agree
that we should not ‘‘effectively read the
requirement out of the statute or
diminish its importance.’’ Instead, we
address the fair compensation and just
and reasonable standards as
interdependent standards as we
implement the requirements of section
276(b)(1)(A).
66. At the same time, we reject
suggestions that the ‘‘just and
reasonable’’ mandate could be treated as
subsidiary to the ‘‘fairly compensated’’
mandate. We therefore reject any
argument that IPCS rates or ancillary
services charges ‘‘must be higher than
they otherwise would be under a ‘just
and reasonable’ ’’ analysis in order ‘‘to
achieve ‘fairness.’ ’’ The text of section
276(b)(1)(A) as amended by the Martha
Wright-Reed Act requires the
Commission to implement both
provisions in tandem. And because the
two mandates potentially can be
satisfied through a range of outcomes,
the record here does not persuade us
that we will be forced into a situation
where one mandate must yield for the
other mandate to be met.
67. Interpreting the Fair
Compensation Standard in Light of the
Martha Wright-Reed Act. While we
conclude that our compensation plan
for IPCS must accord meaning to the
‘‘fairly compensated’’ clause in section
276(b)(1)(A), we also conclude that the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Martha Wright-Reed Act alters our
interpretation and application of that
clause in certain key ways. For one,
deletion of the ‘‘per call’’ and ‘‘each and
every [call]’’ language from section
276(b)(1)(A) fundamentally changes the
requirements of that clause. Consistent
with the Commission’s preliminary
interpretation in 2023, we find that
these statutory amendments signal
‘‘Congress’s intent to restrict the
application of the ‘fairly compensated’
requirement with respect to [IPCS] by
no longer requiring the Commission to
ensure that its compensation plan
allows for ‘fair’ compensation for ‘each
and every’ completed call.’’ Thus, while
we must ensure that providers receive
fair compensation for completed
intrastate and interstate
communications, we are not obliged to
establish a per-call based compensation
plan, as section 276(b)(1)(A) previously
required.
68. The Martha Wright-Reed Act also
affects how we implement section
276(b)(1)(A)’s directive that our
compensation plan for IPCS ‘‘ensure
that all payphone service providers are
fairly compensated’’ for completed
communications, consistent with the
Act’s amendments to section
276(b)(1)(A). Section 3(b)(1) of the
Martha Wright-Reed Act grants us
explicit authority to use ‘‘industry-wide
average costs.’’ Use of industry-wide
average costs, of necessity, evaluates
provider compensation on a more
aggregated—rather than provider-byprovider—basis. Section 3(b)(1)
expressly permits the use of such data
in ‘‘determining just and reasonable
rates’’ as one permissible example,
alongside more general authority to use
industry-wide average costs ‘‘[i]n
implementing this Act and the
amendments made by this Act,’’ and
‘‘promulgating regulations under’’ the
Martha Wright-Reed Act’s amendments
to the Communications Act. Nothing in
the Martha Wright-Reed Act compels
the Commission to use ‘‘the average
costs of service of a communications
service provider’’ in determining just
and reasonable rates. Martha WrightReed Act § 3(b)(1). We thus reject
Securus’s argument that the
Commission somehow ‘‘ignored’’ the
possibility of using such costs in setting
its rate caps. Based on that language we
interpret Congress as authorizing us to
rely on industry-wide average costs in
implementing the ‘‘fairly compensated’’
mandate—and its interplay with the
‘‘just and reasonable’’ mandate—as
amended and codified in section
276(b)(1)(A) by the Martha Wright-Reed
Act. We consequently interpret
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Congress’ permission to use industrywide average costs to mean that rate
caps based on costs evaluated on an
aggregated basis generally will satisfy
the requirement that all payphone
service providers be fairly compensated.
The record supports this interpretation.
Consistent with the Martha Wright-Reed
Act, and its amendments to section
276(b)(1)(A), we therefore adopt rate
caps based on industry-wide average
cost data submitted by IPCS providers
in response to the Commission’s 2023
Mandatory Data Collection, as described
below.
69. We also observe that these
provisions of the Martha Wright-Reed
Act respond directly to the D.C.
Circuit’s holding in GTL v. FCC that
setting rate caps based on industry-wide
average costs was ‘‘patently
unreasonable’’ because ‘‘calls with
above-average costs’’ would not be fairly
compensated on a per call basis. The
elimination by Congress of the ‘‘per
call’’ and ‘‘each and every [call]’’
language from section 276(b)(1)(A) leads
to the interpretation that compensation
need not be evaluated on a per-call
basis. In addition, our reading of section
3(b)(1) of the Martha Wright-Reed Act
persuades us that fair compensation
need not be evaluated on a provider-byprovider basis—still subject, of course,
to Constitutional limits on rate
regulation as applied to individual
providers.
70. At the same time, the flexibility in
evaluating costs described in section
3(b)(1) of the Martha Wright-Reed Act is
tempered by certain requirements to
consider particular costs or cost
characteristics under section 3(b)(2) of
that Act. Section 3(b)(2) provides that
the Commission ‘‘shall consider costs
associated with any safety and security
measures necessary to provide a
service.’’ Under that provision, the
Commission also must consider cost
differences associated with ‘‘small,
medium, or large facilities or other
characteristics.’’ Consistent with that
provision, we therefore also evaluate
such costs considerations in the rate
caps we adopt, as described below.
71. Consistent with the Commission’s
analysis in the 2021 ICS Order, we find
that a provider will be fairly
compensated within the meaning of
section 276(b)(1)(A), as amended by the
Martha Wright-Reed Act, if the rates and
charges we find just and reasonable
afford it an opportunity to be fairly
compensated at the level of the contract,
regardless of the contributions that any
particular communication or service
makes toward the provider’s shared and
common costs, ensuring efficient
providers have an opportunity to obtain
PO 00000
Frm 00013
Fmt 4701
Sfmt 4700
77255
fair compensation when bidding on
contracts. We decline to set rate caps
that ensure cost recovery for providers
with unusually high costs because to let
unusual cases determine rates generally
would result in unjust and unreasonable
rates. Instead, if such providers exist,
they can seek a waiver. In that Order,
the Commission found that
compensation could be fair, when
measured on a per-call basis, even if
‘‘each and every completed call’’ did not
‘‘make the same contribution to a
provider’s indirect costs’’ (i.e., costs
shared among, or common to, groups of
calls) and even if the provider did not
‘‘recover the total ‘cost’ it claims in
connection with each and every
separate inmate calling services call.’’
Instead, the Commission recognized that
‘‘the lion’s share’’ of inmate calling
services costs were shared or common
costs and that there were a range of
economically sound methods of
assigning these costs to individual calls.
Under this approach, a provider will be
fairly compensated if the rates and fees
it is permitted to charge will afford it an
opportunity to recover industry-average
costs associated with prudent
investments used and useful in
providing IPCS and associated ancillary
services at the facilities the provider
serves.
d. Rates and Charges
72. We interpret the statutory
language ‘‘rates and charges’’ to
encompass the amounts imposed on
consumers by IPCS providers as the
Commission proposed in 2023. Section
276(b)(1)(A), as amended by the Act,
requires that ‘‘all rates and charges’’
imposed by providers for the eligible
communications are just and
reasonable. The 2023 IPCS NPRM
proposed to interpret ‘‘rates’’ to include
‘‘the amounts paid by consumers of
incarcerated people’s communications
services for calls or other audio or video
communications covered by the statute
or [the Commission’s] rules.’’ And 2023
proposed to interpret ‘‘charges’’ to
include ‘‘all other amounts assessed on
consumers of incarcerated people’s
communications services’’ including
‘‘ancillary service charges, authorized
fees, mandatory taxes and fees, and any
other charges a provider may seek to
impose on consumers.’’ The record
supports these interpretations. We are
persuaded that the statutory language
‘‘rates and charges’’ encompasses the
amounts imposed on IPCS consumers,
as we proposed in 2023, whether
‘‘rates’’ and ‘‘charges’’ are interpreted
individually or if ‘‘rates and charges’’ is
understood as an all-encompassing
category.
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77256
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
73. The regulation of ‘‘rates and
charges’’ lies at the core of the Martha
Wright-Reed Act, and the amendments
to section 276. Prior to the enactment of
the Martha Wright-Reed Act, the
Commission’s rules commonly used the
term ‘‘rates’’ when referring to the
amounts consumers paid for inmate
calling services calls, while at other
times referring to such amounts as
‘‘charges.’’ The Commission’s rules also
at times use the term ‘‘rates’’ in
connection with ancillary service
charges. Nonetheless, on balance we
conclude that under our rules in place
at the time of the enactment of the
Martha Wright-Reed Act, the term
‘‘rates’’ should be understood as
referring to the amounts paid by
consumers of incarcerated people’s
communications services for calls,
supporting our adoption of the
interpretation of that term proposed in
2023. Our interpretation also comports
with the broad ordinary meaning of the
term ‘‘rate.’’
74. We also conclude that ‘‘charge[s]’’
properly are interpreted as including
ancillary services charges, mandatory
taxes, mandatory fees, and authorized
fees. The Commission’s rules at the time
of the Martha Wright-Reed Act’s
enactment defined ‘‘Ancillary Service
Charge’’ as ‘‘any charge Consumers may
be assessed for, or in connection with,
the interstate or international use of
Inmate Calling Services that are not
included in the per-minute charges
assessed for such individual calls.’’
Although the ancillary service charges
that were permitted to be assessed
under the Commission’s rules were
limited to five discrete categories,
Congress notably did not use the term
‘‘ancillary service charges’’ in the
Martha Wright-Reed Act, instead using
the more generic term ‘‘charges.’’
Consequently, we do not find it
appropriate to focus narrowly on the
scope of ancillary service charges
specifically permitted to be assessed
under the Commission’s rules. Rather,
consistent with Congress’s use of the
broader term ‘‘charges,’’ we look to the
distinction drawn between per-minute
rates and any other ‘‘charge[s]
Consumers may be assessed for, or in
connection with, the interstate or
international use of Inmate Calling
Services.’’ That encompasses not only
ancillary service charges permitted
under the Commission’s rules, but the
other amounts identified in 2023 such
as mandatory taxes, mandatory fees, and
authorized fees. This interpretation
likewise comports with the broad
ordinary meaning of the term ‘‘charge.’’
75. As an alternative basis for our
decision, we conclude that ‘‘rates and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
charges’’ can be interpreted collectively
as reflecting a ‘‘belt and suspenders’’
approach to the Commission’s
regulatory authority under section
276(b)(1)(A) that encompasses the full
array of amounts assessed on IPCS
customers discussed above. The
statutory context and regulatory history
are consistent with that understanding.
For example, leading up to the
enactment of the Martha Wright-Reed
Act, the Commission relied on authority
under section 201(b)—which refers to
‘‘charges’’ but includes no express
reference to ‘‘rates’’—to adopt rules
governing ‘‘rates and charges’’ for IPCS.
Treating ‘‘rates and charges’’ as a
doublet that emphasizes that meaning of
these overlapping terms also
harmonizes section 3(b) of the Martha
Wright-Reed Act—which addresses the
Commission’s consideration of certain
cost information when, among other
things, ‘‘determining just and reasonable
rates’’—with the fact that the Act
amended section 276(b)(1)(A) to include
a mandate that the Commission ensure
that ‘‘rates and charges are just and
reasonable’’ for IPCS. This
understanding of ‘‘rates and charges’’
also is understandable given the
Commission’s own sometimes
inconsistent usage of ‘‘rates’’ and
‘‘charges’’ in its IPCS rules in effect at
the time of enactment of the Martha
Wright-Reed Act. Given that statutory
context and regulatory history, ‘‘rates
and charges’’ need not necessarily be
understood as embodying two distinct
concepts, but rather as ensuring that
Congress collectively encompassed the
full range of amounts assessed on IPCS
customers over which it wanted the
Commission to have authority. Further,
this interpretation of ‘‘rates and
charges’’ reflects the substantial overlap
in the ordinary meaning of those terms.
76. Notably, section 276(b)(1)(A) also
specifies that ‘‘all rates and charges’’ be
just and reasonable. By specifying that
‘‘all,’’ as opposed to some smaller subset
of ‘‘rates and charges,’’ are to be just and
reasonable, Congress obviously
intended to grant us broad regulatory
oversight of ‘‘rates and charges.’’ We
find that the requirement that ‘‘all’’ rates
and charges be just and reasonable
applies both to the rates providers
impose and the rates consumers
ultimately pay. Thus, the totality of the
rates and charges a provider assesses on
or collects from consumers must be just
and reasonable. We find support for this
in the record and judicial precedent.
77. Thus, we disagree with ViaPath
that we should interpret ‘‘rates and
charges’’ as excluding mandatory taxes,
mandatory fees, and authorized fees.
ViaPath contends that our ‘‘current IPCS
PO 00000
Frm 00014
Fmt 4701
Sfmt 4700
rules acknowledge’’ that ‘‘authorized
fees and mandatory taxes and fees are
separate and apart from ancillary service
charges.’’ As we explain above, the
Martha Wright-Reed Act uses a broader
term than ‘‘ancillary service charges,’’
and we conclude it best effectuates
Congress’ choice for our interpretation
to sweep more broadly than the specific
categories of ancillary service charges
permitted under our existing rules. Nor
are we persuaded by ViaPath’s efforts to
rely on rules and precedent from the
operator services context. We find the
statutory and regulatory considerations
that we have described here to be much
more pertinent to understanding
Congress’s actions against that precise
legal backdrop than precedent and rules
cited by ViaPath that were adopted in a
context that we find at most tangentially
related to our regulation of IPCS as
relevant here.
78. To exclude any tax or fee that a
provider might impose on IPCS
consumers from the term ‘‘all rates and
charges’’ would risk opening the door to
assessments that could undercut the
requirement of section 26(b)(1)(A) that
amounts IPCS providers impose—and
that IPCS customers pay—be just and
reasonable. Indeed, the Commission
recognized as much in the 2015 ICS
Order (80 FR 79135, December 18, 2015)
when it repeatedly referred to
mandatory taxes, mandatory fees, and
authorized fees as charges and banned
all inmate calling services ‘‘fees or
charges beyond mandatory taxes and
fees, and authorized fees that the carrier
has the discretion to pass through to
consumers without any mark up.’’ The
Commission concluded that this ban
would help ensure just and reasonable
rates for inmate calling services. The
record at that time demonstrated that
providers had been marking up taxes
and regulatory fees before passing them
on to consumers and that those inflated
fees had contributed to unreasonable
inmate calling services rates and
charges. Given the history of inflated
ICS charges, there can be no assurance
of a just and reasonable end result for
IPCS if the definition of rates and
charges were limited in the manner
ViaPath proposes, which would allow
providers to impose additional charges
on consumers or to mark up their
authorized fees, mandatory taxes, or
mandatory fees before recovering them
from consumers. Indeed, a recent class
action lawsuit alleges that an IPCS
provider charges consumers inflated
fees under the guise of taxes. The rules
we adopt today do not alter the
circumstances in which providers may
pass authorized fees, mandatory taxes,
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
and mandatory fees through to
consumers. We therefore conclude that
the statute requires us to consider the
totality of the rates and charges a
provider assesses or collects from
consumers to ensure that all IPCS rates
and charges are just and reasonable.
e. Authority To Regulate IPCS
Providers’ Practices
79. In 2023, the Commission sought
comment on whether section
276(b)(1)(A)’s mandate that we
‘‘establish a compensation plan to
ensure that . . . all rates and charges’’
for incarcerated people’s
communications services be ‘‘just and
reasonable’’ extends to ensuring that the
providers’ practices, classifications, and
regulations for or in connection with
those services are just and reasonable.
The Commission also asked for
comment on the extent of its section
276(b)(1)(A) authority, if any, to address
providers’ practices, classifications, and
regulations, as well as any limitations
on that authority. Based on the record,
we conclude that the Martha WrightReed Act provides us with limited
authority to regulate IPCS providers’
practices, classifications, and
regulations (collectively, ‘‘practices’’) as
a necessary part of our obligation to
establish a compensation plan to ensure
fair IPCS compensation to providers and
just and reasonable rates and charges for
IPCS consumers and providers under
section 276(b)(1)(A). In addition, section
201(b)’s grant of authority over practices
for or in connection with interstate and
international common carrier
incarcerated people’s communications
services enables us to act in certain
circumstances, as well. We address
these two sources of authority below.
80. Section 276(b)(1)(A)
Compensation Plan Requirement. We
conclude that the section 276
requirement that the Commission
‘‘establish a compensation plan’’ to
achieve the goals of fair compensation
for providers and just and reasonable
rates and charges for consumers and
providers, requires more of the
Commission than the simple act of
setting rates and charges. When
implementing section 276(b)(1)(A)
historically, the Commission has not
limited itself just to the regulation of
rate levels when seeking to effectuate
the ‘‘fairly compensated’’ requirement
that preceded the Martha Wright-Reed
Act. By adding the ‘‘just and
reasonable’’ mandate, while leaving the
directive to establish a ‘‘compensation
plan’’ unaltered, we understand
Congress to intend that the Commission
undertake an integrated set of actions
designed to work in concert to achieve
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the statute’s central goals of fair
compensation and just and reasonable
rates and charges.
81. Long prior to the enactment of the
Martha Wright-Reed Act, the
Commission implemented section
276(b)(1)(A)’s mandate to establish a
compensation plan to ensure payphone
providers are fairly compensated by
addressing the practical details
associated with charging for, and
receiving payment for, payphone
services. In its implementation of
section 276(b)(1)(A) over time, the
Commission adopted various
requirements in particular payphone
contexts apart from simply rate setting.
Such requirements have included,
among other things: (1) requiring the
transmission of information to enable
tracking of calls from payphones; (2)
allocating responsibility for paying
compensation for payphone calls; and
(3) defining the permissible
arrangements between payphone
providers and the carriers paying them
compensation for payphone calls. A
unifying premise of these requirements
is that their inclusion in a compensation
plan enabled the Commission to
advance the fair compensation mandate
in section 276(b)(1)(A).
82. In light of the Martha Wright-Reed
Act’s addition of the ‘‘just and
reasonable’’ mandate in section
276(b)(1)(A), we find that the statute’s
direction to establish a compensation
plan likewise necessarily carries with it
the authority to prescribe regulations to
govern providers’ practices to the extent
that those practices implicate the
Commission’s ability to ensure that rates
and charges are just and reasonable. In
this way, the ‘‘compensation plan’’
requirement—which the Martha WrightReed Act left unaltered—gives the
Commission authority in the case of the
‘‘just and reasonable’’ mandate that is
comparable to what it historically has
possessed when crafting compensation
plans to account for the ‘‘fairly
compensated’’ mandate. As the Public
Interest Parties indicate, the
responsibility to establish a
comprehensive plan ensuring just and
reasonable rates and charges
‘‘necessarily encompasses a
corresponding responsibility to ensure
that IPCS providers do not evade [the
Commission’s rate and fee] caps through
their other practices, classifications, and
regulations.’’ Given the mandate of the
Martha Wright-Reed Act and its
revisions to section 276(b)(1)(A), we
find that the Commission’s authority
over rates and charges necessarily
extends to practices that affect our
ability to ensure that rates and charges
PO 00000
Frm 00015
Fmt 4701
Sfmt 4700
77257
are just and reasonable, as well as that
providers are fairly compensated.
83. If section 276(b)(1)(A) instead
were read only to allow us to regulate
IPCS rate levels, providers’ practices
could thwart Congress’ direction to
ensure just and reasonable rates and
charges for consumers and fair
compensation for IPCS providers. The
risk that providers’ practices could
subvert the goals of the statute is not
speculative. For example, in light of
evidence that inmate calling services
providers were ‘‘engaging in unjust and
unreasonable practices and imposing
unfair rates by instituting minimum or
maximum amounts that may be
deposited for prepaid calling accounts,’’
the Commission prohibited providers
from instituting prepaid account
minimums and required that any
provider that limits deposits set the
maximum purchase amount at no less
than $50 per transaction. Securus asks
that we ‘‘set minimum funding amounts
to allow [IPCS providers] to better
manage costs. We decline on the record
before us to adopt its proposal, but will
continue to monitor its concerns. And,
more recently, the Commission
concluded that all funds deposited into
a debit-calling or prepaid calling
account and not spent on products or
services are generally the property of the
account holder and that any action
inconsistent with this finding is an
unjust and unreasonable practice. The
Commission also has found affirmative
requirements, such as consumer
disclosure rules, necessary to ensure
that rates and charges as implemented
are just and reasonable as applied to
consumers. In sum, we find that section
276, as amended by the Martha WrightReed Act, gives us authority over
providers’ practices to the extent they
may affect the Commission’s ability to
ensure just and reasonable IPCS rates
and charges and fair compensation for
all incarcerated people’s
communications services. Those
services include the full range of
services now subject to Commission
authority as a result of the Martha
Wright-Reed Act, including intrastate
IPCS and the advanced communications
services now included in the statutory
definition of ‘‘payphone service.’’
84. We agree with commenters insofar
as they note that Congress did not
incorporate the entirety of the section
201(b) legal framework to ensure just
and reasonable practices, classification,
and regulations into section
276(b)(1)(A). At the same time, we reject
claims that we lack any authority at all
over IPCS provider practices under
section 276(b)(1)(A). In particular, we
reject arguments that our interpretation
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77258
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
fails to properly credit Congress’
decision to use different language in
section 201(b) and section 276(b)(1)(A).
To the contrary, we honor Congress’s
choice because we do not interpret our
section 276(b)(1)(A) authority over IPCS
practices to be as extensive as the
Commission’s authority over common
carrier practices under section 201(b).
At the same time, we also must honor
Congress’s choice to leave intact the
requirement that the Commission
‘‘establish a compensation plan’’ in the
regulation mandated by section
276(b)(1)(A). As indicated by our
analysis above, the compensation plan
provision goes beyond the
establishment of individual rates and
necessarily entails a harmonized set of
requirements that act as a coordinated
whole to achieve the new statutory
mandate of just and reasonable rates and
charges.
85. Section 201(b) Authority Over
Interstate and International Practices.
Apart from the statutory directives in
section 276 taken as a whole that
support our finding of jurisdiction over
certain IPCS practices to the extent they
bear on just and reasonable rates and
charges, we conclude that section 201(b)
provides an independent statutory basis
for regulating providers’ practices with
regard to IPCS. This authority explicitly
extends to IPCS-related practices for or
in connection to the interstate and
international telecommunications
services that are within our section
201(b) authority, as well as to practices
for or in connection with other IPCS
services within our section 276
authority to the extent those practices
cannot practicably be separated from
practices applicable to services within
our section 201(b) authority.
86. Section 201(b) grants the
Commission jurisdiction over
‘‘practices, classifications, and
regulations’’ of carriers ‘‘for or in
connection with’’ interstate and
international communications services,
including those services used to provide
IPCS. That authority has been
interpreted by the Commission to
extend ‘‘to the intrastate portion of
jurisdictionally mixed services ‘where it
is impossible or impractical to separate
the service’s intrastate from interstate
components’ and state regulation of the
intrastate component would interfere
with valid federal rules applicable to the
interstate component.’’ In 2023, the
Commission sought comment on
whether it could use this ‘‘impossibility
exception’’ to regulate practices for or in
connection with incarcerated people’s
intrastate communications services and
to audio and video services that were
unregulated prior to the enactment of
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the Martha Wright-Reed Act. The record
is mixed on this issue.
87. The Commission has previously
applied section 201(b) and the
impossibility exception to regulate
providers’ practices that affect both
interstate and intrastate inmate calling
services. In the 2020 ICS Remand Order,
the Commission relied on section 201(b)
in adopting rules applicable to both
interstate and intrastate ancillary service
charges, finding that ‘‘ancillary service
charges generally cannot be practically
segregated between the interstate and
intrastate jurisdiction except in the
limited number of cases where, at the
time a charge is imposed and the
consumer accepts the charge, the call to
which the service is ancillary is a
clearly intrastate-only call.’’ In the 2022
ICS Order, the Commission exercised its
201(b) authority to prohibit provider
seizure of outstanding balances in
inactive accounts that could be used to
pay for interstate, intrastate, and
nonregulated services, and to set
limitations on ancillary service fees in
order to curtail the incentives for
providers to engage in revenue-sharing
schemes that drive up prices charged to
inmate calling services consumers.
88. Consistent with this precedent, we
conclude that our section 201(b)
authority over providers’ practices
extends to the full range of ‘‘payphone
service[s],’’ as defined in section 276(d),
to the extent the practices for or in
connection with the payphone services
outside of our separate section 201(b)
authority cannot practicably be
separated from the practices for or in
connection with the payphone services
within that authority. Consistent with
the Commission’s finding in the 2020
ICS Remand Order, we find that this
inseverability generally extends to
providers’ rate and ancillary services
charge practices in connection with
interstate and intrastate IPCS to the
extent that IPCS-related practices cannot
practicably be separated into interstate,
intrastate or non-section 201(b)
regulated services components.
4. Amendment to Section 2(b) of the
Communications Act
89. In the next step of our analysis, we
address the Martha Wright-Reed Act’s
confirmation of our jurisdiction to
regulate the rates of all forms of
intrastate IPCS to ensure they are not
unreasonably high. Section 276(b)(1)(A)
always has been clear that the
Commission has authority to establish
compensation plans for ‘‘intrastate and
interstate’’ payphone calls, and as
explained above, the Martha WrightReed Act amended that provision to
clearly establish the Commission’s
PO 00000
Frm 00016
Fmt 4701
Sfmt 4700
authority to ensure just and reasonable
rates for both intrastate and interstate
communications, as newly
encompassed by section 276(d). Above
and beyond that, the Martha WrightReed Act added section 276 to the
express exceptions to the general
preservation of state authority in section
2(b) of the Act. Consistent with the
Commission’s proposal in 2023, we
conclude that the collective effect of the
amendments to section 276 as to
intrastate communications, when
coupled with the Martha Wright-Reed
Act’s amendment to section 2(b) of the
Communications Act, is to remove any
doubt that our authority over IPCS
includes both interstate and intrastate
jurisdiction.
5. Inclusion of Advanced
Communications Services Within the
Definition of Payphone Service
90. In 2023, the Commission
recognized that the Martha Wright-Reed
Act had expanded its section 276
authority over ‘‘payphone service’’ in
correctional institutions to include
‘‘advanced communications services,’’
as defined in sections 3(1)(A), 3(1)(B),
3(1)(D), and new (3)(1)(E) of the
Communications Act. The Commission
asked how this expansion of statutory
authority applies to each type of
enumerated advanced communications
service for incarcerated people. We
conclude that the Martha Wright-Reed
Act not only retains the Commission’s
preexisting authority over audio
communications in the carceral setting,
but extends that authority to include
four categories of advanced
communications services—
‘‘interconnected VoIP service,’’ ‘‘noninterconnected VoIP service,’’
‘‘interoperable video conferencing
service,’’ and ‘‘any audio or video
communications service used by
inmates for the purpose of
communicating with individuals
outside the correctional institution
where the inmate is held, regardless of
technology used’’—within the definition
of ‘‘payphone service. We also
conclude, as proposed in 2023, that the
language in the new statute confers on
the Commission broad jurisdiction to
develop a compensation plan for the
categories of audio and video
communications included in the
definition of ‘‘payphone service’’ in
order to ensure that IPCS providers are
fairly compensated and all IPCS rates
and charges are just and reasonable. We
likewise find that the expansion of the
types of services and devices over
which we have authority
correspondingly includes entities that
may not have previously been subject to
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
our rules and that now fall under our
regulatory oversight. Below, we discuss,
in turn, the four types of advanced
communications services now included
in the definition of ‘‘payphone service.’’
ddrumheller on DSK120RN23PROD with RULES2
a. Interconnected and NonInterconnected VoIP Services (47 U.S.C.
153(1)(A) to (B))
91. The Martha Wright-Reed Act
expressly confirms the Commission’s
authority over interconnected and noninterconnected VoIP services, adding
interconnected and non-interconnected
VoIP services, as referenced in sections
3(1)(A) and 3(1)(B) of the
Communications Act, to section 276(d)’s
definition of ‘‘payphone service.’’ Based
on universal support in the record, we
find that this authority includes audio
services using interconnected or noninterconnected VoIP, and extends to
each entity that provides IPCS via
interconnected or non-interconnected
VoIP, including entities that provide
those services via non-traditional
equipment such as tablets or kiosks. As
the Commission has observed,
‘‘[s]ection 276 makes no mention of the
technology used to provide payphone
service. . . . Thus, the use of VoIP or
any other technology for any or all of an
ICS provider’s service does not affect
our authority under section 276.’’ Our
authority over inmate calling services is
therefore unaffected by the application
of VoIP technology; rather, the
expansion of our inmate calling services
authority to include VoIP technology
reflects the Commission’s long-held
understanding of inmate calling services
as inherently technology neutral. If a
particular service meets the relevant
definition in the Commission’s rules, it
is a form of inmate calling services and
subject to the Commission’s inmate
calling services rules. To the extent an
entity provides any of these services in
‘‘correctional institutions,’’ it will be
subject to the rules we adopt in the
Report and Order.
b. Interoperable Video Conferencing
Service (47 U.S.C. 153(1)(D))
92. The Martha Wright-Reed Act
extends our section 276 authority to
‘‘interoperable video conferencing
service’’ by adding a reference to subparagraph 3(1)(D) of the
Communications Act to the definition of
‘‘payphone service’’ in section 276(d).
The Communications Act defines
‘‘interoperable video conferencing
service’’ as ‘‘a service that provides realtime video communications, including
audio, to enable users to share
information of the user’s choosing.’’
This definition encompasses video
conferencing applications commonly in
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
use outside the incarceration context,
including applications that rely on
transmission over the internet; and the
rules we adopt in the Report and Order
extend to such applications and similar
applications should they be used in the
incarceration context.
93. One commenter suggests that ‘‘[i]n
the absence of a Commission adopted
definition of ‘interoperable,’ it is
difficult to identify which video
services made available to incarcerated
persons qualify for potential rate
regulation.’’ That argument is outdated.
In the Access to Video Conferencing
Order, the Commission revisited its
previous views regarding the
interpretation of the statutory term
‘‘interoperable video conferencing
service’’ and concluded that there was
‘‘no persuasive reason to modify or limit
the scope of the statutory definition of
this term.’’ There, the Commission
explained that the statutory definition of
‘‘interoperable video conferencing
service’’ encompasses a variety of video
communication services that are
commonly used today, or that may be
used in the future, to enable two or
more users to share information with
one another. In 2011, the Commission
interpreted a qualifying phrase in the
definition—‘‘to enable users to share
information of the user’s choosing’’—to
mean that services ‘‘provid[ing] realtime video communications, including
audio, between two or more users’’
would be included, ‘‘even if they can
also be used for video broadcasting
purposes (only from one user).’’ It
rejected arguments that the term
‘‘interoperable’’ had meaning
independent of the statutory definition
or in some way limited the scope of the
statutory definition of the service. It
concluded that the term interoperable
‘‘may simply reflect the fact that any
video service satisfying [the statutory]
definition . . . necessarily involves
some level of interoperability among the
particular devices and software
employed by users of that service.’’ We
find arguments to the contrary to have
been fully addressed by the
Commission’s actions in the Access to
Video Conferencing proceeding.
94. As the Commission has explained,
the definition of interoperable video
conferencing services does not reflect an
intention to exclude any service based
on whether it is used primarily for
point-to-point or multi-point
conversations, or based on the type of
device used to access the service.
Likewise, the definition does not
depend on the options offered to users
for connecting to a video conference
(e.g., through a dial-up telephone
connection or by broadband, through a
PO 00000
Frm 00017
Fmt 4701
Sfmt 4700
77259
downloadable app or a web browser),
what operating systems or browsers
users’ devices may employ, whether the
service works with more than one
operating system, or whether the service
may be classified as offered to the
public or to a private group of users
(such as a telehealth platform). The
Commission concluded that the
important characteristic is that two or
more people can use the service to share
information with one another in realtime, via video.
95. Our section 276 authority over
interoperable video conferencing
services in the IPCS context therefore
includes all options offered to users for
connecting to a video conference,
regardless of what operating systems or
browsers their devices may use, whether
the service works with more than one
operating system, or whether the service
may be classified as offered to the
public or to a private group of users.
Where two or more people can use a
video conferencing service to share
information with one another in realtime, that service is subject to our
section 276 authority in the
incarceration context. This authority
also extends to educational, vocational,
or other video programming in which
incarcerated people participate in realtime in the incarceration context. To be
clear, entertainment and other forms of
content that are not real-time
communications services are not
included in our authority over
interoperable video conferencing. They
may, however, be subject to our
authority under section 3(1)(E), which is
not limited to real-time communications
services.
96. We disagree that this
interpretation somehow constitutes an
assertion of authority over internet
content. Notwithstanding certain
parties’ comments suggesting otherwise,
we have not proposed to regulate
internet content, nor do we do so in the
Report and Order. The rules we adopt
today are content-neutral, and our
authority over interoperable video
conferencing services, like our authority
over traditional payphone services, is
independent of the information
communicated though those services.
Neither the Communications Act nor
the Martha Wright-Reed Act includes
any language limiting the content or
information that may be offered through
interoperable video conferencing, and
we do not impose any such limitations
in our rules.
97. Interoperable Video Conferencing
Service for People with Disabilities.
Under section 716 of the
Communications Act, as amended by
the Twenty-First Century
E:\FR\FM\20SER2.SGM
20SER2
77260
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
Communications and Video
Accessibility Act of 2010 (CVAA),
interoperable video conferencing service
and equipment used for interoperable
video conferencing service must be
accessible to and usable by people with
disabilities, unless those requirements
are not achievable. Consistent with the
Commission’s analysis in the Access to
Video Conferencing Order, we find no
persuasive reason to modify or limit the
scope of these accessibility
requirements as they apply in the IPCS
context. Instead, we conclude that the
accessibility requirements in section
716 of the Communications Act and part
14 of our rules apply, without
limitation, to all interoperable video
conferencing services provided in
correctional institutions and to all
equipment that people with disabilities
use to access those services. As
explained in more detail below, in the
2011 ACS Order the Commission
assumed that the word ‘‘interoperable’’
needed to be defined independently of
the term ‘‘interoperable video
conferencing service.’’ In the Access to
Video Conferencing Order, the
Commission revisited this issue and
rejected arguments that the term
‘‘interoperable’’ had meaning
independent of the statutory definition
or in some way limited the scope of the
statutory definition of the service. The
Commission explained that the statutory
definition of ‘‘interoperable video
conferencing service’’ encompasses a
variety of video communication services
that are commonly used today, or that
may be used in the future, to enable two
or more users to share information with
one another.
c. Any Audio or Video Communications
Service (47 U.S.C. 153(1)(E))
98. The Martha Wright-Reed Act
added new subsection (E) to section 3(1)
of the Communications Act to expand
the definition of ‘‘advanced
communications services’’ to include
‘‘any audio or video communications
service used by inmates for the purpose
of communicating with individuals
outside the correctional institution
where the inmate is held, regardless of
technology used.’’ It also included these
same services in the definition of
payphone service in section 276(d),
expanding the scope of the
Commission’s authority over
incarcerated people’s communications
services. As proposed in 2023, we
interpret the phrase ‘‘any audio or video
communications service’’ in subsection
3(1)(E) as encompassing every method
that incarcerated people may presently,
or in the future, use to communicate, by
wire or radio, by voice, sign language,’’
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
or other audio or video media, without
qualification. The record strongly
supports this interpretation. In doing so,
we fulfill Congress’s intent that a broad
range of communications services and
technologies be available to incarcerated
persons and their loved ones at just and
reasonable rates. Congress included all
aspects of the section 3(1) definition of
advanced communications services in
the section 276(d) definition of
payphone services with the exception of
electronic messaging services defined in
section 3(1)(C). Certain commenters
address the exclusion of electronic
messaging services from the
Commission’s regulatory jurisdiction in
the record, particularly to the extent
audio or video communications may be
sent via electronic messaging service.
On the limited record before us, we
decline at this time to determine what
is or is not an electronic messaging
service for purposes of excluding such
services from the scope of the Act’s
implementation mandate. While we
decline to make a determination, we
reiterate that under section 716 of the
Communications Act, electronic
messaging service is required to be
accessible to and usable by people with
disabilities, including those in carceral
facilities. Separately, some commenters
argue that the Commission should assert
authority over voicemail. Other
commenters argue that the Commission
may not regulate voicemail because the
Commission treats voicemail as an
information service. The record in this
regard is underdeveloped. Thus, at this
time, we decline to address the
Commission’s regulatory jurisdiction
over voicemail in the IPCS context.
99. Our interpretation encompasses
technology used by people with
disabilities. We find that, consistent
with our mandate to provide TRS to
incarcerated persons with disabilities,
‘‘any audio or video communications
services,’’ as used in section 3(1)(E)
includes all services currently provided
in correctional institutions that an
incarcerated person who is deaf, hard of
hearing, deafblind, or has speech or
other disabilities may use to
communicate with individuals outside
the correctional institution where the
incarcerated person is held, and
incorporates all future services and
technologies that will assist incarcerated
people with disabilities to communicate
with the non-incarcerated—or
incarcerated people to communicate
with non-incarcerated people with
disabilities—so long as it involves audio
or video communications services.
100. We interpret ‘‘audio or video
communications services’’ to encompass
not only services that are audio and/or
PO 00000
Frm 00018
Fmt 4701
Sfmt 4700
video at both ends of the
communication, but also services that
are audio and/or video at only one end
of the communication or otherwise
involve audio and/or video for only a
segment or portion of the
communication. The focus of section
3(1)(E) is not on whether a particular
party to a communication is
communicating in audio and/or video
form, but rather on whether the service
is an ‘‘audio or video communications
service.’’ So long as the communications
service involves audio and/or video in
at least some respect, we conclude the
‘‘audio or video communications
service’’ criterion is satisfied. The
breadth of this interpretation, which
may be of particular relevance where
communications involving people with
disabilities are concerned, is further
supported by the fact that Congress
chose to include that service within the
category of ‘‘advanced communications
services’’ that are subject to various
disability access requirements, along
with the recognition in section
276(b)(1)(A) that the communications
services covered by that provision
would include TRS.
101. Unlike some other services
included within the section 3(1)
definition of advanced communications
services, the services included in
section 3(1)(E) are not expressly
restricted to real-time or near real-time
communications services. We interpret
Congress’ omission of such limiting
language for the comprehensive set of
IPCS services covered by section 3(1)(E)
as bringing non-real-time
communications services generally
within the ambit of our IPCS
jurisdiction, to the extent an
incarcerated person may use them to
communicate with the non-incarcerated.
102. While Congress included no
limitations to the range of audio and
video communications services
encompassed in section 3(1)(E), it
addressed the parties involved by
limiting the definition to audio or video
services used for communications
between two classes of users, i.e.,
‘‘inmates’’ and ‘‘individuals outside the
correctional institution where the
inmate is held.’’ While there is no
dispute in the record regarding the
meaning of the statute’s reference to
inmates, parties do dispute the meaning
of the latter phrase.
103. Consistent with one of the
alternatives raised in the Commission’s
discussion in 2023, we interpret the
phrase ‘‘individuals outside the
correctional institution where the
inmate is held’’ to mean, not the precise
physical location of the individual with
whom the incarcerated person is
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
communicating, but instead the status of
that individual as someone who is
‘‘neither confined in nor employed by
the institution, even if [they are]
temporarily located on the premises of
the institution for purposes of
communicating with incarcerated
individuals through some form of audio
or video communications service.’’ The
record supports this interpretation. As
the Public Interest Parties recognize,
‘‘although the term ‘outside the
correctional institution’ can mean ‘not
physically within the structure,’ it can
equally mean ‘not held within the
institution.’ ’’ The relevant statutory
language appears very similar to part of
the Commission’s longstanding
definition of ‘‘inmate calling service,’’
which likewise refers to ‘‘individuals
outside the Correctional Facility where
the Inmate is being held.’’ Although the
Commission did not definitively
interpret the meaning of the ‘‘outside’’
language in its IPCS rules prior to the
enactment of the Martha Wright-Reed
Act, in the inmate calling context it
regularly used the term ‘‘outside’’ of a
correctional facility when referring to
the status—rather than the physical
location—of the party with whom the
inmate was communicating. We
recognize that the FCC Form established
for purposes of a proposed collection of
data on video visitation services
described ‘‘Off-Site Video Visitation’’ as
‘‘a call that allows an Inmate to
communicate via video with another
party (or parties) located outside the
Facility where the Inmate is being
detained.’’ That limited example does
not overcome our understanding of the
broader usage of ‘‘outside’’ in
Commission decisions in this context,
particularly where it referred to
communications to another party
‘‘located’’ outside the relevant
correctional facility—a qualifier
signaling physical location that is not
present in either the Commission’s
definition of ICS or the text of section
3(1)(E) of the Communications Act.
Because our interpretation is both
consistent with the ordinary meaning of
‘‘outside’’ and accords with the trend
we discern in the regulatory backdrop
relevant here, we find that the best
reading of ‘‘outside the correctional
institution’’ in section 3(1)(E) refers to a
party’s status rather than its physical
location. Consistent with the arguments
of a number of commenters, we thus
conclude that communications with
‘‘individuals outside the correctional
institution where the inmate is held’’ is
best understood to mean
communications with individuals who
are neither incarcerated in, nor
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
employed by, the incarcerated person’s
correctional institution, i.e., ‘‘outside’’
of the institution’s framework,
regardless of the physical location
where they can use the communication
service. By the same token, our analysis
leads us to reject claims that we must
interpret ‘‘outside the correctional
institution’’ to refer to the physical
location of the party with whom the
inmate is communicating. These
commenters do not persuade us that
anything in the statutory text itself
counsels against our interpretation, and
insofar as they otherwise have a narrow
view of congressional intent underlying
the language it adopted, we are not
persuaded by that either, as discussed
more below.
104. Our interpretation also is
supported by our view of congressional
intent and associated policy
considerations. We agree with Worth
Rises that ‘‘[t]here is no evidence that
Congress intended for a miniscule
regulatory cut-out that leaves IPCS
ratepayers unprotected from rate
regulation when they are physically
located within a building that is
property of the correctional authority.
Whether the outside called party is on
their mobile phone in the lobby of a
correctional facility or sitting at a video
kiosk booth in the on-site video calling
room, they should be protected by the
Commission’s ratemaking authority.’’
This reinforces our conclusion that the
best reading of the statutory language is
that it refers to the non-incarcerated
status of the individual with whom the
incarcerated person is communicating,
rather than the physical location of
individuals with whom an inmate can
communicate using a given service.
105. The ordinary tools of statutory
interpretation strongly support the view
that the qualifier, ‘‘individuals outside
the correctional institution where the
inmate is held,’’ in section 3(1)(E)
should be limited to services that only
meet the definition of advanced
communications services under that
specific provision. Section 3(1)
consistently has been understood as a
disjunctive list of services such that
meeting any one of those categories is
sufficient to render a service an
advanced communications service.
While several commenters agree with
this interpretation, one commenter
contends that ‘‘the limiting phrase of
new subsection 3(1)(E)’’ applies to all of
the services included in section 3(1) ‘‘in
the context of IPCS.’’ While the scope of
section 3(1)(E) outside of the phrase in
question is sufficiently expansive to
encompass virtually all communications
services, the National Sheriffs’
Association points to nothing in the
PO 00000
Frm 00019
Fmt 4701
Sfmt 4700
77261
Martha Wright-Reed Act or the amended
text of section 3(1) that would suggest
that Congress intended to override the
preexisting operative structure of that
provision or subsume the definitions of
interconnected VoIP service, noninterconnected VoIP service, and
interoperable video conferencing service
within section 3(1)(E). Indeed, if the
relevant qualifier in section 3(1)(E)
either were interpreted to apply to
sections 3(1)(A), (B), and (D) or if
section 3(1)(E) were read as subsuming
sections 3(1)(A), (B), and (D), it is not
clear what remaining practical
significances sections 3(1)(A), (B), and
(D) would have given the existence of
section 3(1)(E). Under ordinary canons
of statutory interpretation, such an
outcome cuts against that reading. Had
Congress intended the ‘‘outside the
correctional institution’’ language in
section 3(1)(E) to apply to other
advanced communications services, it
could have included that language in
section 3(1) as a whole, appended it to
other subsections of section 3(1) as it
deemed appropriate, or incorporated
that language into section 276(d). It did
none of these things.
106. Nor can the National Sheriffs’
Association’s interpretation be
reconciled with the broader statutory
context. The definition of ‘‘advanced
communications service’’ in section 3(1)
does not owe its existence solely to IPCS
regulation under section 276 of the
Communications Act. Indeed, section
3(1) includes ‘‘electronic messaging
service,’’ 47 U.S.C. 153(1)(C), which was
not included as a specified category of
service covered by amended section
276(d) of the Communications Act.
Rather, a range of statutory provisions
rely on that definition. Interpreting
section 3(1) to mean that each of the
individual audio and video services
listed in sections 3(1)(A), (B), and (D)
are subject to the limitation in (E) would
result in a substantial narrowing of
preexisting statutory requirements
dealing with matters such as disability
access.
107. Likewise, the National Sheriffs’
Association’s interpretation cannot
readily be squared with section 276(d)
as amended by the Martha Wright-Reed
Act. In pertinent part, that provision as
originally enacted defined ‘‘payphone
service’’ subject to Commission
authority under section 276 as
encompassing ‘‘the provision of inmate
telephone service in correctional
institutions.’’ When Congress amended
that definition in the Martha WrightReed Act to include certain advanced
communications services, it made those
services subject to the ‘‘in correctional
institutions’’ limitation, as well. Yet if
E:\FR\FM\20SER2.SGM
20SER2
77262
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
the relevant terms in section 3(1) all
already were subject to the limitation in
3(1)(E), it is not clear how much work
would be left for the section 276(d)
qualifier ‘‘in correctional institutions’’
to perform. At a minimum, Congress’s
deliberate choice to subject the
advanced communications services
covered by section 276(d) to the ‘‘in
correctional institutions’’ qualifier
provides good reason to pause before
inferring arguably similar limitations in
section 3(1) in a manner that appears
contrary to that statutory text.
108. Consequently, we adopt the
proposal in 2023 that the language
requiring that communications involve
‘‘individuals outside the correctional
institution where the inmate is held’’
applies only with regard to
subparagraph 3(1)(E). We therefore agree
with other commenters that the phrase
‘‘outside the correctional institution
where the inmate is held’’ does not
apply outside the context of section
3(1)(E).
ddrumheller on DSK120RN23PROD with RULES2
6. Onsite Video Visitation
109. In 2023, the Commission sought
comment on whether its expanded
authority over IPCS extends to onsite
video visitation services. The
widespread use of onsite video
visitation is a relatively recent
phenomenon, initially driven by
significant health risks posed by the
COVID–19 pandemic. During the
pandemic, ‘‘nearly every jail and
prison’’ shifted from in-person visitation
to onsite video services to prevent
exposure to and the spread of
coronavirus. In many instances,
correctional institutions continue to
restrict onsite visits to video
communications in lieu of in-person
visits.
110. Consistent with the description
in 2023, we define onsite video
visitation services as services that
enable video communications between a
person incarcerated in a correctional
institution and a non-incarcerated
person visiting that institution. We find
that our authority over incarcerated
peoples’ advanced communications
services extends to onsite video
visitation on two independent grounds:
(a) onsite video visitation’s status as an
‘‘interoperable video conferencing
service’’ within the meaning of section
3(1)(D); and (b) its status as an ‘‘audio
or video communications service used
by inmates for the purpose of
communicating with individuals
outside the correctional institution
where the inmate is held, regardless of
technology used’’ within the meaning of
section 3(1)(E).
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
111. Onsite Video Visitation as an
Interoperable Video Conferencing
Service under Section § 3(1)(D). We
conclude that onsite video visitation
includes each of the elements of the
definition of interoperable video
conferencing service in section 3(27) of
the Communications Act and that it is
therefore a ‘‘payphone service’’ within
the meaning of section 276(d) when
provided in correctional institutions.
Section 3(27) defines ‘‘interoperable
video conferencing service’’ as ‘‘a
service that provides real-time video
communications, including audio, to
enable users to share information of the
user’s choosing.’’ Onsite video visitation
meets those criteria: it is a real-time
service that involves video
communications, including audio, and
that enables the incarcerated and the
non-incarcerated to share information of
their choosing. Notwithstanding the
National Sheriffs’ Association’s
advocacy to the contrary, we find above
that the limitation to ‘‘individuals
outside the correctional institution’’
included in section 3(1)(E) is specific to
the grant of authority in that section and
is not generally applicable to section
3(1) as a whole. Thus, to the extent it
were relevant in a given scenario, we
observe that the definition of
interoperable video conferencing service
does not include any limitation or
requirement that the communications be
with individuals outside the
correctional institution. Instead, we find
the statute best interpreted to mean that
any interoperable video conferencing
service, a service that includes onsite
video visitation, is a payphone service,
and therefore subject to our authority
under section 276(b)(1)(A), to the extent
it is provided in correctional
institutions. Onsite video visitation uses
the same or functionally similar
technology and equipment as is used
generally for video IPCS.
112. We also find that Congress
intended our authority under section
276 to extend to the full range of
interoperable video conferencing
services, including onsite video
visitation services, given the inclusion
of section 3(1)(D) in section 276(d). By
this inclusion, Congress eliminated
doubt that video visitation was subject
to the Commission’s authority in
response to the D.C. Circuit’s GTL v.
FCC decision casting doubt on whether
video visitation reporting requirements
were within the Commission’s
authority. As amended by the Martha
Wright-Reed Act, the definition of
‘‘payphone service’’ in section 276(d) of
the Communications Act now includes
all interoperable video conferencing
PO 00000
Frm 00020
Fmt 4701
Sfmt 4700
services, without qualification, to the
extent they are provided in correctional
institutions. Given this statutory
language, we conclude that our
authority under section 276(b)(1)(A)
extends to all onsite video visitation
services.
113. Our conclusion does not change
regardless of whether onsite video
visitation is offered free of charge.
Though one commenter argues that we
should limit our oversight because ‘‘the
industry has no history of charging for
such services, we find that because such
services meet the definition of
‘‘payphone service’’ in section 276(d),
they fall within the Commission’s
jurisdiction. We affirm that onsite video
visitation services are interoperable
video conferencing services, and as
such, are subject to our section 276
jurisdiction and the rules we adopt
herein.
114. Onsite Video Visitation as a
Video Communications Service under
Section 3(1)(E). In 2023, the
Commission sought comment on
whether onsite video visitation services
constitute ‘‘video communications
service[s]’’ within the meaning of
section 3(1)(E). As an initial matter, we
find that, based on the record in
response to 2023, onsite video visitation
is a video communications service
under section 3(1)(E), giving us an
alternative basis for exercising section
276 authority over those services
independent of section 3(1)(D). We are
persuaded by commenters’ explanations
that ‘‘[o]n-site video visitation service
used by an incarcerated person for the
purpose of communicating with those
neither confined nor employed by the
correctional facility fits plainly within
the statutory language in section 3(1)(E),
as the service is used by incarcerated
persons to communicate with . . .
persons not held within the institution.’’
115. Nor do we find any ‘‘reasonable
justification to interpret the Act to allow
the Commission to regulate [remote
video services] but [not onsite video
services].’’ We are not persuaded by
suggestions that Congress intended to
include a limitation based on the
physical location of the nonincarcerated person involved in the
communication such that we have no
authority over onsite video visitation
under section 3(1)(E). As discussed
above, the language of the statute is best
read as focused on the status of the
individuals involved in an audio or
video communication—not on the
physical location of the called party at
the time of the communication. Indeed,
even assuming arguendo that the
qualifier in section 3(1)(E) were
interpreted to apply to the physical
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
location rather than status of the
individuals with whom an inmate is
communicating, the relevant statutory
question would be where the service can
be used, and not where a given
communication occurs. If an audio or
video communications service can be
used by inmates for the purpose of
communicating with individuals
outside the correctional institution
where the inmate is held, the details
associated with a given individual
communication using that service
would be irrelevant.
116. Policy considerations likewise
support our interpretation. We find it
compelling that ‘‘[b]oth remote and onpremises video calls are typically
operated by the same IPCS providers,
involve the same technological systems,
and have the same functions and
equipment for the incarcerated user,
regardless of the location of the person
with whom they are communicating.’’
While some providers offer such service
for free today, it does not follow that
consumers never would or could need
the protection of the ‘‘just and
reasonable’’ standard provided by the
Martha Wright-Reed Act for these video
communications. Absent Commission
oversight of onsite video visitation, both
facilities and IPCS providers could, for
example, have ‘‘a perverse incentive
. . . to reduce the availability of other
forms of IPCS as well as in-person
visitation.’’ We are persuaded that,
because these services share providers,
equipment, and other technology
systems, the only difference between
onsite and remote video
communications is the location of the
non-incarcerated party with whom the
incarcerated individual is
communicating. We therefore agree that
‘‘[t]here is no reasonable justification to
interpret the Act to allow the
Commission to regulate one but not the
other.’’
D. Rate Caps
117. After carefully considering our
expanded statutory authority, the data
received in response to the 2023
Mandatory Data Collection, and the
record developed from the 2023 and the
precursor requests for comment, we take
a series of actions to establish just and
reasonable rates for IPCS while also
ensuring fair compensation for
providers. Specifically, we adopt the
Commission’s proposals to set separate
rate caps for audio IPCS and video IPCS,
and to treat interstate and intrastate
communications uniformly, as
supported by both the record and
provider responses to the 2023
Mandatory Data Collection. We also
revise our rate cap tiers, and adopt
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
separate per-minute rate caps within
each of those tiers for audio IPCS and
video IPCS. Collectively, these steps
will achieve the dual directives of the
statute to ensure just and reasonable
rates for consumers and providers and
fair compensation for providers.
118. These actions reflect our
application of the ‘‘used and useful’’
framework in evaluating the costs of
providing IPCS, consistent with the
Commission’s proposal in 2023. Under
this framework, the determination of
just and reasonable rates focuses on
affording regulated entities an
opportunity to recover their ‘‘prudently
incurred investments and expenses that
are ‘used and useful’ in the provision’’
of the regulated service. In applying this
framework, we use provider-submitted
data and other information from the
record to estimate the costs incurred in
providing IPCS, including any safety
and security measures used and useful
in the provision of these services. Our
rate cap calculations incorporate the
costs providers reported as their costs of
providing ancillary services, consistent
with our decision to eliminate separate
charges for ancillary services. Finally,
our rate caps reflect our best estimate of
the costs incurred in implementing the
TRS reforms adopted in the 2022 ICS
Order and our best estimate of the costs
facilities incur in the provision of IPCS.
119. Accordingly, we adopt the
following permanent rate caps for audio
IPCS, and interim rate caps for video
IPCS:
• For all prisons, $0.06 per minute for
audio communications, and $0.16 per
minute for video communications;
• For jails with an average daily
population (ADP) greater than or equal
to 1,000 incarcerated people, $0.06 per
minute for audio communications and
$0.11 per minute for video
communications;
• For jails with an ADP between and
including 350 and 999 incarcerated
people, $0.07 per minute for audio
communications and $0.12 per minute
for video communications; and
• For jails with an ADP between and
including 100 and 349 incarcerated
people, $0.09 per minute for audio
communications and $0.14 per minute
for video communications.
• For jails with an ADP with 99 or
fewer incarcerated people, $0.12 per
minute for audio communications and
$0.25 per minute for video
communications.
We establish these rate caps using a
zone of reasonableness approach. This
approach allows us to respond to the
limitations of the cost-of-service data
before us in a manner that appropriately
balances fair compensation for IPCS
PO 00000
Frm 00021
Fmt 4701
Sfmt 4700
77263
providers with just and reasonable rates
and charges for consumers and
providers. Through this approach, we
afford providers an opportunity to
recover the used and useful costs
incurred to provide IPCS and also keep
IPCS rates affordable for incarcerated
people and their loved ones.
1. Rate Cap Structure
120. Adopting Rate Caps as the
Regulatory Mechanism. We conclude
that rate caps are the appropriate
mechanism for ensuring that all rates for
IPCS are just and reasonable. Consistent
with the Commission’s prior ratemaking
with regard to inmate calling services,
we find that rate caps provide the best
overall rate structure for IPCS because of
the flexibility that rate caps afford
providers while still ensuring that the
incarcerated individual and their loved
ones are protected from unreasonably
high rates and charges. We also find that
rate caps are preferable to prescriptive
rate setting for IPCS because a rate cap
approach does not preclude or prevent
providers and parties representing
facilities from negotiating and entering
into agreements to provide IPCS at
lower or no cost to incarcerated people
and their friends and family, as is
shown in the record. The record
strongly supports the use of rate caps
rather than prescriptive rate setting.
Rate caps also allow providers to be
responsive to the differing needs of each
facility, and ‘‘protect ratepayers as a
group from high prices and provide
carriers with an incentive to increase
productivity.’’ As the IPCS industry
continues to develop and offer advanced
communications services including
video communications, we find that
flexibility in pricing and in service
offerings will be important to ensure
that providers and incarcerated people
and their friends, families, and loved
ones benefit from the rate caps we adopt
today.
121. Separate Rate Caps for Audio
IPCS and Video IPCS. With the Martha
Wright-Reed Act’s expansion of the
Commission’s authority to regulate
advanced communications services, and
in keeping with the Commission’s
obligation to ensure just and reasonable
rates, we adopt separate rate caps for
audio IPCS and video IPCS. In adopting
these rate caps, we do not intend any
modification of the requirements of
§ 64.6040(d) of our rules, which
addresses TRS and certain related
services (TTY-to-TTY communications
and point-to-point video
communication in American Sign
Language). For IP CTS, CTS, and pointto-point video communication in ASL,
an IPCS provider may assess charges
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77264
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
that do not exceed its charges for an
equivalent voice telephone call. Thus,
charges for these services will be
effectively capped at the applicable rate
cap for audio communications. For
TTY-to-TTY communication, an IPCS
provider may assess a charge that does
not exceed 25 percent of the applicable
per-minute rate for a voice call. Thus,
such charges are effectively capped at
25 percent of the applicable per-minute
rate for a voice call. We find the record,
including the 2023 Mandatory Data
Collection data, overwhelmingly
support this approach. Record
comments support separate rate caps
because of the materially different cost
structures of offering audio and video
IPCS, and we agree. The data show that
video communications typically require
more expensive equipment, and even
when comparing audio and video
communications made using the same
equipment, the data suggest that video
communications are more expensive to
provide. This difference in costs
justifies the need to adopt separate rate
caps for these services to satisfy our
obligations for both providers and
consumers of IPCS. Accordingly, we
separately analyze audio and video IPCS
costs and develop separate rate caps at
each tier for both services.
122. As proposed in 2021 and 2023,
we adopt permanent rate caps for audio
IPCS. The Commission has previously
been constrained to adopt only interim
rates for these services given persistent
limitations of the industry data available
to it. We now find that the audio cost
data received in response to our most
recent data collection provide a
sufficient basis for setting permanent
audio IPCS rate caps.
123. By contrast, video IPCS involves
relatively new services in an emerging
market for the correctional industry, and
one which the Commission has not
previously had the authority to regulate.
The reported costs show a marked
differential between audio and video
costs per minute, which may be
attributable, in part, to the respective
difference in maturity of the two types
of service offerings. As a result of the
relative nascency of the video IPCS
market generally, the wide variations
among facilities in the per-minute costs
of providing IPCS, and the likely need
to revise any video rate caps in the
future to account for growth and
evolution of the video IPCS
marketplace, we find that the reported
costs and demand for video IPCS are
best suited for interim rate caps. We
find that the video data present
similarities to the data that the
Commission reviewed in 2021, when
the Commission was faced with data
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
that it determined was unreliable,
resulting in the adoption of interim rate
caps. NCIC argues that the Commission
should ‘‘delay the adoption of interim
rates until it receives comprehensive
data from all video visitation providers,
and deliver immediate relief by simply
prohibiting flat-rate billing, which is
currently being offered at up to $12.99
per session’’). While we recognize that
the video marketplace is in its nascent
stages, we find that the available data
sufficiently support the interim rate
caps we adopt today. In addition, as we
note below, interim rate caps for video
are necessary to curb abuses identified
in the record concerning other existing
rate structures in the video market.
124. Per-Minute Rate Caps for Audio
IPCS and Video IPCS. We adopt the
Commission’s proposal to set rate caps
for audio and video IPCS on a perminute basis as the foundation of our
efforts to ensure just and reasonable
IPCS rates and charges. The record
provides no basis to abandon the longstanding per-minute rate caps for audio
IPCS, and we find no reason to deviate
from this approach. The Commission
has historically set per-minute rate caps
for audio IPCS. This decision is further
supported by our adoption today of
rules to permit alternate pricing plans
subject to specified conditions.
Similarly, given the per-minute rate
structure we adopt for audio calls, we
find that taking a consistent approach
for video communications would offer
several benefits for IPCS consumers.
First, per-minute rates are simple to
understand and reflect the actual
duration of the call or communication.
As a matter of policy, the Commission
has stated that transparency regarding
the charges for IPCS ‘‘is critical because
it ensures that incarcerated persons and
their families understand the prices they
are, or will be, charged for the services
they use, enabling them to make
informed decisions when purchasing
those services.’’ We find that consistent
use of per-minute rates for audio and
video IPCS will result in an easier to
understand and more transparent
regulatory framework. We therefore
reject proposals to use other rate
metrics, such as per-session charges, in
the rate caps that serve as the
foundation for ensuring just and
reasonable IPCS rates. Per-minute rates
also provide greater transparency and
offer greater familiarity and flexibility
for both industry and consumers.
125. Establishing interim per-minute
rate caps for video IPCS is also
responsive to concerns voiced in the
record about the need to curb abusive
practices associated with other existing
rate structures for video IPCS. At the
PO 00000
Frm 00022
Fmt 4701
Sfmt 4700
same time, however, our new rules
permitting providers to deploy alternate
pricing plans for both audio and video
IPCS, subject to certain conditions,
including, in particular, compliance
with the overall rate caps adopted here,
will permit providers to experiment
with optional rate structures that may be
beneficial and desirable for IPCS
consumers. Taken together, we find
these actions satisfy two goals: our
default per-minute rates will ensure just
and reasonable rates for IPCS consumers
and providers and fair compensation for
providers; and our optional alternate
pricing plan rules will provide some
measure of flexibility for the industry,
allowing providers and customers to
voluntarily opt-in to other pricing
arrangements that may be mutually
beneficial. The Commission has
previously found that when providers
used flat-rate charges for audio calls, if
the duration of the audio call was less
than the maximum time allowable, ‘‘the
price for that call is disproportionately
high.’’ Receiving no record evidence to
the contrary, we find that a similar
result is likely in the case of per-call or
per-session charges for video IPCS.
126. We decline to adopt a model
carrier approach to establish the rates
for either audio or video IPCS. As
proposed in the record, a model carrier
approach would set rates by reference to
general telecommunications industryaverage costs for non-IPCS calls,
including a predetermined return, ‘‘and
then potentially adjust for costs that
may be particular to the provision of
service in incarceration facilities.’’
Although the Commission has
employed a similar approach in other
circumstances, we find that our tiered
approach based on the currently
available IPCS-provider data provides a
more accurate estimate of just and
reasonable IPCS rates and will better
reflect the size variance and the
economies of scale in the IPCS market
rather than relying on a uniform general
telecommunications industry rate
setting approach. We find further that
the marketplace is still adapting to the
requirements of IPCS video
communications, which counsels in
favor of allowing more time before
adopting a model carrier approach.
Because we do not base our analysis on
the model carrier approach, we find it
unnecessary to address arguments
concerning the Commission’s authority
in this respect. At the same time, a
model carrier based approach is useful
for comparative analysis, and as
explained further in a technical
appendix, can be used to confirm our
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
understanding of certain aspects of
providers’ cost data.
127. Adopting Rate Caps Derived from
Industry Average Costs. As permitted by
the Martha Wright-Reed Act, we use
industry average costs reported by IPCS
providers at the company-wide and
facility levels in response to the 2023
Mandatory Data Collection as the basis
for developing the IPCS rate caps we
adopt today. In 2021, the Commission
sought comment on whether to
‘‘calculate industry-wide mean contract
costs per paid minute of use,’’ or to
‘‘analyze costs at the facility level.’’ We
resolve this question by confirming that
we analyze costs at the facility level, in
the interest of evaluating providers’
costs as accurately as possible,
consistent with the facility-level cost
data staff sought and obtained through
the 2023 Mandatory Data Collection.
The Commission previously used
industry average costs to set inmate
calling services rate caps, but the D.C.
Circuit rejected that approach as not
providing fair compensation for
providers on a ‘‘per call’’ basis for ‘‘each
and every call,’’ as was then required by
the language of section 276(b)(1)(a) of
the Communications Act. The Martha
Wright-Reed Act removed the ‘‘each and
every call’’ language from section
276(b)(1)(a) and authorized the
Commission to use ‘‘industry-wide
average costs’’ in determining just and
reasonable rates. We can only conclude,
and commenters concur, that the Act
thereby removed the limitations set
forth in the D.C. Circuit’s decision. We
also believe that using industry average
costs to set rates will best ensure rates
that are just and reasonable for
consumers and providers and provide
fair compensation for providers.
128. We further find that the Act’s
elimination of the requirement that
‘‘each and every’’ completed
communication be fairly compensated
means that we are no longer required to
establish a per-call based compensation
plan. Commenters agree. Rate caps
based on costs evaluated on an
aggregated basis generally will satisfy
the requirement that all payphone
service providers be fairly compensated.
Based on our interpretation of the Act
in light of the D.C. Circuit’s holding in
GTL v. FCC, as well as the Act’s explicit
terms, we further find that setting the
upper and lower bounds of our zone of
reasonableness based on industry-wide
average costs at each tier of facilities—
without the need to consider one
standard deviation or any other measure
of deviance from the average—will
satisfy this requirement. We find that
Congress’s express permission to use
industry average costs in setting rate
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
caps encompasses the specific approach
to using industry average costs that the
Commission adopted in the 2015 ICS
Order: setting rate caps at the level of
the weighted average of providers’
reported costs at each tier. The
regulatory history—particularly our
understanding of the ways that the
Martha Wright-Reed Act sought to
respond to the D.C. Circuit’s decision in
GTL, including with specific respect to
the use of industry average costs—
reinforces the reasonableness of our
interpretation.
a. Rate Caps Based on Total Costs
129. Consistent with the changes to
our authority, we adopt the proposal to
set rate caps that incorporate total IPCS
costs by including all relevant costs
incurred in the provision of IPCS in our
calculations of average provider costs.
In implementing that approach, we
depart from the Commission’s previous
approach to allowing and capping
separate charges for certain ancillary
services and instead include the costs
related to the provision of those
ancillary services in our IPCS rate caps.
We also depart from the Commission’s
use of separate rate additives for facilityincurred costs in the 2021 ICS Order, in
favor of including those costs, to the
extent recoverable, in our per-minute
rate caps. This will substantially
simplify our cap structure. Pay Tel
proposes that we account for facility
costs ‘‘through an explicit additive to
IPCS rate caps,’’ as this will ‘‘incentivize
facilities to compare service-based,
competitive market factors when
awarding contracts.’’ We find that the
approach we adopt here will obtain a
fundamentally similar result. After
analyzing providers’ cost data, we find
that the data for calendar year 2022
collected in response to the 2023
Mandatory Data Collection, together
with other record evidence, provide a
sufficient and reasoned basis on which
to take these steps in establishing our
rate caps. One commenter notes that we
should consider ‘‘free video calls
through off-the-shelf video platforms,’’
such as Microsoft Teams, Zoom, and
Ameelio, as part of the industry-wide
definition of IPCS providers. We find
that these video platform business
models are substantially different from
those of most IPCS providers, and we
decline at this time to do so. Taken
together, reforming our ancillary
services charge rules, and including
costs incurred by facilities to provide
IPCS and TRS-related costs into our rate
caps, result in a total cost approach to
setting IPCS rate caps which is more
straightforward, results in rates which
are easier to understand, and will
PO 00000
Frm 00023
Fmt 4701
Sfmt 4700
77265
empower incarcerated persons and their
loved ones to make better informed
choices. We address each of these steps
below. Lastly, we disagree with
commenters that suggest that we
incorporate an inflation factor into our
methodology for setting rate caps.
Secretariat Economists’ data show that,
historically, growth in the
Telecommunications PPI has been
lower, on average, than general
measures of inflation. Over the last
decade, the average annual change of
the Telecommunications PPI was 0.7%,
as compared to the average annual
change of the broader GDP Deflator over
the same time period of 2.6%. Those
commenters generally fail to
acknowledge the role that productivity
increases play in offsetting inflation.
Neither study includes data on the rates
of increase in productivity in the
telecommunications industry. We also
note that the data in the Secretariat
Economists May 8, 2023 Report shows
that inflation in the telecommunications
industry has generally been lower than
the broader measure of inflation. We
find that they fail to establish that
productivity increases did not offset the
inflation that has incurred since 2022,
much less that inflation will outpace
productivity gains in the future.
130. Incorporating Costs Associated
with Ancillary Services. We find that the
five types of ancillary services
addressed by our rules are intrinsic to
the provision of IPCS, and we
incorporate the costs of providing these
services into our per-minute rate caps
for a number of reasons. For one,
incorporating the costs of these services
into a single rate cap—rather than
allowing providers to assess a separate
ancillary service charge for each
ancillary service—will result in rates
and charges that are easier for
consumers to understand and easier for
providers to administer, while still
allowing providers to recover the
average costs associated with these
ancillary services through our perminute rates.
131. In addition, in the 2021 ICS
Order, the Commission found that,
based on record data, there was ‘‘no
reliable way to exclude ancillary service
costs’’ from the calculations for the
provider-related rate cap component,
resulting in interim rate caps that
included the costs that consumers
already paid for through separate
ancillary services fees. To address this
issue, in 2022 the Commission asked
whether ‘‘some or all of [the ancillary]
services’’ for which separate charges
were permitted are ‘‘an inherent part of
providing inmate calling services,’’ such
that the Commission should continue to
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77266
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
‘‘include these costs in [the] per-minute
rate cap calculations and eliminate
some or all charges for ancillary
services.’’ As the record shows, all of
these fees ‘‘relate to payment and
billing,’’ and other than the paper bill
fee, all of these fees address consumers’
means of paying for the service they rely
upon. Put otherwise, consumers may
pay for IPCS via a payment card or a
third-party money transmitter, with the
assistance of a live agent, and/or may
pay to complete a communication
without setting up an account. Although
these ancillary services may have
qualified as a ‘‘convenience’’ in 2015
when the Commission first identified
them in its rules, the record indicates
that they are now the predominant
means by which consumers gain access
to IPCS. While alternative methods of
funding an account remain available
(e.g., by check or money order), we find
that automated payment or money
transmitter services are ‘‘an intrinsic
part’’ of accessing the service, like most
other services in the 21st-century
economy. Indeed, one provider has
pointed to the decline in one alternative
payment mechanism—collect calls—in
support of its proposal that the
Commission eliminate the fee for paper
statements. In short, ‘‘incarcerated
people and their families must either
incur [these charges] when making a
call or forego contact with their loved
ones.’’
132. Our decision to incorporate the
costs of ancillary service functions in
our rate caps also reflects the limitations
in the cost data providers submitted for
their ancillary services. Like the
Commission found in the 2021 ICS
Order, we still cannot reliably isolate
the costs of providing each type of
ancillary service from other IPCS costs.
In contrast to the Second Mandatory
Data Collection, the instructions for the
2023 Mandatory Data Collection
required providers to report their costs
of each ancillary service separately.
Nevertheless, we find that providers
failed to reliably or consistently allocate
their costs among the various ancillary
services, or even between ancillary
services and other IPCS costs.
Incorporating all of these reported costs
into the rate cap avoids the risk of
setting individual fee caps for each
ancillary service that misestimate
providers’ actual costs. We therefore
find that incorporating ancillary service
costs into our rate caps is the best means
of recovering the aggregated ancillary
services costs reported by providers and
ensuring just and reasonable IPCS rates.
We find that this approach is preferable
to allowing double recovery of the same
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
costs by adopting separate rates and
charges.
133. Incorporating the costs of
providing ancillary services into our
rate caps will provide several benefits to
IPCS consumers and respond to
concerns raised in the record. First, this
rate cap structure will eliminate the
incentive and ability for providers to
charge multiple fees for the same
transaction, as a way of exacting
revenue from consumers that far
exceeds their actual costs of completing
the transaction, a problem that is welldocumented in the record. The
comment record reflects substantial
debate (even confusion) as to whether—
and if so, under what circumstances—
multiple fees can be charged for a single
transaction, and more generally, what
activity the payment-related fees were
intended to encompass. By folding the
costs of all ancillary services into our
rate caps and eliminating providers’
ability to charge for them separately, we
also remove the incentive for providers
to ‘‘double dip’’ in this manner,
effectively mooting related concerns
under our new rules, and mitigate
consumer confusion arising from these
practices. Certain providers contend
that any circumstances in which they
have charged multiple fees are
legitimate. Because the rate cap
structure we adopt enables providers to
recover their average costs of providing
ancillary services, as permitted by the
Martha Wright-Reed Act, we find it
unnecessary to resolve this dispute in
this rulemaking. The record also shows
that such practices have engendered
consumer confusion. We similarly
eliminate the ability of providers to
engage in other rent-seeking activity
described in the record, including
concerns that providers may ‘‘steer’’
consumers to a more expensive singlecall option for an incarcerated person’s
initial call after incarceration in an
effort to artificially inflate revenues
through single-call fees. These practices
undermine the intent of our rules, and
inflate providers’ revenues well beyond
costs, at the expense of consumers, all
while providing no additional consumer
value. Indeed, by removing such
incentives, we find that the rate cap
structure we adopt in this Order may,
for example, motivate providers to make
it easier to set up an account when
consumers receive an IPCS
communication for the first time.
134. We likewise find that
incorporating ancillary service costs
into our rate caps will align rates and
charges more fairly with actual user
activity. Several commenters point out
the seeming unreasonableness and
disproportionality of charging a $3.00
PO 00000
Frm 00024
Fmt 4701
Sfmt 4700
fee for a call that may only last one
minute, or passing through similar fees
for small deposits, causing consumers to
‘‘lose a significant amount’’ of their
account deposits paying such fees. By
incorporating ancillary service costs
into our rate caps, we ensure that the
cost of any particular communication
for any IPCS consumer is more
proportionate to its duration. We also
eliminate certain distortions that our
current fee structure may perpetuate,
such as avoiding a live agent, or
transferring funds to relatives less
frequently in an effort to avoid such
charges. Our actions today reduce these
barriers to communication.
135. Incorporating ancillary service
costs into our rate caps will also
simplify the billing process, easing the
administrative burden on providers and
clarifying the bills and general
operational process for consumers. We
agree that these changes will ‘‘simplify
matters for consumers.’’ Similarly, with
respect to paper billing fees, by
incorporating the costs of these bills
into our rate caps we align IPCS billing
practices more closely with consumers’
experiences for other forms of
telecommunications service outside of
the carceral context, where separate
charges are not assessed for paper bills.
136. Finally, we find that
incorporating ancillary service costs
into our rate caps aligns our rate and fee
structure more effectively with broader
patterns in the industry and the
diminishing utility of certain ancillary
services. As the Commission has
previously observed, several
jurisdictions have already banned
ancillary service charges, either
piecemeal or outright. The record
affirms that several of these services are
declining in use. For example, several
providers assert they rarely charge a
paper bill fee as few consumers require
paper bills, even proposing outright that
this fee be eliminated. At least one
provider no longer charges a live agent
fee, having switched to an automated
system during the pandemic.
Meanwhile, providers have shifted from
offering single-call services through
third parties (as defined in our rules) to
instead provide these services
themselves. The record further suggests
that the single-call service, which
ostensibly offers the convenience of
completing initial contact without
setting up an account, may in practice—
like paper billing—offer little benefit to
consumers, as they still have to enter
their payment card information to
accept the call. The record does not
establish the marginal difference
between single-call payment and
account creation, and we are not
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
convinced that the margin would be
great enough to significantly deter
interested consumers.
137. Some commenters object to the
approach of incorporating ancillary
service costs into the rate caps. Those
commenters argue that this
methodology ‘‘does not reflect the
manner in which costs are caused by
users of the service,’’ and ‘‘would
impose costs for payment processing on
all consumers, rather than just those
consumers directly responsible for the
cost.’’ We are unpersuaded. We find that
most of these functions have become
‘‘an intrinsic part of providing’’ IPCS
because they provide IPCS consumers
the means to obtain IPCS, such that
consumers typically ‘‘must either incur
[these charges] when making a call or
forego contact with their loved ones.’’
For the same reason, we are not
persuaded by Securus’s implicit
argument that the current ancillary fees
are offered ‘‘as a convenience to
incarcerated persons or their friends and
family and are not intrinsic to the
provision of ICS.’’ The sole fee
unrelated to paying for IPCS, the paper
bill fee, is sufficiently rarely used that
it has a negligible impact on the perminute rate caps. It is not necessary that
these services be used by ‘‘all
consumers’’; the fact that these services
operate as a threshold to most IPCS
communications, coupled with the
many factors identified above in support
of ancillary service cost recovery
through our per-minute IPCS rate caps,
establishes that our regulatory approach
provides for just and reasonable rates for
consumers and providers, while also
providing appropriate cost recovery for
providers. In the 2015 ICS Order, the
Commission found that single-call
services were not ‘‘reasonably and
directly related to the provision of ICS’’
because they ‘‘inflate the effective price
end users pay for ICS and result in
excessive compensation to providers.’’
We find that this pattern has been
ameliorated, in part, by the changes to
single-call fees adopted in the 2021 ICS
Order and 2022 ICS Order; we also
recognize that providers incur some
amount of legitimate costs for providing
this service, which for at least some
consumers may offer a crucial means of
completing an IPCS communication. At
the same time, we find that the
continuing abuse of this fee described in
the record supports elimination of the
single-call fee as an independent
charge—and suggests that our analysis
of ancillary service costs may actually
overestimate providers’ actual costs. We
also find unpersuasive the argument
that we should abstain from ‘‘[f]urther
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
changes to, or eliminating, ancillary
fees’’ because this ‘‘likely will cause
new efforts to subvert the FCC’s
ancillary fee caps.’’ NCIC also argues
that changes to, or elimination of,
ancillary fees would ‘‘require ICS
providers to spend thousands of hours
renegotiating contracts to comply with a
new fee structure.’’ The rate caps we
adopt today will require contract
amendments or renegotiations
regardless, and NCIC does not provide
evidence or elaboration to support its
conclusory assertions regarding the
implications of the particular change
associated with ancillary fees, so we
find this argument unpersuasive. The
history of this proceeding demonstrates
that ‘‘efforts to subvert [our] ancillary
fee caps’’ or otherwise abuse ancillary
fees is merely an endemic feature of the
market. The record contains no
evidence that eliminating separate
ancillary service fees would amplify this
pattern; indeed, the record suggests, and
logic supports the fact, that eliminating
separate fees would eliminate entirely
the incentive and ability to subvert
them. For example, the 2015 ICS Order
banned several types of ancillary service
charges, e.g., ‘‘account set-up,
maintenance, closure, and refund fees.’’
The record is bereft of any evidence that
the elimination of these fees has
encouraged providers to attempt to
subvert the Commission’s rules.
138. Incorporating Facility Costs in
IPCS Rate Caps. We also include in our
rate caps an estimate of the costs that
correctional facilities incur that are used
and useful in the provision of IPCS.
Previously, the Commission found that
correctional facilities incur certain costs
that are ‘‘reasonably and directly
related’’ to the provision of IPCS.
However, despite repeated efforts to
collect data from which to reliably
measure such costs, we find that neither
the collected data nor the record before
us allow us to identify those costs with
reasonable certainty. At best, the record
discussion concerning IPCS costs which
facilities may bear falls short of the sort
of quantitative evidence which would
ordinarily support the Commission’s
ratemaking efforts. Further, requiring
accurate cost accounting of facilities’
costs would unreasonably burden
facilities, and facilities have declined to
provide such data voluntarily.
Consequently, as proposed in 2023, we
make generalized findings based on the
available record information before us.
Our rate caps, therefore, include our
best estimate of the used and useful
facility costs incurred in the provision
of IPCS.
139. Incorporating TRS Costs in IPCS
Rate Caps. We also include in our IPCS
PO 00000
Frm 00025
Fmt 4701
Sfmt 4700
77267
rate caps an estimate of the costs
associated with providing TRS in
correctional facilities as required by the
2022 ICS Order to the extent that they
are not recoverable through TRS support
mechanisms. Industry and stakeholders
overwhelmingly support the provision
of communications services to
incarcerated people with hearing or
speech disabilities, but the record
indicates that, in the carceral
environment, enabling these services
imposes certain costs upon IPCS
providers. We find that our inclusion of
a TRS cost estimate into our zones of
reasonableness accounts for providers’
concerns about the imposition of costs
at smaller facilities; and further, we
disagree that ensuring the availability of
functionally equivalent communication
services provides ‘‘little’’ benefit to
those who rely on such services to
communicate with their friends,
families, and loved ones. We find, as the
record demonstrates, that these costs to
provide TRS are particularly
challenging to recover at the smallest
facilities. In light of that record and
informed by responses to the 2023
Mandatory Data Collection, we now
include cost recovery for the additional
infrastructure and hardware costs to
deliver TRS in the carceral environment
in our rate caps, estimated based on the
best available data.
b. Additional Components of Rate Cap
Structure
140. Single Rate Cap for Audio IPCS.
Consistent with the proposal in 2023
and the record, we find that the costs to
provide interstate and intrastate audio
IPCS are not materially different from
each other and therefore adopt a single
rate cap that applies to both interstate
and intrastate audio IPCS
communications at each tier. The
Martha Wright-Reed Act’s directive to
set rates and charges that are ‘‘just and
reasonable’’ for interstate and intrastate
IPCS establishes the framework for our
analysis. Examining the record through
this lens, we find support for treating
the costs of providing interstate and
intrastate audio IPCS as functionally
identical. The record indicates that
providers do not distinguish between
the costs of providing interstate and
intrastate audio IPCS communications,
and we find no reason to do otherwise.
We thus set a single rate cap for these
communications, and find that this
simplified approach will benefit
consumers and providers alike. The
record supports our conclusion that the
adoption of identical rate caps for
interstate and intrastate audio IPCS
communications will benefit the public
interest. For example, one commenter
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77268
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
suggests that adopting a single rate cap
for interstate and intrastate audio IPCS
communications will benefit providers
by ‘‘ensur[ing] a consistent regulatory
approach,’’ and benefit consumers ‘‘by
simplifying and unifying rate structures
in a manner more consistent with
today’s consumer expectations and
experiences with other
telecommunications services.’’ Indeed,
at least one provider has already
independently set a unitary rate for
interstate and intrastate IPCS
communications, reflecting that
providers are likely to benefit from the
implementation of a single rate cap. We
agree that a simple unified rate cap will
benefit both providers and consumers,
and this finding further supports our
action today.
141. Our action today is consistent
with the Commission’s previous
findings that provider cost data failed to
identify meaningful differences between
interstate and intrastate audio IPCS
costs. In the Third Mandatory Data
Collection, the Bureau offered providers
the option to allocate their expenses so
as to reflect any cost differences
between providing interstate and
intrastate ICS, and no providers
exercised this option. This fact suggests
either that no providers had differences
to report, or that any such differences
were de minimis. Commenters have
subsequently recognized the same, and
emphasized that providers declined to
distinguish between costs for interstate
and intrastate audio IPCS in responding
to prior mandatory data collections.
142. More recently, 2023 sought
comment on whether to ‘‘treat costs for
interstate voice services and intrastate
voice services as having identical perunit costs.’’ All commenters to address
the subject support this approach.
Several commenters state that there is
no material cost difference between
providing interstate and intrastate audio
IPCS. Subsequently, in the 2023
Mandatory Data Collection, the Bureau
again offered providers the option to
allocate their costs between intrastate
and interstate audio IPCS. Once more,
providers declined to exercise this
option. In short, nothing in the record
suggests any material differences
between interstate and intrastate audio
IPCS costs, and we therefore adopt a
single unified rate cap for each facility
tier. Independently, our adoption of
identical rates based on an analysis of
the collective (i.e., aggregate of both
interstate and intrastate) average costs of
providing IPCS is further underpinned
by the Martha Wright-Reed Act’s
authorization to ‘‘use industry-wide
average costs’’ in setting rates.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
143. Single Rate Cap for Video IPCS.
We also find that interstate and
intrastate video IPCS communications
have costs that are not materially
different, and adopt a single rate cap for
interstate and intrastate video IPCS
communications at each tier. As with
audio IPCS, the adoption of a unified
rate cap for interstate and intrastate
video IPCS communications is
uniformly supported by the record and
fully consistent with the treatment of
interstate and intrastate video services
by providers.
144. In 2023, the Commission sought
comment on whether to assume that the
average costs for intrastate and interstate
video communications services are
identical. All commenters to address the
subject support taking this approach.
Several commenters observe that there
are no material cost differences between
interstate and intrastate video IPCS,
while others note that providers do not
separate costs between interstate and
intrastate video IPCS internally and will
likely face challenges in separating such
costs.
145. In the 2023 Mandatory Data
Collection, the Bureau offered providers
the option to allocate their video IPCS
expenses to reflect any cost differences
between providing interstate and
intrastate video IPCS. No providers
exercised this option, supporting our
view that such costs are materially
indistinguishable between the two
jurisdictions. In the absence of any
demonstrated material differences
between interstate and intrastate video
IPCS costs or record data supporting
such a distinction, we adopt a single
unified rate cap for video IPCS
communications for each tier as well.
Similar to audio IPCS, setting a single
rate cap for video IPCS will benefit both
providers and consumers by
establishing an efficient and simplified
mechanism for video IPCS rate
regulation.
c. Rate Cap Tiers
146. In light of the directives
established by the Martha Wright-Reed
Act and record support, we adopt a rate
cap structure that first distinguishes
between two types of facilities (jails and
prisons) and then four tiers of jails
based on size. We agree with
commenters that continuing to
‘‘distinguish[ ] between the type of
facility (jails vs. prisons), as well as, for
jails, between different size facilities’’ is
a reasonable approach. While one
commenter supports differentiation
between prisons and jails, it also
suggests that myriad factors may be
‘‘glossed over’’ by our reliance upon
industry averages. As set out in a
PO 00000
Frm 00026
Fmt 4701
Sfmt 4700
technical appendix and explained
below, we believe this tiering structure
best captures the costs across the
various types and sizes of facilities, and
the record does not establish that such
other factors are more cost-causative.
The record and the data also support
rate cap distinctions based on the
‘‘differences in the costs’’ of providing
IPCS that relate to facility size and
‘‘other characteristics.’’ We adopt the
following rate cap tiers to reflect the
cost characteristics attributable to
differences in facility type and size:
(1) Jails with an average daily
population of 0 to 99;
(2) Jails with an average daily
population between and including 100
to 349;
(3) Jails with an average daily
population between and including 350
to 999;
(4) Jails with an average daily
population of 1,000 or more; and
(5) A separate tier for all prisons
regardless of average daily population.
We also revise the definition for
average daily population in our rules by
establishing a date certain each year by
which the jail population during the
preceding calendar year must be
determined. Specifically, we set April
30 as the date on which the annual
recalculation of average daily
population becomes effective, in order
to promote greater uniformity in its
application. We find that the
combination of size and type rate tiers
that we adopt reflect the most critical
factors driving providers’ costs, and will
result in both just and reasonable rates
for consumers and providers and fair
compensation for providers.
147. Facility Size. The Martha WrightReed Act directs the Commission to
‘‘consider . . . differences in the costs’’
incurred to provide IPCS ‘‘by small,
medium, or large facilities’’ in setting
rates for IPCS. We note that, by
requiring only that we ‘‘consider’’ cost
differences ‘‘by small, medium, or large
facilities or other characteristics,’’ the
statute does not require the Commission
to set rate tiers based on facility size or
other applicable factors where, after
appropriate consideration, we
determine that there are not meaningful
cost differences attributable to these
factors. For example, as discussed
below, we do not find support in the
record or the data for establishing
different size tiers for prisons, and so
decline to adopt such tiers. In 2023, the
Commission sought comment on how to
interpret the requirement imposed by
the Martha Wright-Reed Act to
‘‘consider . . . differences in the costs
. . . by small, medium, or large
facilities or other characteristics’’ in
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
determining rates. The Commission
asked for comment on what size
categories to adopt and where to set the
size thresholds for each category. The
Commission proposed that the rate
structure adopted in the 2021 ICS Order,
which ‘‘establish[ed] separate caps for
prisons and jails, as well as separate rate
tiers for different-sized jails,’’ seemed
consistent with this provision of the
Act. However, the Commission sought
comment on whether the Act required
any change to the approach of analyzing
providers’ costs ‘‘based on the type and
size of correctional institution being
served,’’ such as by implementing more
or fewer rate tiers based on facility type
or size.
148. The record nearly uniformly
supports maintaining a rate cap
structure that distinguishes among jails
based on facility size. For administrative
simplicity, we decline to apply size
tiering to prisons for several reasons.
First, as the Commission has previously
observed, ‘‘prisons are almost uniformly
large,’’ allowing them to enjoy greater
economies of scale than jails. Second,
the data filed in response to the 2023
Mandatory Data Collection do not
indicate significant differences in the
costs of serving different prison
facilities. Finally, only one commenter
raised the prospect of tiered rates for
prisons. All commenters addressing the
issue agree that the Act permits us to
maintain this general tiering structure.
Several commenters contend that the
available data do, in fact, indicate
significant variations in costs due to
facility size, and that we should
therefore set rate tiers accounting for
these variations. Indeed, the record in
this proceeding ‘‘contains extensive
documentation of [the] cost differences,
and the reasons for those differences,’’
in providing audio and video IPCS
among different sizes of jails. Several
factors contribute to these cost
disparities, particularly the economies
of scale associated with serving larger
facilities and the fact that smaller
facilities are often located in more rural
areas. As set forth in Appendices D and
G, our data analysis indicates that there
remain statistically significant
differences in the costs of providing
audio and video IPCS among jails of
different sizes. The data submitted in
response to the Third Mandatory Data
Collection further support this
conclusion. The record supports
adopting four size tiers of jails,
expanding the categories contemplated
by the Martha Wright-Reed Act.
Although we find that the present
record and data support establishing
rate caps that vary with size tiers for
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
jails, we reiterate that the statute does
not require us to set rate tiers as
described. After appropriate
consideration, however, we determine
that the record and data do support a
tiering structure for prisons.
Specifically, we find evidence that
providers incur progressively greater
costs in serving jails at the lower tiers
of ADP than at the highest tier that we
adopt. We found in the 2021 ICS Order
that the available data suggested that
‘‘providers incur higher costs per
minute for jails with [ADPs] below
1,000 than for larger jails.’’ The data
submitted for the 2023 Mandatory Data
Collection continues to reflect this
pattern. However, at that time we
deferred on further rate cap setting with
respect to jails with ADPs below 1,000
‘‘because the available data [did] not
allow us to quantify the extent to which
providers’ costs of serving [such] jails
. . . exceed the industry average.’’ With
the data submitted for the 2023
Mandatory Data Collection, we are now
able to determine with greater accuracy
the cost differential of providing service
to jails with ADPs below 1,000.
Consequently, we adopt average daily
population cutoffs of 100, 350, and
1,000 incarcerated persons in order to
distinguish among different sizes of
jails. Although certain commenters
suggest other size thresholds, we find
that the size tiers we adopt here best fit
the data submitted for the 2023
Mandatory Data Collection.
149. While the Martha Wright-Reed
Act specifies that we consider cost
differences among three sizes of
facilities (‘‘small, medium, and large’’),
we do not interpret that specification as
a directive that limits our actions to
only three size tiers that correspond to
the terms referenced in the statute.
Instead, we interpret Congress’ intent as
mandating that the Commission analyze
the relevant data to assess the cost
characteristics of different-sized
facilities, including those referenced in
the statute, and then to reflect that
analysis in the rate cap structure the
Commission ultimately adopts.
Pursuant to their delegated authority,
WCB and OEA structured the 2023
Mandatory Data Collection to ensure it
included the requisite facility-level data
needed to support this analysis. After
‘‘consider[ing] . . . differences in the
costs’’ incurred to provide IPCS ‘‘by
small, medium, or large facilities’’ as
directed by the Act, we find that the
data do reflect size differences among
jails—and that the data further support
distinguishing a further, fourth size tier
of jails to best ensure just and
reasonable rates for consumers and
PO 00000
Frm 00027
Fmt 4701
Sfmt 4700
77269
providers and fair compensation for
providers.
150. We find that the record supports
adopting a more granular tiering
structure than that referenced in the Act
or established by our current rules to
better capture cost differences among
‘‘small, medium, and large facilities,’’ in
addition to creating a separate tier for
very small jails. The record supports
adopting this tiering arrangement to
better reflect the ‘‘differences in the
costs’’ of serving various sizes of jails,
particularly where the record
distinguishes jails of the smallest sizes
as subject to special per-unit cost
differences. Our adoption of an
additional tier for very small jails is
consistent with the statutory directive to
consider cost differences for ‘‘small,
medium, and large’’ facilities as well as
an ‘‘other characteristic’’ for which to
account. This rate cap structure finds
further support in the rate cap tiers
previously adopted by the Commission,
which also distinguished among
facilities based on facility type and size
based on average daily population. In
the 2015 ICS Order, the Commission
found that there was ‘‘substantial record
support’’ from commenters for ‘‘rate
tiering based on differences between
jails and prisons as well as population
size’’ given the differences in provider
costs arising from these factors, a
conclusion supported by the
Commission’s analysis of the First
Mandatory Data Collection. The
Commission therefore adopted rate cap
tiers based on facility type and size, to
‘‘account[ ] for the differences in costs to
ICS providers’’ and to avoid ‘‘overcompensating ICS providers serving
larger, lower-cost facilities.’’ In the 2021
ICS Order, following similar reasoning,
the Commission again adopted a rate
cap structure distinguishing between
prisons and jails and among jails based
on size. We also seek comment in the
Further Notice on whether obtaining
more granular data from providers
serving very small jails would allow us
to further disaggregate this size tier to
better reflect the variability of provider
costs and other characteristics in our
rate tiers.
151. Other Characteristics. In addition
to the three specified sizes of facilities,
the Martha Wright-Reed Act also directs
the Commission to ‘‘consider . . .
differences in the costs’’ incurred to
provide IPCS due to ‘‘other
characteristics.’’ The Commission
sought comment on whether it should
continue to use the type of facility as
another characteristic in determining its
IPCS rate cap structure. Several
commenters propose that we maintain a
rate cap structure that incorporates
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77270
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
facility type as one of these ‘‘other
characteristics,’’ by distinguishing
between prisons and jails. One
commenter also proposes that we
consider several other factors that
impact providers’ costs, including the
variations in facilities’ costs associated
with providing IPCS, the different IPCS
systems employed by different facilities,
and the fact that facilities in rural areas
may be more costly to serve.
152. All commenters that address the
‘‘other characteristics’’ language agree
that the Act permits the Commission to
maintain a distinction between prisons
and jails. Several commenters contend
that the available data indicate
significant variations in costs due to
facility type, and that the Commission
should therefore set rate tiers to account
for these variations. We agree that the
record ‘‘contains extensive
documentation of [the] cost differences,
and the reasons for those differences,’’
of providing audio IPCS between
prisons and jails. Several factors
contribute to these cost disparities,
particularly the higher turnover in jails
than in prisons, economies of scale
associated with serving larger facilities
(as prisons tend to be larger than jails),
and the fact that jails are often located
in more rural areas. Many of these cost
differences stem from the fact that
prisons, in contrast to jails, are ‘‘used
primarily to confine individuals . . .
sentenced to terms in excess of one
year.’’ The consequent differences in
average durations of stay and turnover
rates between prisons and jails account
for much of the disparities in costs
between the two types of facilities. As
set forth in a technical appendix, our
data analysis indicates that there remain
statistically significant differences in the
costs of providing audio IPCS in prisons
versus jails, as well as greater variations
from mean costs for jails than for
prisons. The data submitted in response
to the Third Mandatory Data Collection
further support this conclusion. The
same pattern applies to the costs of
providing video IPCS. We find this
evidence credible and sufficient to
support incorporating facility type, by
adopting separate rate cap tiers for
prisons and jails, as an ‘‘other
characteristic’’ contemplated by the
Martha Wright-Reed Act.
153. One commenter proposed
specific additional factors beyond
facility size and type. The National
Sheriffs’ Association identifies several
other factors that may impact the costs
of providing IPCS: that facility staff
‘‘provide more functions in some cases
tha[n] in others and that the hourly
wage and benefits of jail employees
varies by state and locality’’; that
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
‘‘different facilities employ different
IPCS systems,’’ and ‘‘require different
security measures,’’ with attendant
variation in costs; that ‘‘jails in rural
areas are more costly to serve’’; and that
‘‘jails allow different amounts of inmate
calling.’’ Another commenter claims
there are no significant differences after
accounting for facility size. However,
after controlling for provider and state,
we find that the main predictors of
providers’ costs per minute are facility
size and type. By contrast, other
variables provide negligible
independent predictive value.
Consequently, we find that such factors
are best accommodated through the use
of rate caps based on industry-wide
average costs, which enable the
provision of IPCS to be commercially
viable across the tiers we adopt. In sum,
we find that incorporating these
attributes into our rate caps would
provide little benefit in terms of
meaningfully reflecting providers’ costs,
while imposing additional
administrative burden on providers and
potentially introducing consumer
confusion. We also find that, in the
absence of any data indicating
otherwise, many of the factors identified
by the National Sheriffs’ Association are
simply not well suited for direct
incorporation into a rate cap structure.
Because these factors vary in a
nonlinear manner, they are ill-suited to
a tiered rate cap structure, and
incorporating them into our rate caps
would necessitate an exceedingly
granular and therefore intractable
system. The National Sheriffs’
Association does not point to any
concrete data that might reflect the
impact of any of these factors on
providers’ costs. After ‘‘consider[ing]
. . . other characteristics’’ proposed by
commenters as directed by the statute,
we decline to incorporate any other
additional characteristics in our IPCS
rate cap structure. We have insufficient
data to evaluate the cost-causative
impact of variations in the services
provided or staffing costs incurred by
facilities. In the 2023 Mandatory Data
Collection, we asked providers to
submit ‘‘any verifiable, reliable, and
accurate information’’ they have
regarding any expenses incurred by
facilities to provide IPCS. However, no
provider submitted any information on
facilities’ costs in response to this
request. Given this limitation, we
address the role of costs incurred by
facilities in providing IPCS separately.
154. Alternative Proposals. Not all
commenters agree with the tiering
structure we adopt in the Report and
Order. The National Sheriffs’
PO 00000
Frm 00028
Fmt 4701
Sfmt 4700
Association supports adopting three size
tiers of jails, proposing that the
thresholds be set at ADPs of 350 and
2,500. Conversely, ViaPath argues that
the rate caps adopted in the 2021 ICS
Order do not require any modification
other than ‘‘necessary adjustments for
market changes.’’ We disagree, and find
that neither proposal takes into account
the wider record; nor do they
incorporate the data provided in
response to the 2023 Mandatory Data
Collection. The National Sheriffs’
Association relies on data from its 2015
cost survey, which we have previously
distinguished. Meanwhile, the rate
structure adopted in the 2021 ICS Order
was based on data from the Second
Mandatory Data Collection.
Furthermore, in the 2021 ICS Order, the
Commission explicitly deferred on
setting rate caps for jails with ADPs
below 1,000 because the available data
did not enable accurate calculation of
the relative costs of such facilities—a
gap that, as noted above, has been
rectified with the data submitted for the
2023 Mandatory Data Collection.
Consequently, we find that both of these
proposals fail to accurately account for
the current differences in the costs that
we observe.
155. For similar reasons, we decline
to adopt the proposals from NCIC and
ViaPath that we adopt a single rate cap,
either for all jails (with a separate rate
cap for prisons) or for all facilities. As
several commenters observe, setting a
single rate cap for all facilities, or even
all jails, would almost certainly result in
either unreasonably low rates in smaller
facilities, such that providers may be
unable to recover the costs of providing
service to these higher-cost facilities, or
else a windfall for those serving prisons
and larger jails at the cost of those
incarcerated in such facilities. We find
that these consequences would
outweigh any benefits from adopting a
single rate cap. We agree with
commenters that, given our analysis of
the data, adopting a single rate cap ‘‘will
run counter to’’ the goals of section 276
as well as the Martha Wright-Reed Act,
and would less effectively address the
implications of our consideration of the
‘‘differences in the costs . . . by small,
medium, or large facilities or other
characteristics.’’ Indeed, in the 2015 ICS
Order, the Commission thoroughly
examined the negative consequences of
establishing a single rate cap in the
context of data indicating that costs of
providing IPCS vary by facility size and
type. Once again, we find that the
commenters proposing a single rate cap
‘‘provide no real evidence or support for
why rate tiers would be any more
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
difficult or challenging than’’ the
current approach.
156. Definition and Use of Average
Daily Population. In 2023, the
Commission sought comment on the
‘‘use of average daily population as the
primary metric’’ for the size of
correctional institutions, including
whether there were ‘‘compelling reasons
to adopt a different metric for
determining size.’’ The Commission also
incorporated prior calls for comments
on how ADP should factor into our rate
caps, including on whether the
definition for ADP in the Commission’s
rules ‘‘sufficiently addresses
fluctuations in jail populations and
variations in how correctional facilities
determine average daily populations.’’
The record confirms that ADP continues
to be the most practical metric for
determining the size of correctional
facilities for the purposes of applying
our rate caps. However, the record
reflects a need for ‘‘a clear date and a
clear standard by which the ADP is
measured,’’ so that all parties can
uniformly determine ‘‘whether a
particular jail must comply with’’
different rate caps than in the prior year.
Additionally, we find that the definition
for average daily population under our
rules, which requires the measurement
of all incarcerated persons ‘‘in a facility’’
(rather than those merely within that
facility’s jurisdiction), over a ‘‘calendar
year,’’ effectively addresses related
concerns that states and localities may
track population figures differently.
Accordingly, we revise the definition for
average daily population in our rules by
establishing April 30 as the date on
which the annual recalculation of ADP
reflecting data from the prior calendar
year (and, as applicable, the new
corresponding rate cap) becomes
effective.
157. Adopting a specific date on
which the annual ADP recalculation
must be performed—and by which
providers must implement new rates to
comply with the appropriate rate cap,
where applicable—will yield greater
uniformity and accountability in the
application of this metric, and address
related concerns raised in the record. A
uniform effective date for implementing
each year’s newly recalculated ADP
(and corresponding rate caps) will help
consumers ‘‘to determine which jails
must comply with [each of] the FCC’s
new rate caps,’’ and will help providers
by establishing a more predictable and
consistent calculation process. We
select April 30 as the effective date for
the annual ADP recalculation because,
as Securus points out, providers need to
obtain data from correctional officials in
order to determine each jail’s average
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
daily population during the preceding
calendar year. To the extent they have
not already done so, providers should
ensure that their contracts with
correctional facilities provide for the
providers’ timely receipt of all
information they need to recalculate
average daily populations in accordance
with our rules. Our rules already require
providers to report that information in
their annual reports, which are due each
year on April 1. An April 30 date for
determining each jail’s rate cap tier
going forward avoids the imposition of
any additional burden on providers,
while providing a ‘‘realistic timeframe’’
for providers to collect and process data
on average daily populations as part of
the mandated annual review and
updating of rate cap tiers.
158. ViaPath cites the ‘‘concerns
[raised] about consistency and
variations in population’’ and suggests
that the current requirement for annual
calculation of ADP ‘‘could require
negotiated per-minute IPCS rates to
increase or decrease each year due to
changes in facility population year-toyear.’’ To address this concern, and aid
consistency, ViaPath proposes that we
redefine ADP to permit it to be
‘‘calculated and applied for the initial
term of an IPCS contract, and thereafter
recalculated and applied for each
renewal term of a contract.’’ We decline
to adopt ViaPath’s proposal. We are
concerned that this approach would
incentivize providers to commence or
renew contract terms at times of
unusually low populations to ‘‘lock in’’
the consequently higher rates for the full
contract term. ViaPath’s proposal may
not even meaningfully improve
consistency in the calculation of ADP,
given the substantial variation in IPCS
contract terms. Although we recognize
that requiring ADP to be recalculated
annually may entail a near-term
administrative burden, the record fails
to suggest that this burden outweighs
the benefit of IPCS rates that correspond
to the costs associated with different
size jails. No other commenter addresses
the issue of the yearly recalculation
requirement for ADP, suggesting that
this requirement does not impose a
disproportionate burden. We also find
that the revision we adopt today, which
grants providers a full month to
calculate and (where necessary)
implement the newly-applicable ADP
figures each year, will help to
ameliorate this burden. For similar
reasons, we decline to adopt Talton
Communications’ proposal that ADP be
calculated quarterly ‘‘by taking an
average of the population of detainees
across all facilities serviced by a single
PO 00000
Frm 00029
Fmt 4701
Sfmt 4700
77271
ICS provider.’’ First, we find that this
proposal risks generating either
insufficient returns or excessive returns
for a given provider, depending on the
nature of the facilities it serves. Second,
we find that it would also make the
rates imposed on any given consumer
relatively arbitrary, based purely on the
portfolio of the IPCS provider serving
their respective facility rather than the
actual costs of providing service.
Finally, this proposal would ultimately
require updating the applicable rates
even more frequently than under our
current rules, imposing greater
administrative burdens on providers
and greater inconsistency on consumers.
And over the longer term, contracting
will occur against the backdrop of our
rule providing certainty regarding the
timing of ADP calculations and from the
outset such contracts can be tailored
accordingly as needed.
2. Preliminary Costing Issues
159. To assess the costs that should be
included in or excluded from our rate
cap calculations to ensure just and
reasonable rates for IPCS, we rely on the
‘‘used and useful’’ framework and its
associated prudent expenditure
standard. Under the used and useful
framework the Commission first
considers the need to compensate
providers ‘‘for the use of their property
and expenses incurred in providing the
regulated service.’’ Second, the
Commission looks to the ‘‘equitable
principle that ratepayers should not be
forced to pay a return except on
investments that can be shown to
benefit them.’’ In this regard, the
Commission considers ‘‘whether the
expense was necessary to the provision
of’’ the regulated service. And third, the
Commission considers ‘‘whether a
carrier’s investments and expenses were
prudent (rather than excessive),’’ and
has found that ‘‘imprudent or excess
investment . . . is the responsibility
and coincident burden of the investor,
not the ratepayer.’’ Although the
Commission has identified these
‘‘general principles regarding what
constitutes ‘used and useful’
investment,’’ it ‘‘has recognized ‘that
these guidelines are general and subject
to modification, addition, or deletion’ ’’
and that ‘‘ ‘[t]he particular facts of each
case must be ascertained in order to
determine what part of a utility’s
investment is used and useful.’ ’’ The
Commission ‘‘may, in its reasonable
discretion, fashion an appropriate
resolution that is tailored to the specific
circumstances before it.’’
160. We apply this framework in
evaluating the costs and expenses to be
included in our IPCS rate cap
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77272
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
calculations. As described below, we
rely on a zone of reasonableness
approach to adopt separate rate caps for
audio and video IPCS by facility size
and type. As applied here, our approach
begins by looking to the record to
identify an upper limit for each rate
category that corresponds to a rate level
above which rates would clearly be
unjustly and unreasonably high. We
then make adjustments to that upper
limit based on the record to remove
costs that are not used and useful for the
provision of IPCS in order to identify
the lower limit of our zone of
reasonableness. Between the upper and
lower limits of that zone, we then seek
to identify a particular rate level that
will best reflect the proper balancing of
the equitable interests that ratepayers
only bear costs or expenses that
reasonably benefit them and that
providers earn a reasonable return when
their property is used in the provision
of regulated services. The particular rate
level we identify within that zone of
reasonableness is then adopted as the
relevant rate cap for that rate category.
161. The upper bounds we adopt
include all reported provider costs,
including those categories that we
generally find are not ‘‘used and useful’’
in the provision of IPCS. We are
confident based on this record that rate
caps set above the upper bound clearly
would be unjustly and unreasonably
high. In turn, we rely on the used and
useful framework to make reasonable
adjustments to those upper bound costs
to establish the lower bounds of the
zones of reasonableness. By deriving our
rate caps from the ‘‘used and useful’’
framework, our approach reflects the
Commission’s longstanding
methodology for ensuring that providers
are able to obtain recovery for the costs
and expenses that demonstrably benefit
ratepayers. At the same time, including
all reported provider costs to establish
the upper bound reflects a conservative
approach. As a result, we are confident
that setting rates within that zone of
reasonableness will yield rate caps
designed to afford fair compensation to
IPCS providers.
162. Next, our interpretation of
section 3(b)(2) of the Martha WrightReed Act requires us to examine
available evidence of ‘‘costs associated
with any safety and security measures
necessary to provide’’ IPCS which,
along with the other costs, we review
and use to arrive at a reasoned
conclusion regarding the recoverability
of those costs. To conduct that
examination—including with respect to
safety and security costs—we employ
the ‘‘used and useful’’ framework. In
doing so, we consider all relevant cost
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
evidence in the record before us that
could conceivably fall within the scope
of costs of safety and security measures
required to be considered as
‘‘necessary’’ under section 3(b)(2) of the
Martha Wright-Reed Act. As we discuss
below, we therefore have no need to
more precisely define the ultimate scope
and contours of the term ‘‘necessary’’
under section 3(b)(2) at this time.
3. Accounting for Correctional Facility
Costs
163. To account for the possibility
that some correctional facilities may
incur—and IPCS providers may
reimburse—used and useful costs in
allowing access to IPCS, we incorporate
into our zones of reasonableness the
Commission’s best estimate of IPCS
costs that correctional facilities may
incur. To facilitate recovery of any used
and useful costs—but only such costs—
that correctional facilities incur, we
permit IPCS providers to reimburse
correctional facilities for the used and
useful costs they may incur as those
costs have been identified in the Report
and Order. Together, these measures
ensure that we account for used and
useful correctional facility costs in our
ratemaking calculations to the extent the
record allows. Finally, our actions also
ensure that rates and charges for IPCS
will be just and reasonable as required
by the Martha Wright-Reed Act, while
also ensuring fair compensation for
providers to the extent justified by the
record here.
164. Our treatment of correctional
facility costs reflects a careful balancing
of two competing factors. First, certain
commenters generally assert—though
largely without support or current
data—that correctional facilities may
incur some used and useful costs in
providing access to IPCS. While the
nature and extent of such costs is
unclear on the current record, Worth
Rises explains that ‘‘[w]hile exceedingly
rare in the provision of IPCS,
correctional facilities may incur used
and useful costs which the Commission
could include within rates.’’ These
assertions and the Commission’s prior
recognition that correctional facilities
may incur some costs in allowing access
to IPCS persuade us to recognize a
measure of these costs in our ratemaking
calculus to the extent the record
permits.
165. Second, despite some
commenters’ assertions that correctional
facilities incur costs in their
administration of IPCS, the available
cost data (i.e., the 2015 survey data
submitted by the National Sheriffs’
Association) do not allow us to quantify
what those costs are with any level of
PO 00000
Frm 00030
Fmt 4701
Sfmt 4700
exactitude. This issue is not new. In the
2020 ICS Notice, the Commission asked
‘‘correctional facilities to provide
detailed information concerning the
specific costs they incur in connection
with the provision of interstate inmate
calling services.’’ In the 2021 ICS Order,
the Commission observed that despite
this request, ‘‘nothing more current was
submitted’’ into the record regarding
correctional facility costs. Again the
Commission, in 2021, sought broad
comment on correctional facility costs,
including methodologies to estimate
such costs and how to obtain reliable
data. And, in an effort to understand
potential cost differentials between
prisons and jails of differing sizes, the
Commission also sought specific
comment on facility costs for each type
of correctional facility. Finally, in the
2023 Mandatory Data Collection, WCB
and OEA directed IPCS providers to
report ‘‘any verifiable, reliable, and
accurate information’’ in their
possession showing the costs incurred
by correctional facilities.
166. Despite these numerous and
repeated public attempts to obtain
relevant data, commenters have neither
provided updated facility cost data nor
proposed a methodology that would
allow the Commission to accurately
estimate used and useful correctional
facility costs. Instead, the National
Sheriffs’ Association continues to rely
on its 2015 cost survey as a ‘‘reasonable
proxy’’ for facility costs, while a single
provider simply lists various tasks for
which correctional facilities allegedly
incur costs but provides no supporting
data as to what those costs are. Given
the state of the record, it is reasonable
for us to conclude that no allowance for
correctional facility costs is warranted
in our lower bounds. In particular, the
failure of providers and facilities—
which would have the relevant data—to
provide such data to the Commission
despite repeated calls for them to do so
warrants an adverse inference that
actual information would not support
the case for recovery. However, out of
an abundance of caution, and in
recognition of those commenters that
continue to assert that correctional
facilities may incur used and useful
costs in allowing access to IPCS, we
conclude that we should incorporate
some allowance for such costs into the
upper bounds of the zones of
reasonableness. Specifically, based on
data from a 2015 cost survey provided
by the National Sheriffs’ Association we
incorporate $0.02 into the upper bounds
of our zones of reasonableness for all
facilities. We do not include an estimate
of correctional facility costs in the lower
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
bounds of our zones of reasonableness
as neither the record nor providers’ cost
data reported in the 2023 Mandatory
Data Collection adequately or
consistently support the inclusion of
any specific level of cost.
167. To that end, there are two
sources of data we can look to in
determining whether and how to
incorporate a measure of correctional
facility costs into our ratemaking
calculus. The first is the 2015 cost
survey from the National Sheriffs’
Association, upon which the National
Sheriffs’ Association and Pay Tel ask us
to rely. The Commission relied, in part,
on data from that survey in the 2021 ICS
Order when it adopted a $0.02 interim
cap for recovery of IPCS providers’
contractually prescribed site
commission payments. Although the
Commission expressed concerns about
the National Sheriffs’ Association
survey data at that time, it explained
that ‘‘they are the best data available
from correctional facility representatives
regarding their estimated costs.’’ That
remains true today. As the Prison Policy
Initiative observes, the National
Sheriffs’ Association survey relies
‘‘entirely on self-reported data from
correctional facilities’’ and involves
‘‘inappropriately expansive
descriptions’’ of IPCS-related tasks.
Such infirmities make it very likely that
the National Sheriffs’ Association data
overstated correctional facility costs at
the time of the survey, and severely
limit the data’s value as a proxy for
current facility costs. Indeed, neither
correctional facilities nor IPCS
providers have an incentive ‘‘to
understate their costs in the context of
a rate proceeding, lest the Commission
adopts rates that are below cost.’’ But,
as the Commission has explained, ‘‘an
agency may reasonably rely on the best
data available where perfect information
is unavailable.’’ The National Sheriffs’
Association survey data are the best data
available from correctional facility
representatives which we may, and do,
reasonably consider in determining how
to account for used and useful
correctional facility costs in our
ratemaking calculations.
168. The second source of data we
consider in determining whether and to
what extent correctional facility costs
may incur used and useful costs is the
data providers reported regarding their
site commission payments in response
to the 2023 Mandatory Data Collection.
A technical appendix compares the
costs per minute that providers reported
for contracts requiring the payment of
monetary site commissions with the
costs per minute that providers reported
for contracts not requiring the payment
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
of monetary site commissions. We find
this comparison potentially helpful
because both facilities and providers
have explained that some portions of
some site commission payments may
compensate facilities for costs they
incur in permitting access to IPCS. If we
saw lower per-minute costs for
providers at facilities with site monetary
commission payments than for facilities
without monetary site commission
payments, we might reasonably infer (or
at least hypothesize, subject to further
analysis) that facilities may be incurring
such significant levels of used and
useful costs as to require an approach
materially different from our approach
in this Order. Our comparison, however,
shows higher per-minute costs for
providers at facilities with monetary site
commission payments than for facilities
without monetary site commission
payments. Previously, the Commission
relied in part on a similar analysis of
earlier provider data—in conjunction
with the National Sheriffs’ Association
data—as grounds for a $0.02 per minute
interim allowance for reasonable
correctional facility costs. However,
even the 2021 data analysis suggested
that the $0.02 per minute interim
allowance might have been too high.
And our analysis of the data from the
2023 Mandatory Data Collection
ultimately provides no basis to identify
an amount of correctional facility costs
that should be recoverable through
regulated IPCS rates. In particular,
performing the same comparison used
in 2021, but updated to reflect the latest
data, discloses that providers actually
incur greater costs per minute to serve
facilities for which they pay monetary
site commissions, providing no
substantiation of certain commenters’
suggestion that site commissions
operate to compensate for the transfer of
some costs of service from providers to
facilities. We conclude that because
providers report greater costs per
minute for contracts requiring the
payment of monetary site commissions
versus those that do not, our approach
of including a $0.02 per-minute additive
for facility costs in the upper bounds of
our zones of reasonableness, but no
additive for facility costs in the lower
bounds of those zones, is the best
approach given the record before us.
This balancing reflects our recognition,
on the one hand, that correctional
facilities may well incur used and
useful costs in allowing access to IPCS,
with the absence of any basis in the
record that would enable us to estimate
those costs with any degree of precision.
169. In accounting for correctional
facility costs in this manner, we decline
PO 00000
Frm 00031
Fmt 4701
Sfmt 4700
77273
requests that we instead account for
those costs by adding a specific amount
per-minute to our rate caps based on
data from the National Sheriffs’
Association cost survey. These data do
not enable us to quantify such costs
with anything near the level of
specificity that would be required to
adopt a specific ‘‘just and reasonable’’
additive reflecting used and useful
correctional facility costs. Commenters
supporting a rate additive have failed to
explain a connection between their
proposed additives and the National
Sheriffs’ Association 2015 cost survey
data. Nor have they explained the
methodology used to derive the
additives they propose or, indeed, any
alternative additives. We therefore
cannot accept at face value the proposed
rate additives, or adopt any alternative
additive, based on these data and
simultaneously ensure that the rate caps
we adopt are just and reasonable and
fairly compensatory. Given the state of
the record, we conclude that our
approach, as described below, strikes
the best balance.
170. Incorporating A Measure of
Correctional Facility Costs Into the
Upper Bounds of the Zones of
Reasonableness. In establishing the
upper bounds of our zones of
reasonableness, we use providers’
unadjusted reported IPCS costs.
Ordinarily, we would undertake the
same exercise to incorporate
correctional facility costs into our upper
bounds. But as detailed above, we have
no reliable reported correctional facility
cost data, which requires us to find a
reasonable substitute. Because the
National Sheriffs’ Association 2015 cost
survey is the only available correctional
facility cost data reported by
correctional facility representatives in
the record, we rely on those data to
incorporate $0.02 into the upper bounds
of our zones of reasonableness for all
facilities. The $0.02 figure derives from
the Commission’s prior analysis of the
amount of used and useful correctional
facility costs the National Sheriffs’
Association’s cost survey reasonably
supported. In the 2021 ICS Order, the
Commission relied, in part, on these
data to conclude that $0.02 was a
reasonable estimate of the used and
useful correctional facility costs
recovered through IPCS providers’
contractually prescribed site
commission payments for prisons and
for jails with average daily populations
of 1,000 or more. The Commission
explained that the majority of prisons
and large jails that responded to the
National Sheriffs’ Association survey
reported ‘‘average total costs per minute
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77274
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
of less than $0.02’’ but declined to adopt
a lower figure, reflecting the
Commission’s ‘‘conservative approach’’
to estimating correctional facility costs
in setting interim rate caps based on
these data. The Commission,
nevertheless, continued to express
concerns about the data.
171. The record has not developed in
any meaningful way since the
Commission determined that the
National Sheriffs’ Association data
supported, at most, a $0.02 allowance
for correctional facility cost at prisons
and jails with average daily populations
of 1,000 or more. We sought to identify
in using data from the 2023 Mandatory
Data Collection the extent to which
correctional facilities bear costs by
seeking to determine how much
providers’ reported expenses decline
when they pay monetary site
commissions, but found providers’
reported expenses increase in a
statistically significant manner when
they pay such commissions. We thus
see no principled or reasonable basis on
which to depart from that determination
so as to find a higher cost justified now.
As one commenter explains, instead of
‘‘refreshing the record or seriously
engaging on the merits of the
Commission’s inquiry,’’ the National
Sheriffs’ Association ‘‘simply continues
its years-long practice of rote repetition
of the cost categories identified in its
2015 survey findings.’’ The National
Sheriffs’ Association contends that
because the Commission found its cost
survey ‘‘credible’’ in the 2016 ICS
Reconsideration Order, there is ‘‘no
basis’’ to change that conclusion now.
This argument is unpersuasive. The
Commission made a credibility
determination in the 2016 ICS
Reconsideration Order in the context of
a record on facility costs that the
Commission acknowledged was lacking.
The National Sheriffs’ Association’s
arguments do not acknowledge the very
specific circumstances under which the
Commission relied on the 2015 survey
data, and do not provide sufficient basis
for the Commission to deviate from its
subsequent findings in the 2021 ICS
Order.
172. The National Sheriffs’
Association acknowledges the
imprecision of the data it provided but
argues that the ‘‘wide unexplained
variations’’ in costs that the Commission
observed in the data are attributable to
the fact that ‘‘there are different hourly
rates for Sheriffs’ and jail employees’’
and that different facilities use different
IPCS systems and require different
administrative and security measures.
These arguments do not provide us with
a methodology that would let us verify
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
or isolate costs used and useful in the
provision of IPCS from the other costs
that correctional facilities incur and that
are reflected in the survey data. Rather,
the National Sheriffs’ Association’s
statements concede that correctional
facilities do not incur costs uniformly,
making it even more likely these data
overstate correctional facility costs. The
National Sheriffs’ Association also
continues to maintain that the costs
reported in its cost survey should be
fully recoverable. These include costs
related to various safety, security,
surveillance, and administrative tasks.
The National Sheriffs’ Association
explains that without these functions no
IPCS would be provided in certain
correctional facilities and, conversely,
without IPCS, correctional facilities
would not incur costs associated with
the administrative and security tasks it
lists. We find the argument that IPCS
would not be provided in certain
facilities as the National Sheriffs’
Association and FDC claim to be
unsubstantiated. In effect, then, the
National Sheriffs’ Association’s argues
that because IPCS is made available to
incarcerated people, the costs that it has
put into record are necessarily used and
useful and therefore recoverable in full.
This argument misses the mark. Simply
because some tasks ‘‘are sometimes
performed does not end the
Commission’s inquiry.’’ But simply
because certain tasks are performed by
facilities or sheriffs does not
automatically mean that such tasks are
related to communications services. If
anything, the fact that certain tasks may
be performed by the correctional
facilities suggests that these are costs of
incarceration, not of IPCS. For example,
the fact that a correctional facility might
elect to undertake certain activities
given the existence of IPCS in that
facility does not automatically mean
that the activities are of sufficient
benefit to IPCS ratepayers to warrant
their bearing the activities’ costs
through IPCS rates. We instead must
undertake a more nuanced analysis to
determine the types of costs that are
allowable in IPCS rates. And we do so
by applying the used and useful
framework the Commission has relied
on for decades. Employing that
approach, we incorporate, to the extent
the record provides meaningful data, the
used and useful costs incurred in the
provision of IPCS into our rate cap
calculations, regardless of whether those
costs are incurred directly by IPCS
providers or instead incurred directly by
correctional facilities and subject to
IPCS provider reimbursement. As to
costs that we do not find used and
PO 00000
Frm 00032
Fmt 4701
Sfmt 4700
useful in the provision of IPCS, IPCS
ratepayers should not be forced to bear
them—nor should IPCS providers be
compelled to do so themselves. Thus,
while correctional facilities remain free
to engage in (or employ) activities or
functions that are not used and useful
in the provision of IPCS, they must look
elsewhere besides regulated IPCS rates
to fund them.
174. Fundamentally, the costs
reflected in the National Sheriffs’
Association survey are, for the most
part, ‘‘cost[s] of operating prisons and
jails, not providing communication
service’’ and, as such, do not benefit
IPCS consumers sufficiently to render
them used and useful in the provision
of IPCS. Stated differently, ‘‘[t]he
presence or absence’’ of these tasks
‘‘does not actually prevent or enable
communication.’’ Subject to those costs
we conclude are used and useful in the
provision of IPCS as reflected in our
ratemaking calculus, we agree. But
outside of the costs we do allow, the
National Sheriffs’ Association cost
survey fails to support the inclusion of
any amount greater than $0.02 to
account for used and useful correctional
facility costs.
175. We decline to give any weight to
the survey provided by Pay Tel’s
outside consultant, which purports to
quantify ‘‘an estimate of the [s]afety and
[s]ecurity costs incurred by confinement
facilities that are specifically caused by
making IPCS available at that facility.’’
We find this survey to be unreliable.
First, the survey is unrepresentative. As
the consultant concedes, the ‘‘sample
size of [the] data collection effort is
limited.’’ It encompasses 30 correctional
facilities, which is less than 1% of all
facilities included in the 2023
Mandatory Data Collection, and covers
only ‘‘small county jails and large
regional facilities’’ thereby excluding
prisons and large jails. Second, the
survey does not attempt to account for
the nuances of how safety and security
measures are administered and, in
particular, the division of labor between
correctional facilities and IPCS
providers. The record is clear that these
and other functions and activities for
which correctional facilities allegedly
incur costs are sometimes performed by
the IPCS provider and sometimes
performed by the correctional facility.
What is more, certain IPCS providers
have stated that they offer
comprehensive services, that include
safety and security services, as part of a
unified platform they sell to correctional
facilities.
Thus, we find it unlikely that the
information provided in the Pay Tel
consultant’s survey is representative of
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
the costs incurred by correctional
facilities in connection with safety and
security measures across the IPCS
industry. As such, we decline to rely on
it to estimate used and useful
correctional facility costs. Even if we
were to find the data reliable enough to
be decisional, it would support the
$0.02 that we incorporate into the upper
bounds of our zones of reasonableness
based on the National Sheriffs’
Association survey. The June 7, 2024
Wood Report, which is based on
information self-reported by
correctional facilities across seven
categories of safety and security
measures, suggests that the ‘‘average
reported cost for these 30 facilities in
$0.08 per MOU.’’ However, this estimate
includes three categories of safety and
security measures that we conclude
today are not used and useful in the
provision of IPCS, including ‘‘Routine
Preventative Call Monitoring,’’ ‘‘Call
Recording Review’’ and ‘‘Enrolling
Inmates for Voice Biometrics.’’ These
three categories account for a total of
74% of the average reported costs of
safety and security measures in the
Wood June 7, 2024 Report (38% for
routine preventative call monitoring,
28% for call recording review, and 8%
for enrolling inmates for voice
biometrics). Removing costs associated
with those measures reduces the $0.08
per minute figure that the report argues
represents facilities’ safety and security
costs by 74%, yielding an average cost
of approximately $0.0208 per minute.
Thus, in excluding categories of safety
and security costs that we conclude are
generally not used and useful from the
amount in the Wood June 7, 2024
Report, we arrive at essentially the same
$0.02 that we incorporate into the upper
bounds of our zones of reasonableness.
176. Therefore, we adopt the $0.02
allowance for correctional facility costs
in the upper bounds of our zones of
reasonableness for all facilities. In the
2021 ICS Order, the Commission limited
the applicability of the $0.02 cap for
recovery of contractually prescribed site
commissions to prisons and jails with
average daily populations of 1,000 or
more individuals ‘‘in response to
criticism that this value would not be
sufficient to recover the alleged higher
facility-related costs’’ of smaller
facilities. Because commenters ‘‘did not
provide sufficient evidence to enable
[the Commission] to quantify’’ the
allegedly higher costs incurred by
smaller correctional facilities, the
Commission sought comment on that
issue in 2021. The Commission further
explained that the National Sheriffs’
Association data varied too widely to
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
determine whether correctional facility
costs were indeed higher for smaller
facilities.
177. Here, too, commenters have not
substantiated their claims that
correctional facility costs are higher in
smaller facilities. The National Sheriffs’
Association argues that the
Commission’s concerns about its data
concerning smaller facilities ‘‘contradict
the Commission’s finding in the 2016
ICS Reconsideration Order.’’ They also
argue that ‘‘a wide variation in data is
not disqualifying when there is an
explanation for the variation,’’ which
they claim the survey data provide.
Prior statements from the National
Sheriffs’ Association potentially account
for the variation in costs for smaller
facilities, including differences in
employee time spent on certain tasks,
compensation rates, and differences in
minutes of use. And the Commission
noted that ‘‘there are many potential
variables that impact facilities’ costs’’
and sought ‘‘detailed comment on those
variables’’ in an attempt to obtain a
clearer record on costs for smaller
facilities. Yet commenters have not
provided any such details to explain the
wide variation in facility costs for
smaller facilities reflected in the
National Sheriffs’ Association survey. In
short, the record does not support the
inclusion of an amount greater than
$0.02 into the upper bounds of the
zones of reasonableness for all facilities.
178. Correctional Facility Costs in the
Lower Bounds of the Zones of
Reasonableness. The lower bounds of
our zones of reasonableness reflect only
those costs that the record affirmatively
establishes as generally being used and
useful in the provision of IPCS. Due to
the lack of any reliable data concerning
correctional facility costs in connection
with IPCS, we rely on data reported by
IPCS providers in the 2023 Mandatory
Data Collection in connection with
providers’ site commission payments.
While we recognize that correctional
facilities do incur used and useful costs
in allowing access to IPCS, the record
provides no data that would allow us to
estimate those costs with any degree of
precision. Accordingly, we include no
estimate for such costs in the lower
bounds of our zones of reasonableness.
We decline to rely on the National
Sheriffs’ Association cost survey in
connection with our evaluation of
whether and how to incorporate
correctional facility costs into the lower
bounds of our zones of reasonableness.
As discussed above, we find that the
National Sheriffs’ Association survey
data that we use to incorporate
correctional facility costs into the upper
bounds of the zones of reasonableness
PO 00000
Frm 00033
Fmt 4701
Sfmt 4700
77275
do not enable us to quantify such costs
with any level of specificity. The same
applies to the Wood June 7, 2024
Report. As discussed above, that
‘‘limited’’ report covers only 30
correctional facilities and only includes
‘‘small county jails and large regional
facilities,’’ rendering the survey far too
unrepresentative as a measure of
correctional facility costs across the
industry. We therefore conclude that we
cannot meaningfully adjust the data
providers reported for purposes of
establishing the lower bounds.
179. We reach our decision regarding
correctional facility costs in the lower
bounds based on the absence of a record
quantifying such costs, and supported
by the analysis described in a technical
appendix. This analysis, which is based
on the Commission’s analysis in the
2021 ICS Order, takes providers’ cost
and site commission data reported in
response to the 2023 Mandatory Data
Collection and compares providers’
relative costs per minute for contracts
with and without site commissions.
That analysis indicates that contracts
with site commissions exhibit greater
costs per minute than those without site
commissions, which provides no
support for the assertion that site
commissions operate to transfer some
costs of service from providers to
facilities. If the opposite were true, and
site commissions did recover facility
costs used and useful in the provision
of IPCS, we would expect to see higher
costs to the provider for contracts
without site commissions. Because
providers’ responses to the 2023
Mandatory Data Collection
‘‘incorporate[ ] no correctional facilityprovided cost data,’’ we find that our
approach of including a $0.02 perminute additive for facility costs in the
upper bounds of our zones of
reasonableness, but no additive for
facility costs in the lower bounds of
those zones, properly balances our
recognition that correctional facilities
may well incur used and useful costs in
allowing access to IPCS with the
absence of any basis in the record that
would enable us to estimate those costs
with any degree of precision. Pay Tel
argues that not including a measure of
facility costs in the lower bound
‘‘reflects a misunderstanding of the
evidence in the record and in no way
justifies withholding cost recovery from
facilities.’’ Yet Pay Tel does not contend
with the inadequacies of the record data
we have identified in any meaningful
way beyond asserting that they show
that correctional facilities incur costs
associated with making IPCS available.
As we explain above, the available
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77276
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
correctional facility cost data are
unreliable for purposes of including a
measure of correctional facility costs in
the lower bounds of our zones of
reasonableness. Furthermore, we do not
withhold cost recovery from facilities by
declining to include a measure of
correctional facility costs in the lower
bounds. As explained below, we take
the fact that our lower bounds may not
reflect all used and useful costs into
account in setting rate caps, and we
allow IPCS providers to reimburse
correctional facilities for the used and
useful costs they may incur, if any. And
because the available provider data do
not enable us to quantify the extent to
which providers’ site commission
payments compensate facilities for any
costs that they incur that are used and
useful in the provision of IPCS, we do
not incorporate correctional facility
costs into the lower bounds of our zones
of reasonableness.
180. We acknowledge that because we
do not incorporate a measure of
correctional facility costs in the lower
bounds of our zones of reasonableness,
those bounds may understate the used
and useful costs of providing IPCS. As
discussed above, none of the data in the
record concerning correctional facility
costs allow the Commission to quantify
these costs with any level of precision
and, as such, preclude any adjustment
to the lower bounds. We account for
that fact in choosing rate caps at levels
that exceed the lower bounds, as
discussed below.
181. Reimbursement for Used and
Useful Correctional Facility Costs.
Despite the limitations in our data
reflecting facilities’ costs, we
nevertheless take measures to ensure
that correctional facilities have a
mechanism to recover their used and
useful costs, if any, in the provision of
IPCS. To that end, we permit IPCS
providers to reimburse correctional
facilities for such used and useful costs,
if it is apparent that such costs are,
indeed, incurred by a facility. The IPCS
rate caps we adopt today reflect, based
on the record before us, all of the used
and useful costs incurred in the
provision of IPCS regardless of whether
such costs are incurred by IPCS
providers or correctional facilities.
Thus, the rate caps recognize, consistent
with the record, that correctional
facilities may incur some used and
useful costs in allowing access to IPCS.
Pay Tel’s contention that the
Commission ‘‘fail[s] to allow for a
mechanism by which facilities may
recover their costs associated with
making IPCS available’’ is contradicted
by our explicit allowance for such a
mechanism here. Pay Tel’s argument
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
appears to be grounded in its preference
for an ‘‘express additive to IPCS rate
caps’’ rather than the reimbursement
mechanism permitted by the Report and
Order. As we explain above, the
available data do not enable us to
quantify correctional facility costs in a
way that would allow us to disaggregate
our rate caps into just and reasonable
provider components and facility
components, and Pay Tel has not
supplied more robust data or otherwise
attempted to cure the defects in the
available data. As a result, we rely on
our rate caps, which reflect all of the
used and useful costs incurred in the
provision of IPCS, and therefore ‘‘allow
IPCS providers to recover facility costs,’’
despite Pay Tel’s argument to the
contrary. Because we eliminate site
commissions below, which have
historically been the primary means by
which correctional facilities may have,
to some extent, recovered used and
useful costs they may incur in allowing
access to IPCS, correctional facilities
would have no means to recover those
costs absent that further action to allow
a level of provider reimbursements.
182. The reimbursement we allow
extends only to those costs that are used
and useful in the provision of IPCS as
reflected in the Report and Order. Given
the over-arching problems associated
with site commission payments, if a
correctional facility seeks
reimbursement from an IPCS provider
for an allegedly used and useful cost,
the IPCS provider should determine
whether the cost for which the
correctional facility seeks
reimbursement is a cost that the
Commission has determined to be used
and useful and thus properly
reimbursable under the standard set
forth in the Report and Order. We
otherwise leave the details of any
reimbursement transaction to the parties
to resolve. IPCS providers and their
correctional facility customers are well
aware of the types of costs that are used
and useful in the provision of IPCS and
are in the best position to negotiate
reimbursement as they see fit. We also
clarify that while we permit IPCS
providers to reimburse correctional
facilities for their used and useful costs
in allowing access to IPCS, nothing in
the Report and Order should be
interpreted to require IPCS providers to
do so. To the extent a correctional
facility incurs used and useful costs in
allowing access to IPCS, the correctional
facility and the IPCS provider are free to
negotiate such reimbursement in
accordance with the Report and Order.
ICSolutions asks whether, within the
rate caps, IPCS providers can ‘‘pay
PO 00000
Frm 00034
Fmt 4701
Sfmt 4700
correctional facilities up to the $0.02/
minute for reasonable corrections
facilities’ costs’’ and, if so, whether the
$0.02 per minute is a safe harbor.
ICSolutions July 12, 2024 Ex Parte at 1.
We do not establish a safe harbor. The
$0.02 figure to which ICSolutions
presumably refers reflects the
Commission’s best estimate of used and
useful correctional facility costs for the
purpose of calculating the upper bounds
of our zones of reasonableness. That
figure is not meant to suggest that $0.02
per minute would be an appropriate
reimbursement amount and does not
establish a safe harbor for purposes of
the reimbursement we permit. For
example, ‘‘[i]f a correctional facility
were to pay for internet installation and
maintenance to enable the provision of
IPCS,’’ that payment would be
considered used and useful in the
provision of IPCS. In that case, the IPCS
provider could reimburse the
correctional facility for its costs from the
revenue collected by the IPCS provider
since the cost of internet installation is
included in our rate caps. In contrast,
IPCS providers may not reimburse
correctional facilities for costs that we
find not to be used and useful in the
provision of IPCS, such as costs for
certain safety and security measures that
we conclude are not used and useful in
the provision of IPCS. Finally, under no
circumstances may reimbursement
result in IPCS consumers being charged
more than the rate caps we adopt today.
4. Adopting Audio and Video
Incarcerated People’s Communications
Services Rate Caps
183. We adopt permanent audio IPCS
and interim video IPCS rate caps by
employing a zone of reasonableness
approach, similar to the Commission’s
previous efforts. We find that adopting
zones of reasonableness, updated from
the Commission’s approach in the 2021
ICS Order, is the best means of
establishing rate caps in which IPCS
rates are ‘‘just and reasonable’’ and, in
conjunction with our ban on site
commissions, providers are ‘‘fairly
compensated.’’ We further find that the
data collected in the 2023 Mandatory
Data Collection offers a sufficient basis
from which to derive the zones and rate
caps, despite the limitations of the
reported cost data. We reject cursory
claims that our rate caps will be
unreasonable because our rules
‘‘impose[ ] significant and new
operational obligations and changes on
all providers’’ but ‘‘fails to account for
the costs of these new obligations.’’
Securus does not quantify or otherwise
substantiate this claim, nor does it
demonstrate that the waiver process
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
would be inadequate to address any
unusual implementation costs that
theoretically might arise for a given
provider. We derive the upper bounds
and lower bounds of the zones for each
facility tier by evaluating and analyzing
the data and other information received
in response to the 2023 Mandatory Data
Collection.
184. Reliance on Data from the 2023
Mandatory Data Collection. The 2023
Mandatory Data Collection, which
updated and supplemented the Third
Mandatory Data Collection, is the most
comprehensive data collection in the
IPCS proceeding to date, building upon
the lessons learned from each previous
effort. As instructed by the Commission,
WCB and OEA structured this data
collection to strike a balance between
meeting the statutory timeline directed
by the Martha Wright-Reed Act and
simultaneously reducing the burdens on
providers to respond to an expanded
collection, such as by limiting the
information requested, lowering
reporting requirements, and making
other changes associated with reducing
burdens through the notice and
comment process. To reduce the time
required and the burdens associated
with responding to the 2023 Mandatory
Data Collection, it was decided to only
require parties to report data collected
in the ordinary course of their business,
to require at least GAAP consistency for
financial reporting, and to allow
providers to develop cost allocations
based on their knowledge of their
businesses and accounts, rather than
imposing a regulatory set of accounts on
providers. These decisions traded
minimizing burdens off against
obtaining useful data. Staff experience
acknowledged that different providers
would take different approaches, would
have different business models, and
would differ in other important ways,
and accordingly, questions designed to
provide necessary context to
understanding these differences were
updated and included as well. We agree
with commenters who assert that the
currently available data are of
substantially greater quality than that
available in 2021 when we established
interim rates, and we find the most
recent reported data continued to
improve in the same fashion. These data
are derivative of the cost allocation
instructions for this data collection,
which have been improved and refined
themselves. Even so, the data from the
2023 Mandatory Data Collection are
imperfect. While we afforded providers
the leeway to report data collected in
the ordinary course of business rather
than imposing a regulatory set of
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
accounts upon them, the absence of a
uniform system of accounting rules
engenders variance in the reported data.
We likewise acknowledge that providers
are incentivized to report their data in
ways that produce higher IPCS costs,
that providers are differently situated
and may interpret our data requests
differently, and that cost allocation, as
a general matter, can be difficult. While
the record raises some questions as to
whether these data accurately capture
IPCS expenses, we have sought to
account for that risk as best we can,
including by using a range of other
record sources or publicly available
information beyond our data collection.
185. Nevertheless, we find the data
from the 2023 Mandatory Data
Collection sufficient to support our
actions today. As stated previously,
agencies may reasonably rely on the best
available data where perfect information
is unavailable. The Supreme Court has
recognized that ‘‘[i]t is not infrequent
that the available data does not settle a
regulatory issue,’’ and in such cases,
‘‘the agency must then exercise its
judgment in moving from the facts and
probabilities on the record to a policy
conclusion.’’ Having ‘‘explain[ed] the
evidence which is available,’’ we apply
our judgment to the record and reach
results that provide a ‘‘rational
connection between the facts found and
the choice made.’’ In doing so, we
minimize our reliance on data that we
find inaccurate or unreliable by setting
lower bounds that adjust for anomalies
in the reported data. Under the
circumstances, we choose ‘‘to use the
best available data, and to make
whatever adjustments appear[ ]
necessary and feasible’’ to ensure that
audio and video IPCS rates are just and
reasonable. NCIC argues that ‘‘nearly
half of the current video visitation
service providers’’ did not respond to
the 2023 Mandatory Data Collection,
and so urges the Commission to ‘‘delay
the adoption of interim rates until it
receives comprehensive data from all
video visitation providers, and deliver
immediate relief by simply prohibiting
flat-rate billing.’’ In effect, NCIC asks
that we pursue ‘‘the perfect at the
expense of the achievable.’’ For the
reasons set forth herein, we find it
appropriate to address the limitations in
providers’ video IPCS data by making
appropriate adjustments to our upper
and lower bounds and in setting interim
rate caps, rather than abandoning the
effort to set rate caps altogether in
contravention of Congress’s mandate.
We have undertaken a comprehensive
analysis of the available data, explained
our concerns with the imperfections
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
77277
that we have identified, and fully
explicated the basis for the rate
methodology that we adopt in light of
the relative merits of the data. We also
provide our reasoning for excluding
certain data from our analysis, based on
both flaws in the data and the directives
of the Martha Wright-Reed Act.
186. Implementing the Zone of
Reasonableness Approach. In 2023, the
Commission sought comment on the
approach to ratemaking and the
statutory directive that we may use
industry-wide average costs. The zone
of reasonableness approach is wellsuited to reconcile competing concerns,
such as those reflected by the Martha
Wright-Reed Act’s respective obligations
to set ‘‘just and reasonable’’ rates that
‘‘fairly compensate[ ]’’ providers. This
approach helps avoid ‘‘giving undue
weight to the assumptions that would
lead to either unduly high or unduly
low per-minute rate caps,’’ and helps us
balance the respective competing
interests of providers and consumers.
Precedent establishes that we are ‘‘free,
within the limitations imposed by
pertinent constitutional and statutory
commands, to devise methods of
regulation capable of equitably
reconciling diverse and competing
interests.’’ It also gives us the flexibility
to effectively address imperfections in
the data and ultimately select rate caps
that satisfy both statutory standards.
Indeed, the D.C. Circuit has emphasized
the ‘‘basic principle’’ that ‘‘rate orders
that fall within a ‘zone of
reasonableness,’ where rates are neither
‘less than compensatory’ nor
‘excessive,’ ’’ are ‘‘just and reasonable.’’
We reiterate, ‘‘[i]t is well-established
that rates are lawful if they fall within
a zone of reasonableness.’’
187. The record supports this
approach. As certain commenters
observe, the zone of reasonableness
approach ‘‘allowed the Commission to
take into account the different
approaches to cost reflected in the
Second Mandatory Data Collection,’’
and it ‘‘continues to be the appropriate
method for establishing permanent rates
based on the data submitted in response
to the Third Mandatory Data
Collection.’’ Commenters add that the
zone of reasonableness remains
appropriate under the Martha WrightReed Act, which ‘‘embraces the use of
industry-wide average costs to set rate
caps for IPCS’’ and ‘‘adjust[ing] those
costs as necessary.’’
188. Not all commenters agree,
however. A few argue that the zone of
reasonableness approach is unnecessary
with higher quality data and advocate
for us to employ a statistical method
paradigm. While the data collected in
E:\FR\FM\20SER2.SGM
20SER2
77278
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
the 2023 Mandatory Data Collection are
more comprehensive and reliable than
the data from prior data collections, we
disagree that the improvement in the
collected data requires us to change our
approach. As we discuss elsewhere, the
market for video IPCS is still
developing, which strengthens the case
for applying the zone of reasonableness
to the data before us. Nor have those
commenters persuaded us that their
alternative approaches to rate regulation
would be an improvement. The
alternative statistical methods advanced
by providers, including using a mean
plus standard deviation or an
interquartile range, ignore the
limitations of the data and the
likelihood that providers have
overstated their costs, problems which
the zone of reasonableness approach
helps us address. We also find that the
zone of reasonableness approach
remains particularly apt for balancing
the directives established by the Martha
Wright-Reed Act on the basis of the data
before us. NCIC separately criticizes the
zone of reasonableness as ‘‘overly
complicated,’’ and suggests that it ‘‘may
well be impossible to monitor at smalland medium-sized facilities that have
frequently fluctuating populations with
varying lengths of incarceration.’’ We
are unpersuaded. The resultant caps are
straightforward, and NCIC fails to
explain how monitoring rates at
individual facilities (regardless of size)
is problematic. Indeed, providers are
required to track and report the rates
they charge, and neither providers nor
facilities have any role (much less any
responsibility) in the ‘‘zone of
reasonableness’’ calculation process.
Nor has NCIC explained how
population turnover impacts the zone of
reasonableness calculation process. As
we explain in a technical appendix, by
distinguishing between prisons and
jails, our rate-setting methodology helps
account for turnover to the extent
relevant, and NCIC’s comments do not
demonstrate what, if anything, more is
justified in that regard.
a. Establishing the Zones of
Reasonableness
189. Our zone of reasonableness
approach involves three distinct steps
which echo the approach the
Commission took in the 2021 ICS Order.
First, we establish ceilings, or upper
bounds, for our zones for each audio
and video tier by using the data that
providers submitted in response to the
2023 Mandatory Data Collection. To
reach these ceilings, we also add all
reported safety and security costs to the
industry averages reflected by the
reported data without regard to whether
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
those costs are used and useful, and
include estimates of facility costs and
TRS costs. Second, we make reasonable,
conservative adjustments to the reported
data, including by reducing the types of
safety and security costs and amount of
facility costs we incorporate into our
industry average cost calculation,
among other steps. We use those
adjusted data to establish reasonable
floors, which become the lower bounds
of our zones of reasonableness. In
determining the upper and lower
bounds, we calculate industry average
costs across the sum of both billed and
unbilled minutes, as we find that this
sum (rather than billed minutes alone)
more accurately reflects providers’
average costs. Finally, we rely on record
evidence and on our agency expertise to
pick reasonable rate caps for each tier
from within those zones for both audio
and video IPCS communications.
190. Determining Upper Bounds for
the Zones of Reasonableness. We begin
our determination of the upper bounds
for our permanent audio rate caps and
our interim video rate caps by
identifying the weighted average of
providers’ reported IPCS costs at each
tier. To do this, we exclude those
submissions we find incomplete or
otherwise unusable, and we otherwise
accept providers’ costs as reported.
Because reported costs include costs
which we find are not used and useful
in the provision of IPCS, our upper
bounds mark the upper limits of what
might be considered ‘‘industry-wide
average costs’’ within the meaning of
section 3(b)(1) of the Martha WrightReed Act.
191. In keeping with our acceptance
of providers’ IPCS costs as reported, we
also include all reported safety and
security costs in our upper bounds of
the zones of reasonableness. We do so
for several reasons. First, we recognize
that while questions were pending
surrounding the inclusion of such costs
in our IPCS rates, providers continued
to develop and offer safety and security
measures for the benefit of and use by
authorized personnel in the carceral
environment. This suggests that
historically, IPCS providers were able to
provide service without certain safety
and security services which have been
more recently developed. In developing
our upper bounds, however, we decline
to weigh the various categories of safety
and security measures, and instead give
providers the benefit of the doubt by
treating all such measures as used and
useful IPCS costs, regardless of whether
such measures are of the type that were
historically used and useful in the
provision of IPCS. Second, because of
limitations in the reported data, we
PO 00000
Frm 00036
Fmt 4701
Sfmt 4700
cannot further disaggregate or
distinguish costs for individual safety
and security measures with precision.
Rather than attempt to remove costs for
specific constituent safety and security
measures which are not used and useful
in the provision of IPCS, we take a
conservative approach and include all
reported safety and security measures
costs within the upper bounds.
192. Next, we incorporate an estimate
of the separate IPCS costs which
facilities may incur in allowing access
to IPCS. First, as we explain above, we
adopt an estimate of $0.02 per minute
for the proposed caps at each tier for our
upper bounds to reflect any used and
useful costs facilities may incur. As we
have explained, the record does not
sufficiently quantify the amount of such
costs, particularly at smaller facilities.
Although the Commission has
repeatedly sought more recent and more
accurate data, the record before us is
lacking. We derive an estimate of these
costs from the facility cost additive the
Commission used in its 2021 ICS Order,
which previously applied to prisons and
large jails, depending on the existence
of contractually prescribed site
commissions related to a given facility.
This $0.02 estimate continues to reflect
the best data available concerning
facility costs despite outstanding
questions. The use of this additive did
not generate any waiver requests in the
interim, suggesting that the estimate was
not unduly low. Without better data
from which to determine how facilities’
IPCS costs may differ, if at all, between
facilities of different sizes and types, we
apply this same estimate uniformly
across all tiers.
193. Finally, we also include an
estimate of the costs incurred by
providers to implement the changes to
TRS services required under the 2022
ICS Order. These changes did not take
effect until January 9, 2023, and the
costs of implementing them therefore
were not reflected in the data filed in
response to the 2023 Mandatory Data
Collection, which are for calendar year
2022. We understand that the costs to
provide TRS in the carceral
environment may frequently exceed the
support available to TRS providers
because of the specialized equipment
and networks often required to deploy
these services inside of prisons or jails.
We include this estimate so that our rate
caps will cover these excesses and fully
compensate providers for the costs of
providing these services. However, the
record quantifying these costs is once
again scant. The only available data in
the 2023 Mandatory Data Collection
stems from the response of a single
provider, which suggest that these costs
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
may be $0.002 per minute. Without
more data on which to rely, we
incorporate that estimate into both our
upper and lower bounds.
194. As we explain in a technical
appendix, we find that the upper
bounds overstate providers’ actual costs
of providing both audio IPCS and video
IPCS, likely by a significant margin.
This conclusion echoes the reasoning in
the Commission’s 2021 ICS Order. In
addition to the overinclusion of safety
and security costs and facility costs
which we discuss above, all providers
have reasons to overstate their general
IPCS costs in response to our data
collection, as higher costs could lead to
higher cost-based rate caps, and thus
higher profits.
195. Additionally, our upper bounds
also incorporate the weighted average
cost of capital (WACC) as reported by
providers, another factor which
heightens the likelihood that they are
overstated. The instructions to the 2023
Mandatory Data Collection included the
caveat that the Commission would
apply a WACC figure of 9.75% for any
provider that failed to justify the
application of an alternative figure.
Generally, 9.75% is the Commission’s
currently authorized rate of return for
incumbent local exchange carriers
regulated on a rate-of-return basis. Of all
providers, only Securus and ViaPath
reported higher costs of capital than the
standard 9.75% rate of return. We find
Securus and ViaPath failed to justify the
higher costs of capital they reported and
therefore use 9.75% in determining our
lower bounds. Particularly because the
weighted average cost of capital has a
cascading effect upon reported costs,
accepting these figures as reported tends
to overstate the upper bounds.
196. There are also distinct attributes
of the video IPCS market which
reinforce our conclusion that the upper
bounds likely overstate providers’ used
and useful costs. One overarching
attribute is that video IPCS remains a
developing marketplace—in fact,
providers report offering video IPCS at
less than half of all facilities where they
offer audio IPCS. Currently, video IPCS
is being deployed at 49.24% of facilities
in the dataset. There are significant
indicia that the reported data reflect
high upfront costs to develop and
deploy video IPCS across the nation’s
carceral facilities, which costs should
decrease over time. For example, many
facilities represented in the dataset have
extraordinarily high costs per minute for
video IPCS, yet very low relative
demand, which is consistent with newly
deployed services. Further, the variation
in providers’ reported data for almost
every aspect of video communication is
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
substantially higher than for audio,
suggesting that video supply in 2022
was in an early developmental stage,
and that providers will likely become
more efficient over time, resulting in
lower unit costs. Keeping in mind the
rate caps that we adopt today reflect
data from 2022, we expect providers
have become more efficient in
supplying video services and will
continue to do so. We also expect usage
of video IPCS to increase and hence, as
providers reap economies of scale, for
costs relative to demand to decrease
over time.
197. In light of the above, we calculate
the upper bounds for audio and video
IPCS rate caps for each tier as follows:
• Prisons: $0.107 per minute for
audio communications and $0.326 per
minute for video communications;
• Large Jails: $0.098 per minute for
audio communications and $0.223 per
minute for video communications;
• Medium Jails: $0.110 per minute for
audio communications and $0.216 per
minute for video communications;
• Small Jails: $0.121 per minute for
audio communications and $0.208 per
minute for video communications; and
• Very Small Jails: $0.151 per minute
for audio communications and $0.288
per minute for video communications.
Taken together, these upper bounds
form a reasonable, yet cautiously
overstated, edifice from which to
continue our calculation of the zones of
reasonableness.
198. Determining Lower Bounds of the
Zone of Reasonableness. Our lower
bound calculations begin by
incorporating the results of our upper
bound analysis, which ‘‘provides an
appropriate starting point for
determining the lower bounds of the
zones.’’ We then make reasonable
adjustments to the upper bound figures
to ‘‘minimize our reliance on data that
we find inaccurate or unreliable.’’ We
also adjust the upper bound figures to
remove the costs of those categories of
safety and security measures that we
find generally are not used and useful
in the provision of IPCS.
199. Our lower bound adjustments to
providers’ reported costs entail several
modifications beyond those applied to
reach our upper bound figures.
Nevertheless, we find that several
significant anomalies in providers’
reported data justify these
modifications. Most critically,
providers’ total reported costs across the
industry for 2022 exceed their total
reported revenues by approximately
$219 million. This represents a deficit
amounting to over 16% of the total size
of the IPCS market. This pattern applies
individually as well as in the aggregate,
PO 00000
Frm 00037
Fmt 4701
Sfmt 4700
77279
with half of the providers making up
our database reporting cost-revenue
deficits for 2022, including four of the
top five providers by market share, a
result ‘‘inconsistent with the record
evidence establishing that providers are
able to achieve significant economies of
scale.’’ The existence of such a
disparity, let alone its magnitude,
strongly suggests that reported costs are
inflated, given that rational firms are
profit seeking. Nor have any providers
offered an explanation of why costs
might reasonably exceed revenues at
such a magnitude, either in their
responses to the 2023 Mandatory Data
Collection or otherwise in the record.
Consequently, we find that even the
more impactful modifications that we
adopt to establish our lower bounds
represent reasonable, conservative
adjustments, which help account for
this deficit, in addition to addressing
the other anomalies in the reported data
we detail further below.
200. The construction of the lower
bounds is driven by removing the costs
of those categories of safety and security
measures that we find generally are not
used and useful in the provision of
IPCS. As discussed above, we find that
only two of the seven categories of
safety and security measures identified
in the 2023 Mandatory Data Collection
are generally used and useful in the
provision of IPCS: the Communications
Assistance for Law Enforcement Act
(CALEA) compliance measures and
communication security services. By
incorporating the costs reported for
these service categories into our lower
bounds, we retain a significant portion
of providers’ reported safety and
security costs, i.e., $180 million. This
sum is equivalent to nearly half of
providers’ reported costs of providing
audio and video IPCS (even before
applying the additional adjustments
addressed below). Additionally, as
discussed above, several commenters
contend that none of the costs of
providing safety and security measures
should be incorporated into our rate
caps, arguing that these measures are
not ‘‘used and useful’’ to IPCS
consumers but instead merely ‘‘elective
features,’’ and that incorporating these
costs into our caps effectively requires
consumers to finance the conditions of
their own confinement as a condition of
communicating with loved ones. We
disagree, and find that allowing a
portion of such costs results in just and
reasonable rate caps. Conversely,
incorporating the costs of the five
remaining categories would run counter
to the purposes and language of the
Martha Wright-Reed Act and would fail
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77280
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
to yield just and reasonable rates.
Excluding these costs reduces industrywide total costs by approximately $326
million. By excluding these costs from
our lower bound figures, we ‘‘ensure
that IPCS consumers do not bear the
costs of those safety and security
measures that are not necessary to
provide IPCS.’’
201. Next, we revisit our per-minute
estimate of the IPCS related costs that
facilities incur, and set the estimate of
such costs at zero for the lower bounds.
Again, the lower bounds of our zones of
reasonableness include only those costs
we find are used and useful; with
respect to the costs facilities may incur
to provide IPCS, the limited record and
the lack of quantifying data persuade us
to estimate that there are no facility
costs that we should consider used and
useful in IPCS. Given the likelihood that
the estimate we accepted for the upper
bounds is overstated, we find that using
a lower estimate of these costs at the
lower bounds minimizes reliance on
flawed data while we still provide for
the opportunity to recover costs for
providing IPCS through our process for
determining rate caps. In sum, we
conclude from both the record and the
reported cost data that it is reasonable
to estimate facility costs to be zero in
our lower bounds. And because we do
not permit—let alone require—IPCS
providers to reimburse correctional
facilities for costs those facilities incur
that are not used and useful in the
provision of IPCS and not allowed in
regulated IPCS rates, or to otherwise
provide in-kind site commissions to
correctional facilities, providers will not
face the prospect of paying
unrecoverable site commissions to
correctional facilities that might deny
the providers fair compensation.
202. We do, however, continue to
incorporate the same estimate for TRS
costs in our lower bounds as we did in
our calculation of the upper bounds.
There is nothing in the record that
suggests a range for these costs.
203. We also revise the weighted
average cost of capital (WACC) for
ViaPath and Securus, the only two
companies which elected to estimate an
alternative WACC figure. ViaPath and
Securus adopted a weighted average
cost of capital of 14.86% and 11.43%,
respectively, well above the 9.75% rate
which every other reporting provider
adopted. We find that neither provider
offered sufficient justification to support
their proposed alternatives to the
Commission’s 9.75% WACC. Both
providers rely on several assumptions
which we find lacking and which
consistently favor material
overestimation of the ultimate WACC
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
figure. For example, certain components
of the WACC calculation are supposed
to rely on data assimilated from a
‘‘demonstrably comparable group of
firms.’’ Both providers assembled
groups of firms that we find, on balance,
are not ‘‘demonstrably comparable.’’
Furthermore, ViaPath failed to
document its underlying calculations
and processes with the requisite detail,
rendering its approach nonreplicable—a
flaw that not only undermines the
reliability of such calculations, but also
makes them impossible to validate.
Given these concerns, we find that
Securus and ViaPath failed to meet their
burden of justifying the alternative
WACCs they propose and that the most
reasonable approach for factoring the
WACC into our lower bounds is to
apply the default WACC figure of 9.75%
for both providers. This default 9.75%
WACC is equal to the Commission’s
authorized rate of return for local
exchange carrier services subject to rateof-return on rate base regulation, which
reflects comprehensive analyses of
capital structures and the costs of debt
and equity, and is designed to
compensate these carriers for their cost
of capital.
204. Finally, we adjust Securus’s
reported video cost data downward in
order to address significant and
unresolvable, on the record before us,
issues with those data. Unadjusted,
Securus’s reported video cost data stand
apart from those reported by the rest of
the industry. For example, Securus
reports average video IPCS costs per
minute that exceed the average of the
rest of the industry by anywhere from
100% to over 250%, depending on the
facility tier. Across all facilities,
Securus’s reported per-minute video
IPCS costs are over four times the
average of all other providers: an
anomalous result, given that we would
expect Securus—as one of the two
largest providers in the IPCS market—to
benefit from economies of scale and
scope. Indeed, Securus’s reported cost
data for audio IPCS reflect such
economies of scale—with substantially
lower costs per minute at each tier than
the industry average—which only raises
further concerns with the reliability of
its reported video IPCS costs. This
situation is analogous to the situation
the Commission confronted in 2021; as
the Commission then concluded with
respect to ViaPath, Securus ‘‘should be
better enabled to spread its fixed costs
over a relatively large portfolio of
contracts relative to other providers,’’
but ‘‘[i]nstead, taking [its] reported costs
at face value would imply that it does
not achieve economies of scale.’’
PO 00000
Frm 00038
Fmt 4701
Sfmt 4700
Indeed, Securus’s reported video IPCS
costs are even more out of proportion
than ViaPath’s reported costs examined
in the 2021 ICS Order. This conclusion
is strengthened by comparing Securus’s
and ViaPath’s reported costs to their
respective minutes of use. Instead, we
find that Securus’s reported video IPCS
data likely reflect substantial initial
investment in fixed assets that, while
presumably proportionate to the number
of video IPCS minutes over which this
investment may eventually be spread, is
disproportionate to the number of video
IPCS minutes Securus provided in 2022,
the year covered by the 2023 Mandatory
Data Collection. Incorporating Securus’s
video cost data as reported would
therefore inaccurately skew the
industry’s mean above what it is likely
to be as demand grows significantly
over time. At base, we find that
Securus’s per-minute video IPCS costs
are simply non-representative for the
industry at large. We disagree that it is
appropriate to set rates for the IPCS
industry based on per-minute cost data
so heavily skewed by one provider’s
outsized investment in upfront costs for
a nascent service offering; to do so
would lead to recovery in excess of long
run average costs, failing to meet our
obligations for just and reasonable rates.
205. We conclude that the best way to
address this anomaly is to follow an
approach similar to that adopted in the
2021 ICS Order, and adjust Securus’s
video expenses to align more closely
with their competitors. Specifically, we
set Securus’s video IPCS cost per
minute equal to the weighted average
for all other providers and estimate
Securus’s new annual total expense for
video. We then calculate the percentage
reduction in Securus’s annual total
expenses as a result of this adjustment,
and reduce the cost per-minute data
reported for each facility at which
Securus provides video IPCS by the
same percentage, in order to retain
Securus’s relative allocations of video
expenses. We describe this method in
greater detail and show its application
to Securus’s data in a technical
appendix. In the 2021 ICS Order, the
Commission applied the k-nearest
neighbor method to determine
appropriate substitutes for ViaPath’s
reported cost data. This approach
reasonably preserves the non-cost
information that Securus reported for
the facilities it serves (e.g., average daily
population, facility type, and total video
IPCS minutes of use), while reducing its
anomalous reported cost data to fit the
industry norm. We also considered
removing all of Securus’s data from our
lower bound calculations; however, we
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
find this approach too sweeping because
it would exclude all of Securus’s video
cost data from our analysis. Given the
developing nature of the video IPCS
market, and the role which Securus
plays within it, excluding its data would
create an incomplete picture of the
video IPCS industry. However, we
recognize that this adjustment may still
overestimate Securus’s costs per minute,
particularly given certain attributes of
the nascent market for video IPCS.
These flaws in providers’ video IPCS
cost data (both industry-wide and for
Securus in particular), as well as
evidence suggesting that this market has
significant room for future growth,
confirm that it is appropriate to adopt
interim video rate caps to effectively
account for these conditions.
Conversely, the fact that we do not
implement any adjustments specific to
any provider’s reported audio IPCS
costs further reflects our confidence in
our approach to audio IPCS and our
incrementally greater confidence in the
underlying data, such that we do not
apply the ‘‘interim’’ descriptor to the
rate caps that we adopt for audio IPCS.
In particular, the more established
marketplace for audio IPCS, coupled
with our experience with audio IPCS
data analysis in the past, gives us
sufficient confidence that our overall
rate-setting approach will appropriately
account for the remaining limitations in
those data sufficient to justify rate caps
that will apply indefinitely. Although
our audio IPCS rate caps are in that
sense ‘‘permanent’’ rate caps, they
naturally remain subject to reevaluation
if warranted in the future based on new
developments or new information.
206. Following the aforementioned
steps, we calculate the lower bounds for
audio and video IPCS rate caps for each
tier as follows:
• Prisons: $0.049 per minute for
audio communications and $0.122 per
minute for video communications;
Lower bound
ddrumheller on DSK120RN23PROD with RULES2
Prisons (any ADP) ...................................
Large Jails (1,000+) .................................
Med. Jails (350 to 999) ............................
Small Jails (100 to 349) ...........................
Very Small Jails (0 to 99) ........................
$0.049
0.047
0.061
0.080
0.109
208. We settle on these rate caps
through our examination of the record,
our analyses of the available data, and
on the basis of our extensive regulatory
experience in this market. As discussed
above, the Commission has been
engaged in an ongoing process of
examining and regulating various
aspects of the IPCS market for over a
decade, in the course of which the
Commission has conducted several
notice and comment cycles and
supporting data collections (and
analyses of the data produced therefor).
209. Lower Bounds as an Accurate
Metric for Used and Useful Costs. We
begin by considering the midpoint in
each of the zones of reasonableness, and
whether the record and evidence
suggest the appropriate cap lies above or
below those midpoints. On balance, we
find that just and reasonable rates are
likely below the midpoint of each tier
for both audio and video IPCS. As
discussed above, we find that only those
categories of safety and security costs
included in the lower bounds generally
are truly used and useful in the
provision of IPCS. Setting rate caps at
the midpoint, which would give equal
weight to both upper and lower bounds
VerDate Sep<11>2014
17:27 Sep 19, 2024
• Large Jails: $0.047 per minute for
audio communications and $0.087 per
minute for video communications;
• Medium Jails: $0.061 per minute for
audio communications and $0.102 per
minute for video communications;
• Small Jails: $0.080 per minute for
audio communications and $0.126 per
minute for video communications; and
• Very Small Jails: $0.109 per minute
for audio communications and $0.214
per minute for video communications.
b. Determining Permanent Rate Caps for
Audio IPCS and Interim Rate Caps for
Video IPCS
207. Based on our analysis of the
available information, we find that the
following rate caps within the zones of
reasonableness for each tier of facilities
will provide just and reasonable rates
while ensuring fair compensation:
Audio
(per minute)
Tier
(ADP)
Jkt 262001
Audio rate
caps
Video
(per minute)
Upper bound
$0.06
0.06
0.07
0.09
0.12
$0.107
0.098
0.110
0.121
0.151
would risk incorporating costs that we
find are ultimately highly unlikely to
benefit the ratepayer and, therefore,
produce rates that are not ‘‘just and
reasonable.’’ This risk is nontrivial: the
adjustment made for safety and security
costs accounts for 84% of the overall
reduction in audio costs and 50% of the
overall reduction in video costs between
the upper and lower bounds, such that
even a minor increase above our
midpoint is likely to incorporate a
significant portion of costs we find are
properly excluded from the rate caps.
The record suggests that some providers
may have had difficulty isolating and
properly allocating their safety and
security expenses, a difficulty which
would increase reported IPCS costs
where providers were unable to report
these costs separately. Consequently, we
find that the lower bounds operate as a
more accurate reference point for
providers’ used and useful costs. As
discussed further below, we recognize
that, given the limitations inherent in
the 2023 Mandatory Data Collection and
providers’ responses to the data
collection, our estimate of providers’
safety and security costs may not
PO 00000
Frm 00039
Fmt 4701
77281
Sfmt 4700
Lower bound
$0.122
0.087
0.102
0.126
0.214
Interim video
rate caps
$0.16
0.11
0.12
0.14
0.25
Upper bound
$0.326
0.223
0.216
0.208
0.288
incorporate all costs that are used and
useful in providing IPCS. While we find
that this warrants setting rate caps
marginally above the lower bounds, it
does not fundamentally change our
conclusion here. The substantive
evidence in support of the other
adjustments we make in setting our
lower bounds warrants a similar
conclusion: that we must set rate caps
well below the midpoint if we are to
obtain an accurate estimate of those
costs that are used and useful in
providing IPCS.
210. Unaccounted Factors Which
Support Choosing Lower Rate Caps. Our
calculation of the lower bound left
several other factors unaccounted for,
which collectively reinforce our
decision to set caps below the
midpoints. While we were unable to
precisely quantify the effect of these
factors upon reported industry costs, the
factors nevertheless indicate that
providers’ reported costs are likely
inflated. At the outset, we reiterate that
total industry reported costs exceeded
total industry revenues by $219 million.
Without context, this might indicate
that the IPCS industry at large is
unprofitable, and suggests that rational
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77282
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
firms might exit the market, results
inconsistent with the fact that there is
no evidence that any provider is not an
ongoing viable operation. This is also
inconsistent with the lack of
competition and competitive pressures
that we have documented above. While
some of the observed cost-revenue gap
for the industry can be explained by the
nascent state of the video IPCS
marketplace as providers continue to
develop and deploy video IPCS,
investing heavily in fixed assets needed
to provide those services, this does not
explain the gulf, which strongly
suggests that costs are overstated. As
discussed elsewhere, the high perminute video costs attributable to
nascency do not reflect the efficient
costs of the industry in a steady-state.
211. There are also several factors that
we find are likely to decrease providers’
costs per minute going forward,
suggesting that their reported costs tend
to overestimate future costs. As the
Commission has previously observed,
‘‘[w]hen prices fall, quantity demanded
increases.’’ NSA points out that the
increase in minutes of use will also
result in an increase in ‘‘associated
safety and security costs.’’ Our rate cap
structure accounts for this demanddriven basis of safety and security costs
by basing the recovery of those costs
that we find used and useful in the
provision of IPCS on relative demand,
i.e., via the incorporation of such costs
into the per-minute rate caps. We find
that the increase in communications
generated by the reductions in price
which our rate caps will achieve should
reduce providers’ average costs, other
things being equal. And incorporation of
ancillary service charges into our rate
caps (which, as noted above, should
reduce overall prices) will only amplify
this effect. This effect should be further
augmented to the extent that the growth
in market-wide minutes of use from
2021 to 2022 reflects an independent
trend of increased demand, unrelated to
the impact of the decrease in rates
resulting from the 2021 ICS Order.
Similarly, video IPCS, as a service, is
still in its nascent stages, and it may be
that the reported figures overstate costs
(as providers, in addition to Securus,
make large capital investments that will
be depreciated over time) and
understate demand compared to what
could be expected in a more mature
market. We expect that, as the video
IPCS market approaches a more stable
equilibrium, cost per minute will
decline. The record suggests that the
hardware used by providers in
deploying video IPCS (including both
tablets and network infrastructure) may
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
also be used to provide, or improve the
service for, audio IPCS. Thus, as
providers continue to invest in capital
as part of the expansion of their video
IPCS offerings, these investments will
cross-subsidize costs for audio IPCS,
reducing the net costs of providing
IPCS.
212. Several elements of providers’
responses to the 2023 Mandatory Data
Collection also indicate that providers
accounted for costs in a way that likely
overestimated the costs attributable to
IPCS and ancillary services. For
example, several providers recognize
substantial amounts of goodwill. The
size of these amounts, whether these
amounts are amortized or written down
upon being tested for impairment, and
how these amounts are allocated can
significantly impact reported IPCS costs.
Goodwill represents the difference
between the purchase price of a
company and the company’s fair market
value at the time of purchase. Under the
Generally Accepted Accounting
Principles (GAAP), until 2021, private
companies were required to elect either
to amortize goodwill on a straight-line
basis over a period of up to ten years,
or to conduct annual impairment
testing. The threshold step of the
impairment testing process is a
qualitative assessment of whether the
goodwill carried on a company’s
balance sheet likely exceeds its fair
market value, which takes into account
several factors including
macroeconomic developments and
regulatory changes. Since the goodwill
reported by these providers was first
recorded on their balance sheets, several
events have transpired that would seem
likely to have triggered the impairment
testing process, potentially leading to a
significant write down of these
amounts: most notably, the Covid–19
pandemic, several orders issued in this
proceeding and by certain state
Commissions, and the passage of the
Martha Wright-Reed Act. We question
whether providers’ goodwill figures are
overstated as none recorded any
significant write down of the goodwill
on its balance sheet notwithstanding
these events, and thus we find their
reported goodwill figures unreliable.
These providers left their allocations of
goodwill largely unexplained, which
makes it difficult to assess to what
extent it is properly attributable to IPCS.
The instructions for the 2023 Mandatory
Data Collection require providers to
comply with GAAP in calculating their
goodwill figures attributable to IPCS.
However, GAAP does not necessarily
entail distinguishing between goodwill
attributable to IPCS and IPCS-related
PO 00000
Frm 00040
Fmt 4701
Sfmt 4700
services versus nonregulated services. A
similar principle applies to providers’
incentives to over-allocate costs that
support both video IPCS and
nonregulated services to IPCS,
particularly where the Commission has
no effective means of auditing these
allocations. Providers often offer IPCS
using the same platform as nonregulated
services (and thus the platform costs are
shared between these services). The
instructions to the 2023 Mandatory Data
Collection, despite a high level of
specificity left providers with
substantial leeway in choosing precisely
how to allocate costs that support both
video IPCS and nonregulated services
(e.g., tablet and app development
expenses) between video IPCS (and
ancillary services) and nonregulated
services. For example, providers’ Word
template responses illustrate that they
may have failed to disaggregate platform
development costs, reporting the full
costs of development as a video IPCS
expense even where the platform
provides non-IPCS services. Such
expenses can be significant, and
misallocating them could readily skew
costs toward IPCS. Each of these factors
tend to inflate reported costs—and
therefore suggests our rate caps should
be lowered—for reasons entirely
unrelated to the costs of service.
213. Factors Supporting Rates Above
the Lower Bounds. We also recognize a
series of factors which support setting
the rate caps above our lower bound. As
a general matter, we find it appropriate
to set rates somewhat above the lower
bounds to minimize reliance on the
imperfect data on which we base our
rate caps, which will better ensure that
providers will have the opportunity to
recover the costs of providing IPCS,
consistent with both the equitable
considerations underlying just and
reasonable rates and the fair
compensation mandate of section
276(b)(1)(A). Setting rate caps above the
lower bounds will help to account for
the possibility that the adjustments we
applied to providers’ reported costs to
obtain the lower bound estimates were
too aggressive, to account for the
possibility that aspects of our evaluation
of used and useful costs to provide IPCS
may be inaccurate to some degree, to
account for any inflation not offset by
productivity growth, and to ensure that
providers will be better able to recover
their costs of providing TRS.
214. We also recognize several
specific factors that guide us to select
rate caps above our lower bounds. In
particular, we find that the data
submitted for the costs of providing
safety and security measures are
imperfect and imprecise; we recognize
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
these flaws are likely attributable, at
least in part, to the inevitable
imprecision of the allocations required
to comply with the 2023 Mandatory
Data Collection. For example, providers
generally declined to provide further
detail on the costs attributable to each
individual function. The questions
regarding safety and security costs in
the 2023 Mandatory Data Collection
necessarily reflected some imprecision
for at least two reasons. First, the
Commission was operating with limited
information on this subject, given the
limited detail obtained on this subject in
prior data collections. Second, the
Commission took efforts to avoid
imposing an outsize burden on
providers in reporting specific details of
their safety and security costs,
particularly in light of the comment
record suggesting that providers have
not historically accounted for the costs
of their safety and security measures in
particularly discrete detail. Due to the
aggregation of the submitted data within
each category, we are unable to
meaningfully identify the specific costs
for the various functions within each
safety and security category enumerated
in the data collection. Consequently, we
recognize the possibility that providers
may have misallocated the costs of
providing certain component functions,
causing those costs to be improperly
excluded from the calculation of the
lower bounds. For example, NCIC
{[REDACTED]}. Material that is set off
by double brackets {[ ]} is subject to a
request for confidential treatment and is
redacted from the public version of this
document. Given the limitations in the
data provided, we are unable to
ascertain costs for any of these
individual services. The costs of any
such services, to the extent they exist,
would have been improperly excluded
from the calculation of the lower
bounds. Similarly, we recognize that
facilities may incur certain costs that are
used and useful in the provision of IPCS
but the lack of reliable data in the record
makes it impossible to quantify those
costs with any degree of precision.
Finally, although we exclude one-time
implementation costs which are
inappropriate for inclusion in
permanent rate caps, providers’ ongoing
costs of implementing the Report and
Order may, on balance, exceed their
ongoing savings from, for example, not
having to process site commission
payments. We thus take the
conservative approach of setting our
rates somewhat above the lower bounds
to account for facilities’ used and useful
costs. Additionally, as noted above, the
record and the data make clear that
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
video IPCS is still a developing market.
Given this context, we find it
appropriate to set interim rates above
the lower bounds for video IPCS in
particular, to afford providers flexibility
in responding to the cost and demand
uncertainties inherent to such markets.
As discussed above, we recognize that
the developing nature of the video IPCS
market also suggests that providers’
reported costs per minute may be higher
than similar figures would be in a more
mature market. We account for both of
these implications of the nascent market
in selecting our rate caps.
215. Collectively, these reasons
counsel in favor of setting our rate caps
higher than the lower bounds. But we
find that these factors are generally
outweighed by countervailing factors,
including the providers’ incentive to
overstate their costs and the lack of
evidence that the upper bounds
accurately capture providers’ actual
costs of providing IPCS. Accordingly,
we find it appropriate to set our rate
caps at levels nearer to, but still above,
the lower bounds, to more accurately
account for all of these factors. We
reiterate, however, that even these lower
bounds largely reflect providers’ costs as
reported. The rate caps we set reflect
our reasonable balancing of these
considerations.
216. Commercial Viability and Cost
Recovery. Applying these rate caps to
each provider’s reported minutes of use
allows us to calculate their potential
revenues under these caps. In making
this determination, we refer to
providers’ reported costs, net of those
categories of costs that we identify in
this Order as unrelated to the provision
of IPCS: i.e., site commissions, and the
five excluded categories of safety and
security costs discussed above. The fact
that several states and smaller
jurisdictions have adopted rate caps
equal to or lower than those we adopt
today—with no evidence in the record
indicating that these rates have made
the provision of IPCS unprofitable—
lends further support to our findings as
to providers’ commercial viability.
Potential revenues for eight out of 12
IPCS providers exceed their total
reported costs when excluding site
commissions and safety and security
categories that generally are not used
and useful in the provision of IPCS.
Because our estimates of providers’
average costs are likely overstated, we
find it unlikely that any provider will be
unable to recover its individual average
costs of providing audio and video
IPCS. In the event providers are unable
to recover their used and useful IPCS
costs, providers remain free to seek a
waiver of our rules, a process we revise
PO 00000
Frm 00041
Fmt 4701
Sfmt 4700
77283
herein. These eight firms represent over
90 percent of revenue, 96 percent of
ADP, and 96 percent of billed and
unbilled minutes in the dataset. An
alternate method to estimate potential
revenue under the rate caps sums
reported IPCS and ancillary services for
audio and video by facility, reducing
these values, if applicable to match
potential revenues under the rate caps.
Under this method, the projected
revenues of the same 8 of 12 providers
exceed their costs. In the 2021 ICS
Order, the Commission conducted a
similar analysis at the facility-specific
level. However, in light of the Martha
Wright-Reed Act’s amendments to
section 276, and its authorization to use
both ‘‘industry-wide average costs’’ and
the ‘‘average costs of service of a
communications service provider’’ in
setting rates, we find it more
appropriate to conduct this analysis
across each provider’s full portfolio of
facilities served and, more generally,
across the full IPCS industry.
217. We reiterate that our rate caps
likely overestimate providers’ actual
costs of providing IPCS, for the reasons
set forth above. Additionally, our rate
caps, by lowering prices, will likely
increase communications volumes (and
so decrease average costs per minute), as
will providers’ continuing expansion of
and investment into their video IPCS
services. Taken together, we find that
these reasons demonstrate that this
number is conservative, and that we
likely underestimate the extent to which
providers will be able to recover their
costs under our rate caps. We anticipate
that, over time, revenues for additional
providers will exceed their total actual
costs even beyond those already
identified in our analysis above. Our
analysis of the underlying facility-level
data corroborates this conclusion.
{[REDACTED]} of facilities report perminute revenues net of site
commissions under our rate caps,
meaning that providers will be able to
recover the same per-minute revenues at
these facilities under our rate caps.
Assuming that these facilities are
generally profitable (as profitmaximizing firms are unlikely to bid for
unprofitable contracts), our rate caps
will therefore not undermine providers’
profitability for these facilities.
However, this does not mean that the
remaining facilities would not recover
their costs under our rate caps, as
detailed further in a technical appendix
(for example, per-minute revenues net
of site commissions likely exceed
providers’ per-minute costs net of site
commissions).
218. Finally, we find that our rate
caps do not threaten providers’ financial
E:\FR\FM\20SER2.SGM
20SER2
77284
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
integrity such that they could be
considered confiscatory, even in those
anomalous circumstances where a
provider cannot recover its costs under
our rate caps. Further, we find the fact
that providers negotiate for per-minute
rates lower than our choice of caps to
support our conclusion that these rate
caps do not threaten providers’ financial
integrity. The rate caps are based on
data supplied by providers and
correctional facilities. As the
Commission has previously observed,
neither of these parties ‘‘have incentives
to understate their costs in the context
of a rate proceeding, lest the
Commission adopts rates that are below
cost.’’ Rather, providers had ‘‘every
incentive to represent their [IPCS] costs
fully, and possibly, in some instances,
even to overstate these costs.’’ Further,
our rate caps explicitly account for all
costs of providing IPCS identified in the
record, including costs incurred by
correctional facilities, costs of necessary
safety and security measures, and cost
variations attributable to facility size
and type. Additionally, as the
Commission has repeatedly observed,
the offering of IPCS ‘‘is voluntary on the
part of the [IPCS] providers, who are in
the best position to decide whether to
bid to offer service subject to the
contours of the request for proposal’’;
IPCS providers have no obligation ‘‘to
submit bids or to do so at rates that
would be insufficient to meet the costs
of serving the facility or that result in
unfair compensation.’’
c. Consistency With Statutory
Requirements
219. Section 276(b)(1)(A) of the
Communications Act, as amended by
the Martha Wright-Reed Act, requires
the Commission to ‘‘establish a
compensation plan to ensure that all
payphone service providers are fairly
compensated and all rates and charges
are just and reasonable for completed
intrastate and interstate
communications.’’ We conclude that the
rate caps and waiver process we adopt
in the Report and Order fully satisfy this
mandate. We find that rates will be just
and reasonable if they afford providers
an opportunity to recover their
‘‘prudently incurred investments and
expenses that are ‘used and useful’ in
the provision of the regulated service for
which rates are being set,’’ and upon
reflection of the amendments to section
276, we find that a provider will be
fairly compensated if it is afforded an
opportunity to recover the industry
average of those costs on a companywide basis. Securus argues that the
Martha Wright-Reed Act requires that
each provider be able to recover its
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
average costs. We conclude the Act does
not require such particularized analysis
and reiterate that rate caps based on
costs evaluated on an aggregated basis
generally will satisfy the requirement
that all payphone service providers be
fairly compensated. And as the Public
Interest Parties explain, ‘‘for a service
provider to be ‘fairly compensated’ for
its services would signify that it is paid
an amount that reasonably reflects the
value of the services that it provides.
. . . The standard does not require
every carrier to be profitable, but rather
for rates to be set at a level where
carriers receive compensation that
would allow a well-run and prudent
IPCS carrier to realize a fair rate of
return.’’ Securus argues that our rate
caps fail to ensure that ‘‘all’’ providers
are fairly compensated, threatening the
competitiveness of the IPCS
marketplace, because our industry
average-based rate caps do not account
for costs on a provider-by-provider
basis. We disagree. Securus interprets
the term ‘‘all payphone service
providers’’ in section 276(b)(1)(A) to
mean ‘‘each payphone service
provider,’’ and ignores the fact that fair
compensation does not require the
Commission to adopt rate caps which
allow for the recovery of inefficiently
incurred costs.
220. Across the industry, these rate
caps will allow providers to generate
sufficient revenue from the audio and
video communications they provide (1)
to recover the actual, direct costs of each
communication, and (2) to make a
reasonable contribution to their indirect
costs related to IPCS. Because they
reflect what we have determined are the
industry average costs incurred to
provide IPCS, falling ‘‘squarely within
the zones of reasonableness,’’ the rate
caps we adopt today meet this standard.
Indeed, by setting our rate caps above
our lower bounds, ‘‘[o]ur approach
incorporates assumptions and actions
that lean toward over-recovery of costs.’’
At the same time, these rate caps reflect
our best estimate of providers’ actual
costs of providing IPCS, therefore
limiting the recoverable costs to those
costs ‘‘that directly benefit the
ratepayer’’ and excluding ‘‘any
imprudent, fraudulent, or extravagant
outlays.’’ Direct Action for Rights and
Equality, et al., argue that our caps
‘‘remain far from ‘just and reasonable’
for indigent individuals and
communities,’’ and so ‘‘encourage the
Commission to propose even lower
caps—the lowest possible caps for voice
and video communications. However,
these commenters fail to identify what
rate caps would be more appropriate, or
PO 00000
Frm 00042
Fmt 4701
Sfmt 4700
how such rate caps would both be ‘‘just
and reasonable’’ and ensure that
providers are ‘‘fairly compensated.’’
221. The rate caps we adopt in the
Report and Order also meet the separate
rate-making evaluation requirements set
out by the Martha Wright-Reed Act. The
Act requires that we ‘‘shall consider
costs associated with any safety and
security measures necessary to provide’’
IPCS, as well as the ‘‘differences in
costs’’ of providing IPCS ‘‘by small,
medium, or large facilities or other
characteristics.’’ We disagree that ‘‘small
facility cost[s]’’ are not adequately
captured by our use of industry
averages. Because we set our caps on the
basis of several tiers, costs for facilities
of various sizes are captured at the
respective tier. WCB and OEA directed
providers to explain the nature of their
safety and security costs in their
responses to the 2023 Mandatory Data
Collection, and we sought comment on
these issues in 2023. Having examined
the data and the record on these issues,
we have incorporated into our rate caps
the costs of those safety and security
measures we find are, in fact, used and
useful in the provision of IPCS, as well
as the most critical factors driving the
differences in providers’ costs,
including facility size. Our analysis
therefore takes into account all of the
factors identified in the record and the
data that ‘‘account[ ] for cost
discrepancies among providers,’’ and
addresses certain commenters’ concerns
that our use of average costs ‘‘must take
into account size and type differences.’’
We find that any cost variation that is
not accounted for by the tiers we adopt
(and not reflective of ‘‘imprudent,
fraudulent, or extravagant outlays’’ by
individual providers) is accommodated
by our use of a rate cap structure.
Accordingly, our rate caps meet these
requirements imposed by section 3 of
the Act. The Act also requires that we
‘‘promulgate any regulations necessary’’
to implement the Act ‘‘[n]ot earlier than
18 months and not later than 24 months
after the date of [its] enactment.’’ The
Act was enacted on January 5, 2023,
requiring the adoption of implementing
regulations between July 5, 2024 and
January 5, 2025.
222. Our regulatory approach also
includes measures to ensure that
providers are not forced to bear
unrecoverable costs, through our actions
to prohibit all monetary and in-kind site
commissions at all facilities. Thus,
outside the context of reimbursements
paid to correctional facilities for costs or
expenses that we find used and useful
in the provision of IPCS—and for which
we allow recovery in IPCS rates—
providers will not be permitted or
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
required to make monetary payments or
in-kind contributions to correctional
facilities that arguably could represent
unrecoverable costs at odds with section
276(b)(1)(A)’s fair compensation
mandate. To the extent that providers
voluntarily elect to incur other costs or
expenses that are not used and useful in
the provision of IPCS and subject to
recovery under the rate caps we adopt
(or the associated waiver process), that
voluntary assumption of costs or
expenses does not give rise to a burden
on the Commission to provide for
recovery under the fair compensation
mandate of section 276(b)(1)(A). In the
event that a provider is not afforded the
opportunity to recover its costs for
providing IPCS under our caps, that
provider may seek a waiver of those
caps in accordance with our revised
waiver procedures adopted in the
Report and Order. The combination of
our regulatory actions here, including
our rate caps and our revised waiver
process, consequently will afford all
providers the opportunity to be fairly
compensated at just and reasonable
rates for providing IPCS consistent with
section 276(b)(1)(A). Our approach of
setting rate caps that we find reasonable
based on general conclusions from the
industry as a whole, while leaving
providers the opportunity to make
provider-specific showing that
additional recovery should be
permitted, thus does not ‘‘preclude[ ] a[ ]
‘provider-by-provider’ assessment’’ as
some contend. The regulatory approach
we employ also is consistent with
regulatory approaches the Commission
has employed in setting just and
reasonable rates in other contexts in the
past.
5. Preemption
223. Consistent with section 2(b) of
the Communications Act, as amended
by the Martha Wright-Reed Act, and
section 276(c) of the Communications
Act, we preempt state and local laws
and regulations that require IPCS rates
that exceed the rate caps we adopt
today. We similarly preempt state and
local laws and regulations requiring
separate ancillary service fees. We
decline, however, to preempt state and
local laws and regulations requiring
IPCS rates below the rate caps we adopt
today.
224. It is well established that ‘‘a
federal agency may pre-empt state law
only when and if it is acting within the
scope of its congressionally delegated
authority.’’ Section 276(b)(1)(A) always
has been clear that the Commission has
authority to establish compensation
plans for ‘‘intrastate and interstate’’
payphone calls, and as explained above,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the Martha Wright-Reed Act amended
that provision to clearly establish the
Commission’s authority to ensure just
and reasonable rates for both intrastate
and interstate communications, as
newly expanded under section 276(d).
Above and beyond that, the Martha
Wright-Reed Act added section 276 to
the express exceptions to the general
preservation of state authority in section
2(b) of the Act. Commenters uniformly
agree that this demonstrates Congress’s
intent to grant the Commission
authority to ensure just and reasonable
rates for all intrastate IPCS, firmly
anchoring the Commission’s authority
over such services. Furthermore, while
the Martha Wright-Reed Act decisively
expanded the scope of the
Commission’s authority over IPCS, it
retained the express preemption
provision in section 276(c), which
provides 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.’’
225. We find that state and local laws
and regulations that require IPCS rates
that exceed the rate caps we adopt today
or that require separate ancillary service
charges conflict with the Commission’s
regulations adopted in the Report and
Order to ensure just and reasonable
rates and charges for intrastate and
interstate IPCS and fair compensation
for IPCS providers under section
276(b)(1)(A). Pursuant to section
276(b)(1)(A), as amended by the Martha
Wright-Reed Act, the compensation
plan the Commission adopts today
includes IPCS rate caps carefully
calibrated to ensure that all payphone
service providers are fairly compensated
and all rates and charges are just and
reasonable for all IPCS, including
intrastate. These rate caps are ceilings
limiting what IPCS providers may
charge for intrastate and interstate audio
and video communications. To the
extent state and local laws or
regulations require IPCS rates that
exceed those ceilings, such state and
local laws or regulations would, by
definition, lead to unjust and
unreasonable IPCS rates and charges. In
connection with ancillary service
charges, as noted above, our rate caps
incorporate the costs of providing these
services. Thus, to the extent state or
local laws and regulations require
separate ancillary service charges, such
charges would also be unjust and
unreasonable as they would exceed the
Commission’s IPCS rate caps.
226. Commenters broadly agree that
state and local requirements mandating
IPCS rates and charges that are higher
PO 00000
Frm 00043
Fmt 4701
Sfmt 4700
77285
than the rate caps we adopt today are
subject to preemption. No commenter
argues that the Commission lacks
authority to preempt such state and
local requirements or should not do so.
As noted above, the Communications
Act provides the Commission the
necessary authority to adopt regulations
ensuring just and reasonable rates and
charges for intrastate and interstate
IPCS, which requires preemption of
state and local laws and regulations
requiring IPCS rates that exceed the
Commission’s adopted rate caps or that
require separate ancillary service
charges.
227. Preemption of State
Requirements. When a federal law
contains an express preemption clause,
the courts ‘‘focus on the plain wording
of the clause, which necessarily
contains the best evidence of Congress’
preemptive intent.’’ The Supreme Court
has explained that where a ‘‘statute
‘contains an express pre-emption
clause,’ we do not invoke any
presumption against pre-emption but
instead ‘focus on the plain wording of
the clause, which necessarily contains
the best evidence of Congress’ preemptive intent.’ ’’ Independently, even
assuming arguendo that any preemption
analysis should begin ‘‘with the
assumption that the historic police
powers of the States [are] not to be
superseded by the Federal Act unless
that was the clear and manifest purpose
of Congress’’—particularly where
‘‘Congress has ‘legislated . . . in a field
which the States have traditionally
occupied’ ’’—it nonetheless remains the
case that ‘‘Congress’ intent, of course,
primarily is discerned from the language
of the pre-emption statute and the
‘statutory framework’ surrounding it.’’
228. Here, the express preemption
clause in section 276(c) applies to ‘‘State
requirements’’ to the extent they are
‘‘inconsistent with the Commission’s
regulations.’’ ViaPath argues the
Commission should ‘‘preempt any
existing state rates that are higher than
the Commission’s rates as well as all
future state regulation of voice IPCS.’’
As stated herein, the Report and Order
preempts state regulations which
mandate prices above the caps we set
today. As also discussed, we see no
rationale for disturbing state regulations
which require pricing below our caps,
nor has ViaPath offered any, and we
decline to preempt such regulations at
this time. ViaPath also suggests that the
Commission should preempt state
regulation of all video IPCS because it
has ‘‘historically been treated under the
law as inherently interstate.’’ We are
unpersuaded. Our exercise of our
preemption authority does not require
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77286
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
such a categorical approach. The term
‘‘state requirements’’ in express
preemption provisions has been
interpreted by the Supreme Court more
broadly than terms like ‘‘laws or
regulations.’’ For example, the Court has
concluded that ‘‘[a]bsent other
indication, reference to a State’s
‘requirements’ in an express preemption
provision includes its common-law
duties.’’ By contrast, the Court has
found that references to state ‘‘laws or
regulations’’ preempt only ‘‘positive
enactments.’’ Consistent with this
precedent, we find that the reference to
‘‘state requirements’’ in section 276(c) is
broad enough to reach state laws and
regulations requiring IPCS rates that
exceed the rate caps we adopt today.
229. The surrounding statutory
framework also demonstrates that
preemption of laws and regulations
requiring IPCS rates that exceed the rate
caps we adopt today is authorized by
section 276(c). As noted above, section
276(b)(1)(A) always has been clear that
the Commission has authority to
establish compensation plans for
‘‘intrastate and interstate’’ payphone
calls, and as explained above, the
Martha Wright-Reed Act amended that
provision to clearly establish the
Commission’s authority to ensure just
and reasonable rates for all
communications now encompassed by
section 276(d). In amending section 276,
Congress left the express preemption
provision in section 276(c) unaltered,
revealing Congress’ understanding that
Commission regulations implementing
the full scope of amended section
276(b)(1)(A) would be subject to that
express preemption provision.
230. This point was further
emphasized by the amendment of
section 2(b) of the Communications Act
to expressly exempt section 276 from
the preservation of state authority over
intrastate communications under that
provision. In the Martha Wright-Reed
Act, Congress expressly considered the
potential effect of that statute on other
laws, and only disclaimed the intent to
‘‘modify or affect any’’ state or local law
‘‘to require telephone service or
advanced communications services at a
State or local prison, jail, or detention
facility or prohibit the implementation
of any safety and security measures
related to such services at such
facilities.’’ That narrow express
preservation of existing law is not
implicated by our preemption here. The
statutory context provided by section
276 as a whole, coupled with the
Martha Wright-Reed Act, thus reinforces
our understanding of the scope of
preemption encompassed by section
276(c).
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
231. Relatedly, we conclude that
preemption is consistent with section 4
of the Martha Wright-Reed Act, which
states that nothing in that Act ‘‘shall be
construed to modify or affect any
Federal, State, or local law to require
telephone service or advanced
communications services at a State or
local prison, jail, or detention facility or
prohibit the implementation of any
safety and security measures related to
such services at such facilities.’’ We
preempt only those state laws and
regulations that require IPCS rates that
exceed the rate caps we adopt today or
that require separate ancillary service
charges. To the extent federal, state, or
local laws or regulations require IPCS to
be provided to incarcerated people at
state or local correctional facilities, such
laws and regulations are not preempted
by our actions here. Similarly, we do
not prohibit the implementation of any
safety and security measures related to
IPCS at any state or local correctional
facility. As we explain above, section 4
of the Martha Wright-Reed Act is ‘‘not
intended to interfere with any
correctional official’s decision on
whether to implement any type of safety
and security measure that the official
desires in conjunction with audio or
video communications services.’’
Consistent with that interpretation, here
we preempt state laws and regulations
requiring IPCS rate caps that exceed the
Commission’s adopted caps or that
require separate ancillary service
charges, a pre-emption that we conclude
is necessary to achieve the statutory
requirements of section 276(b)(1)(A) to
ensure just and reasonable rates and
charges for IPCS consumers and fair
compensation for providers.
Correctional officials remain free to
implement desired safety and security
measures.
232. Preemption of Local
Requirements. Our analysis of our
preemptive authority is somewhat
different when it comes to local
requirements that may require IPCS
rates and charges that exceed the
Commission’s rate caps because section
276(c) does not expressly reference
‘‘local’’ laws or regulations.
Nonetheless, we conclude that
principles of conflict preemption allow
us to also preempt such local laws and
regulations. As an initial matter, we
note that ‘‘for the purposes of the
Supremacy Clause, the constitutionality
of local ordinances is analyzed in the
same way as that of statewide laws.’’
Thus, relevant precedent concerning
state law is equally applicable to local
law.
233. As a threshold matter, we find
that local laws and regulations that
PO 00000
Frm 00044
Fmt 4701
Sfmt 4700
require IPCS rates and charges that
exceed the Commission’s IPCS rate caps
or that require separate ancillary service
charges stand as an obstacle to our
regulation of IPCS. We explained above
the conflict that occurs as a result of
state requirements, and that conclusion
is not altered if the requirements
originate instead at the local level.
Consequently, under section
276(b)(1)(A) coupled with standard
conflict preemption principles we
preempt local laws and regulations that
require IPCS rates and charges
exceeding the Commission’s caps or that
require separate ancillary service
charges.
234. Our conflict preemption
determination is bolstered by the
enactment of the Martha Wright-Reed
Act, which modified the
Communications Act in a manner that
we see as intended to establish a
uniform system of federal regulation for
all IPCS under section 276(b)(1)(A). As
explained above, the Martha WrightReed Act was enacted against the
regulatory backdrop of—and in response
to—the GTL v. FCC decision, where the
D.C. Circuit found that the Commission
had unreasonably relied on the ‘‘just
and reasonable’’ standard of section
201(b) when implementing the
differently-worded language of section
276. Insofar as that left the Commission
to rely on section 201(b) to ensure IPCS
rates and charges were not too high, it
generally precluded the Commission
from addressing excessive intrastate
IPCS rates. The Martha Wright-Reed
Act’s amendment of section 276(b)(1)(A)
gave the Commission clear authority to
ensure just and reasonable rates under
that provision, which always has
encompassed both intrastate and
interstate services. Given the legal and
regulatory backdrop, that persuades us
that Congress envisioned a uniform
system of federal regulation as far as
IPCS rates and charges are concerned.
235. Scope of Preemption. At this
time, our preemption extends only to
those state and local laws and
regulations that require IPCS rates and
charges exceeding the Commission’s
rate caps or that require separate
ancillary service charges. The record is
mixed as to whether the Commission
should or must also preempt state and
local laws or regulations that set IPCS
rates and charges that are below the
Commission’s caps. For example, Pay
Tel and Securus assert that the
Commission must preempt these lower
rates. They argue that the Commission
must adopt rates for intrastate and
interstate IPCS that ensure fair
compensation for IPCS providers, and
state rate caps that are below the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Commission’s caps are necessarily
‘‘inconsistent’’ with the Commission’s
regulation of IPCS since such caps
would be below cost and thus not afford
fair compensation. These commenters
assert that below-cost intrastate rate
caps are problematic insofar as they may
require ‘‘increases in federal rates to
defray costs which are not being
recovered at the state level’’ and lead to
cross-subsidization between states
because ‘‘[i]f consumers in one state pay
less than the rate the Commission has
determined is necessary to fairly
compensate providers . . . consumers
in other states may end up making a
larger contribution to the company’s
costs.’’ They add that below-cost
intrastate rates ‘‘may lessen the
willingness of providers to bid for
facilities, depress market participation
(particularly by smaller, regional
providers), and reduce investment in
new technologies’’ while also raising the
‘‘very real possibility of confiscatory
rates,’’ particularly if rates are set using
a zone of reasonableness approach. We
address concerns about confiscatory
rates in connection with our zone of
reasonableness analysis above.
236. On the other hand, state
commenters and public interest
advocates argue that the Commission is
not required to preempt state rates that
are lower than the Commission’s caps.
The California Public Utilities
Commission explains that ‘‘states and
local governments are in a better
position to assess what a reasonable rate
would be for the provision of services in
their geographic locations.’’ The Public
Interest Parties assert that state and local
laws that require intrastate rates to be
lower than the Commission’s rate caps
are not inconsistent with the
Commission’s regulations ‘‘because any
intrastate rates lower than the
Commission’s rate cap would not
violate any specific provision of the
Communications Act and lower rates
are consistent with the underlying
purpose of the MWRA.’’ Both the
California Public Utilities Commission
and the Public Interest Parties explain
that to the extent the Commission’s rate
caps act as ceilings and not floors, the
Commission should not preempt lower
state rates. We agree. State IPCS rate
proceedings are designed to look at cost
data and market conditions unique to
that particular state, a much smaller
geographic area and a much more
disaggregated basis than the ratemaking
analysis the Commission was required
to undertake on a national level which
covered the entire country. It is entirely
possible that cost data reflecting a
smaller subset of the national footprint
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
of facilities targeted to only certain state
specific facilities could yield fair
compensation for providers operating in
that state at those facilities at lower rates
than reflected by the Commission’s rate
caps adopted today.
237. We decline to preempt state or
local laws and regulations requiring
rates lower than the caps we adopt
today. As the California Public Utilities
Commission explains, the argument
from Securus and Pay Tel that lower
intrastate rates is necessarily
inconsistent with the Commission’s
regulation of IPCS is ‘‘question-begging’’
as it ‘‘assumes that the FCC’s regulations
do not allow rates below the federal
cap.’’ The rate caps we adopt today
establish ceilings, rather than floors that
inherently would limit potential state
action. These rate caps, which are based
on provider-supplied data,
appropriately balance the need to
ensure just and reasonable rates and
charges for IPCS consumers based on
industry averages and fair compensation
for IPCS providers. More generally, it is
well established that rates can be lawful
if they fall within a zone of
reasonableness. Thus, a state’s intrastate
rate cap might fall within that zone even
if it is lower than the Commission’s
specified rate caps.
238. We also find that state or local
requirements that mandate intrastate
IPCS rates or charges below the
Commission’s caps are consistent with
the ‘‘underlying purpose of the [Martha
Wright-Reed Act]’’ to fundamentally
reform the IPCS marketplace and
eliminate, to the greatest extent
possible, decades of exorbitant rates for
communications services used and paid
for by incarcerated people and their
loved ones. Finally, this approach is
also consistent with the policy the
Commission established when it
considered this issue in the 2021 ICS
Order. In light of considerable statelevel reform efforts, the Commission
decided that the ‘‘federal requirements
will operate as ceilings’’ for
jurisdictionally mixed calling services.
239. Should an IPCS provider claim
that a state or local requirement leads to
unfair compensation, that provider may
seek appropriate relief in the relevant
state or locality or from the Commission
by submitting a petition for preemption.
240. Our approach to state or local
requirements mandating lower IPCS
rates is consistent with the legal and
regulatory backdrop here. When the
Commission undertook regulation of
intrastate inmate calling services rates
in the 2015 ICS Order, the Commission
adopted an analogous approach to
preemption—it declined requests to
treat state or local requirements
PO 00000
Frm 00045
Fmt 4701
Sfmt 4700
77287
mandating rates below the FCC’s caps as
inherently in conflict with the
Communications Act or Commission
rules, instead leaving providers to seek
relief on a case-by-case basis should
they be able to demonstrate in a
particular scenario that they were not
being fairly compensated. Although the
D.C. Circuit in GTL subsequently
rejected the Commission’s claim of
statutory authority to cap intrastate
calling services rates under section 276,
the Martha Wright-Reed Act made clear
the Commission’s authority to ensure
just and reasonable rates for intrastate
IPCS under section 276(b)(1)(A). Yet
Congress left section 276(c)’s express
preemption of conflicting state laws
unchanged relative to the provision in
place when the Commission acted in
2015. Nor does the amended text of
section 276(b)(1)(A) expressly mandate
the exclusivity of the Commission’s
implementing rules. Thus, in acting
consistent with the general approach to
preemption adopted in 2015, we are
acting consistent with the Commission’s
historical regulatory approach, which
we see no intent by Congress to displace
through the Martha Wright-Reed Act.
241. Finally, we decline to adopt
Securus’s proposal that the Commission
preempt lower state rates unless a state
can ‘‘make a showing to the
Commission that IPCS costs in the state
justify a lower rate and that the lower
rate satisfies the statutory standard that
providers are fairly compensated and
that rates and charges are just and
reasonable.’’ We also decline to pursue
Securus’s recommendation that ‘‘states
should be required to adopt a waiver
process.’’ We see no basis on which we
could mandate that states or localities
adopt such a process and Securus offers
none. Under this proposal, ‘‘a lower
state rate cap would not take effect until
the Commission first finds that the state
had met its burden of demonstrating
that the lower rate complies with the
statutory standard.’’ Securus’s proposal
would have us begin from the premise
that lower state rates and charges are
necessarily inconsistent with the
Commission’s regulations and preempt
them. In order to reverse this
preemption decision, the onus would
then be on the state or locality to justify
why its lower rates or charges are
consistent with the statutory standard in
that they provide fair compensation for
providers and just and reasonable rates
for consumers. We decline to make a
determination ex ante that state and
local rates and charges below our caps
are inconsistent with a fair
compensation plan. As we explain
above, we do not find lower state rates
E:\FR\FM\20SER2.SGM
20SER2
77288
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
to be inconsistent with the
Commission’s IPCS regulations.
6. Site Commissions
ddrumheller on DSK120RN23PROD with RULES2
a. Introduction
242. We next comprehensively reform
the Commission’s treatment of site
commission payments associated with
IPCS to implement the requirements of
the Martha Wright-Reed Act. Our
actions today continue to allow IPCS
provider reimbursement of correctional
facilities for costs used and useful in
providing IPCS while decoupling other
IPCS provider payments to correctional
facilities, which constitutes what we
henceforth refer to as ‘‘site
commissions.’’ We then end the practice
of paying site commissions associated
with IPCS.
243. In 2021, the Commission
highlighted the difficulties in
accounting for and isolating the portion
of site commission payments, if any,
that may be used and useful in the
provision of audio calling services for
incarcerated people. The Commission
sought comment on whether it should
prohibit providers from entering into
contracts requiring the payment of site
commissions and whether it should
preempt state or local laws and
regulations that require such payments.
The Commission also questioned the
propriety of allowing providers to
recover the costs of their site
commission payments from consumers.
244. After carefully considering the
record in these proceedings and the
Martha Wright-Reed Act, we find that
site commission payments—payments
from IPCS providers to correctional
facilities that are not used and useful in
the provision of IPCS—are
fundamentally incompatible with our
mandate under section 276(b)(1)(A), as
amended, to ensure both just and
reasonable IPCS rates and charges for
IPCS consumers and providers as well
as fair compensation for IPCS providers.
Considering the requirements of the
Martha Wright-Reed Act and the
demonstrated negative effects of site
commission payments, particularly with
regard to consumer affordability, we
conclude that we must eliminate site
commissions associated with IPCS.
245. Accordingly, we prohibit all
IPCS providers from paying site
commissions of any kind associated
with intrastate, interstate, international,
jurisdictionally mixed, and
jurisdictionally indeterminate audio and
video IPCS, including all monetary and
in-kind site commissions, at all
facilities. To implement this
prohibition, and consistent with the
record and the Commission’s proposals
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
in 2021, we preempt all state and local
laws and regulations requiring or
allowing IPCS providers to pay site
commissions associated with IPCS and
prohibit IPCS providers from entering
into contracts requiring or allowing
them to pay site commissions associated
with IPCS. Compliance with our reforms
associated with site commission
payments will be required by the dates
specified in Section III.H below.
246. Although we eliminate site
commissions associated with IPCS, we
do not deny correctional facilities the
opportunity to be reimbursed by IPCS
providers for any costs the correctional
facilities incur that are used and useful
in the provision of IPCS. The IPCS rate
caps we adopt today reflect, based on
the record before us, all of the used and
useful costs incurred in the provision of
IPCS regardless of whether such costs
are incurred by IPCS providers or
correctional facilities. Consistent with
that record, the rate caps account for
used and useful costs associated with
IPCS providers’ provision of IPCS
incurred by correctional facilities.
Therefore, we permit IPCS providers to
reimburse correctional facilities for the
used and useful costs the facilities incur
to enable the provision of IPCS. We
therefore find without merit the
National Sheriffs’ Association’s
argument that ‘‘[t]he proposals to
arbitrarily disallow legitimate costs and
preclude their recovery is contrary to
the Communications Act requirement to
set reasonable rates, the Commission’s
statutory mandate to promote access to
ICS, and court precedent.’’ The
Commission has identified the used and
useful costs, including a measure of
facility costs for safety and security
measures, in the rate caps it adopts
today. The Commission is thus fully in
accordance with ‘‘rate-making
principles that require the allowance of
legitimate costs in rates.’’ We also find
the National Sheriffs’ Association’s
argument that ‘‘[f]acility compensation
through rates also is consistent with the
Commission’s precedent that costs
should be recovered from the cost
causer’’ to be moot given our allowance
for facility-related cost recovery in our
rate caps. We are unpersuaded by the
National Sheriffs’ Association’s
assertion that the Commission has
‘‘found that the calling and called party
are the cost causer and the beneficiary
of calls’’ such that the costs of calls
should be recovered from the
ratepayers. The Commission made that
cost-causation determination in the
context of certain intercarrier
compensation reforms, not with respect
to IPCS, which occurs in a
PO 00000
Frm 00046
Fmt 4701
Sfmt 4700
fundamentally different context where
the users of the service have no choice
in the provider they use—and the
choice of provider can significantly
affect the cost of service. In any case,
costs that are not used and useful in the
provision of IPCS are not caused by
IPCS communications, and thus neither
party to such communications
reasonably can be seen as causing those
costs through the use of IPCS. To the
extent a correctional facility performs a
function that is used and useful in the
provision of IPCS under the standards
set forth in the Report and Order, the
IPCS provider may reimburse the
correctional facility for that function’s
cost. As we explain above, any costs
that facilities incur to provide ‘‘safety
and security measures necessary’’ for
the provision of IPCS are also used and
useful in the provision of IPCS. This
reimbursement therefore encompasses
any costs a correctional facility incurs in
performing safety and security measure
functions that are necessary for the
provision of IPCS. We emphasize,
however, that the cost recovery we
permit extends only to costs that the
Commission has classified as used and
useful in the Report and Order. Costs
that the Commission has not found to be
used and useful in the provision of IPCS
may not be recovered from IPCS
providers through revenues under the
rate caps we establish. And under no
circumstances may reimbursement
result in IPCS consumers being charged
more than the rate caps we adopt today.
b. Background
(i) Site Commissions and IPCS
247. IPCS connect incarcerated people
to their families, loved ones, clergy, and
counsel. But unlike communications
services offered to the general public
outside of the correctional environment,
IPCS providers have monopoly power in
the facilities they serve. As the
Commission has explained:
[I]ncarcerated people have no choice in the
selection of their calling services provider.
The authorities responsible for prisons or
jails typically negotiate with the providers of
[IPCS]. Once the facility makes its choice—
often resulting in contracts with providers
lasting several years into the future—
incarcerated people in such facilities have no
means to switch to another provider, even if
the chosen provider raises rates, imposes
additional fees, adopts unreasonable terms
and conditions for use of the service or offers
inferior service.
248. In many cases, correctional
authorities award contracts for IPCS
‘‘based in part on what portion of [IPCS]
revenues a provider has offered to share
with the facility.’’ These payments,
historically referred to as ‘‘site
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
commissions,’’ are salient components
of the exclusive contracts between
correctional authorities and IPCS
providers. Site commissions broadly
include ‘‘any form of monetary
payment, in-kind payment requirement,
gift, exchange of services or goods, fee,
technology allowance, product or the
like.’’ They can be expressed ‘‘in a
variety of ways, including as per-call or
per-minute charges, a percentage of
revenue or a flat fee.’’
249. Site commissions can arise in
several different scenarios. First, a state
or local statute or regulation ‘‘that
operate[s] independently of the [IPCS]
contract process’’ may mandate ‘‘site
commission payments at a specified
level.’’ Second, ‘‘there can be situations
where the correctional institution’s
request for proposal, or the like, asks
bidders to agree to pay site commissions
at a specified level.’’ And third, there
may be circumstances where no state or
local law or regulation ‘‘compels site
commission payments and the
correctional institution soliciting bids
does not request any specific payment
(even if it indicates that offers to pay
site commissions will influence bid
selection).’’ Some state laws permit—
but do not require—correctional
institutions to collect site commissions
while others may require site
commissions but do not specify any
particular level. In these circumstances,
IPCS providers and correctional
institutions may negotiate the amount of
the site commission.
250. In general, site commissions
provide benefits to correctional
authorities and the IPCS providers
bidding on IPCS contracts. By providing
a mechanism for correctional authorities
to share in some portion of IPCS
revenues, site commission payments
allow correctional authorities to
‘‘benefit financially from the contract
that they sign with their [IPCS]
provider.’’ And ‘‘by proposing higher
prices’’ during the bidding process,
IPCS providers ‘‘can pay more in
commissions to the state, thereby
increasing the probability with which
they win the contract.’’ It is due to these
market dynamics that site commissions
have sometimes been described as
‘‘kickbacks’’ or ‘‘legal bribes.’’
251. Regardless of how they arise, site
commissions, as historically
understood, ‘‘fund a wide and disparate
range of activities.’’ In some cases, site
commission revenues may be used to
fund programs related to ‘‘education
and reintegration into society.’’ ‘‘In
certain jurisdictions, state law requires
that revenue from site commission
payments, or a portion thereof, be
deposited into welfare funds or the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
state’s general treasury. In other cases,
site commission payments may be used
to ‘‘defray costs of maintaining carceral
facilities.’’ Because site commission
revenues can include many different
types of payments, they may also be
offered for the benefit of correctional
officials, through, for example,
campaign contributions or ‘‘payments to
influential sheriff-led associations’’ or
through in-kind payments. In one
instance, correctional officials were
offered cruises as part of IPCS contracts.
Finally, site commissions—as that term
historically was understood—may also
serve, in part, to ‘‘compensate
correctional facilities for the costs they
reasonably incur in the provision of
[IPCS].’’ Those facility-related costs may
encompass various safety, security,
surveillance, and administrative tasks.
These functions and activities may be
performed by correctional authorities or
IPCS providers, depending on their
mutually agreed arrangements.
252. Regardless of the purposes for
which site commissions may be used,
they historically have been ‘‘a
significant driver of rates’’ that
incarcerated people and their loved
ones pay. Specifically, site commissions
have exerted and continue to exert
‘‘upward pressure’’ on rates. By
imposing higher rates, IPCS providers
historically could afford to pay more in
commissions to correctional authorities.
Thus, providers ultimately recovered
the costs of their site commission
payments through the rates they charged
consumers. This means that
incarcerated people and their loved
ones, who cannot choose their own
IPCS providers, were forced to bear the
financial burden imposed by site
commissions in the rates they pay,
thereby subsidizing the tasks or
activities that correctional officials or, in
some cases, state law, dictate associated
with the use of site commission
revenue. As explained above, this
subsidization could have extended to
tasks and activities that have nothing to
with enabling communication between
incarcerated people and their loved
ones, including funding ‘‘inmate welfare
programs . . . salaries and benefits of
correctional facilities, states’ general
revenue funds, and personnel training.’’
253. These historical consumer costs
could be substantial. Site commissions
historically could account for ‘‘33
percent of the out-of-pocket consumer
call charges on average’’ and rising ‘‘to
more than 70 percent in some
jurisdictions.’’ Collectively, as set forth
in a technical appendix, providers
reported total industry site commissions
of over $446 million. Relatedly, in
jurisdictions that have eliminated site
PO 00000
Frm 00047
Fmt 4701
Sfmt 4700
77289
commissions, IPCS rates have
‘‘decreased significantly.’’ In short, there
is ‘‘no question’’ that the site
commissions result in higher consumer
prices.
254. At the same time, site
commissions have distorted the IPCS
marketplace. Each correctional facility
has ‘‘a single provider of [IPCS] that
operates as a monopolist within that
facility,’’ and very often ‘‘correctional
authorities award the monopoly
franchise for [IPCS] based in part on
what portion of inmate calling services
revenues a provider has offered to share
with the facility.’’ Such scenarios can
create ‘‘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).’’ Thus, as
a matter of historical practice,
‘‘providers bidding for a facility’s
monopoly franchise compete to offer the
highest site commission payments,’’
instead of competing on ‘‘service-based,
competitive market factors’’ such as
price or quality of service that would
ultimately benefit incarcerated people
and their loved ones. While reverse
competition occurs in other contexts, it
has been ‘‘at its most pernicious in the
inmate phone service context because
buyers not only do not have a choice of
service providers, they also have strong
reasons not to forego using the service
entirely.’’ What is more, once a contract
is signed, ‘‘the terms of the contract are
set in stone’’ in that they need not be
renegotiated by the IPCS provider
absent a change in law and, because the
provider then has monopoly power, it
‘‘[does] not have to worry about’’
lowering its prices ‘‘in order to stay
competitive.’’ As a result in such
scenarios, ‘‘at any given time, the endusers are not necessarily benefitting
from the lowest possible’’ IPCS prices.
(ii) The Commission’s Regulation of
Recovery for Site Commission Payments
255. The Commission has historically
viewed site commission payments as ‘‘a
division of locational monopoly profit’’
and not a cost of providing payphone
service. This characterization led the
Commission to exclude site commission
costs from the costs it used to set
interim calling services rate caps in the
2013 ICS Order and permanent rate caps
in the 2015 ICS Order. Over time,
however, the Commission recognized
that ‘‘some portion of [site commission
payments] may be attributable to
legitimate facility costs.’’ Thus, in the
2016 ICS Reconsideration Order (81 FR
62818, September 13, 2016), the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77290
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Commission explained that ‘‘some
facilities likely incur costs that are
directly related to the provision of ICS,’’
and determined that ‘‘it is reasonable for
those facilities to expect ICS providers
to compensate them for those costs . . .
[as] a legitimate cost of ICS that should
be accounted for in [the] rate cap
calculations.’’ As a result, the
Commission reconsidered its decision to
entirely exclude site commission
payments from its 2015 rate caps and
adopted additives to those caps ‘‘to
account for claims that certain
correctional facility costs reflected in
site commission payments are directly
and reasonably related to the provision
of inmate calling services.’’
256. In the 2017 GTL v. FCC opinion,
the D.C. Circuit held that the ‘‘wholesale
exclusion of site commission payments
from the FCC’s cost calculus’’ in the
2015 ICS Order was ‘‘devoid of reasoned
decision-making and thus arbitrary and
capricious.’’ The court was unpersuaded
by the Commission’s assertion that site
commissions have nothing to do with
the provision of calling services,
reasoning that ‘‘[i]n some instances,
commissions are mandated by state
statute’’ while in others ‘‘commissions
[are] required by state correctional
institutions as a condition of doing
business with ICS providers.’’ The court
also explained that because the
Commission acknowledged that some
portion of some providers’ site
commission payments might represent
‘‘legitimate’’ costs of providing inmate
calling services, the Commission could
not ‘‘categorically exclude[ ] site
commissions and then set rate caps at
below cost.’’ ‘‘Ignoring costs that the
Commission acknowledges to be
legitimate,’’ the court explained, ‘‘is
implausible.’’ But the court left it to the
Commission on remand to determine
‘‘which portions of site commissions
might be directly related to the
provision of ICS and therefore
legitimate, and which are not.’’
257. In 2020, the Commission
proposed rate reform of the inmate
calling services then within its
jurisdiction with the 2020 ICS Notice.
Based on extensive analysis of the data
the Commission collected in the Second
Mandatory Data Collection, the
Commission proposed to lower the
interstate rate caps to $0.14 per minute
for debit, prepaid, and collect calls from
prisons and $0.16 per minute for debit,
prepaid, and collect calls from jails.
Consistent with the D.C. Circuit’s
opinion in GTL v. FCC, the Commission
also proposed to include ‘‘an allowance
for site commission payments in the
interstate rate caps to the extent those
payments represent legitimate
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
correctional facility costs that are
directly related to the provision of
inmate calling services.’’ The
Commission proposed an allowance of
$0.02 per minute, which reflected the
Commission’s ‘‘analysis of the costs
correctional facilities incur that are
directly related to providing inmate
calling services and that the facilities
recover from inmate calling services
providers as reflected by comparing
provider cost data for facilities with and
without site commission requirements.’’
Recognizing that facility costs for
contracts covering only jails with low
average daily populations might exceed
the proposed $0.02, the Commission
invited comment on adopting higher
allowances for correctional facility costs
for such contracts if the record
supported such allowances.
(iii) 2021 Rate Structure Reforms
258. In the 2021 ICS Order, the
Commission adopted interim inmate
calling services rate caps that included
an allowance for site commission
payments ‘‘consistent with section 276’s
fair compensation provision’’ as
interpreted by the D.C. Circuit’s
decision in GTL v. FCC. In relevant part,
the Commission adopted two facilityrelated rate components reflecting
different types of site commissions for
prisons and larger jails: legally
mandated site commission payments
that providers are obligated to pay
under laws or regulations; and
contractually prescribed site
commission payments that providers
agree, by contract, to make. The
Commission did not adopt facilityrelated rate components for jails with
average daily populations below 1,000,
which remained subject to the existing
$0.21 per-minute total rate cap. This
outcome reflected, in part, record
arguments suggesting that ‘‘legitimate
facility costs related to [IPCS] may
indeed be higher for smaller facilities.’’
Because commenters ‘‘did not provide
sufficient evidence to enable [the
Commission] to quantify any such
costs,’’ the Commission sought
comment on facility costs for smaller
jails as part of 2021. The Commission
permitted providers to recover the costs
of their legally mandated site
commission payments, without any
markup, as an additive to the interim
interstate per-minute rate caps up to a
total rate cap of $0.21 per minute.
Where site commission payments
resulted from contractual obligations or
negotiations between providers and
correctional officials, the Commission
permitted providers to recover no more
than $0.02 per minute for prisons and
larger jails.
PO 00000
Frm 00048
Fmt 4701
Sfmt 4700
259. In evaluating cost recovery for
site commissions in the 2021 ICS Order,
the Commission emphasized that full
recovery of site commission payments is
not required by the D.C. Circuit’s
decision in GTL v. FCC, given that the
court made clear that the Commission
may ‘‘assess on remand which portions
of site commissions might be directly
related to the provision of [inmate
calling services] and therefore
legitimate, and which are not.’’ The
Commission reasoned that full recovery
of site commissions ‘‘cannot be
reconciled with [the Commission’s]
statutory duty to ensure that
incarcerated people and the people with
whom they speak are charged ‘just and
reasonable’ rates for inmate calling
services.’’ At the same time, the
Commission concluded that it could
not, consistent with the record before it
at that time and ‘‘current law and
policy’’ treat all site commissions solely
as a division of locational monopoly
profit and therefore deny any recovery
of such payments.
260. The Commission relied on its
section 201(b) authority over interstate
and international rates and charges in
the 2021 ICS Order in analyzing cost
recovery separately for legally mandated
and contractually prescribed site
commissions. As to legally mandated
site commissions payments, the
Commission recognized them ‘‘as a cost
that providers must incur to provide
calling services, consistent with section
276’s fair compensation provision.’’
Thus, the Commission found legally
mandated site commission payments
‘‘to be used and useful in the provision
of interstate and international inmate
calling services at least as long as the
Commission continues to permit
providers of interstate and international
inmate calling services to continue to
make these site commission payments.’’
261. The Commission next found that
contractually prescribed site
commission payments ‘‘reflect[ ] not
only correctional officials’ discretion as
to whether to request site commission
payments . . . but also providers’
voluntary decisions to offer payments to
facilities that are mutually beneficial in
the course of the bidding and
subsequent contracting process.’’ The
Commission also recognized that
contractually prescribed site
commissions payments that ‘‘simply
compensate a correctional institution for
the costs (if any) an institution incurs to
enable interstate and international
inmate calling services’’ were
‘‘prudently incurred expenses used and
useful in the provision of interstate and
international inmate calling services.’’
Contractually prescribed site
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
commission payments were deemed not
recoverable, however, ‘‘insofar as they
exceed[ed] the level needed to
compensate a correctional institution for
the costs (if any) an institution incurs to
enable interstate and international
inmate calling services.’’
262. Ultimately, the Commission
arrived at the $0.02 per minute
allowance for prisons and larger jails on
two independent bases. First, it
estimated ‘‘the portion of site
commissions that are legitimately
related to inmate calling services’’ based
on a comparison of per-minute costs for
facilities that receive site commission
payments and those that do not from
cost and site commission data that
providers reported in response to the
Second Mandatory Data Collection. The
Commission first used this methodology
in Appendix E of the 2020 ICS Notice
but updated it with corrected cost data
in Appendix B of the 2021 ICS Order.
Because those data ‘‘incorporated no
correctional facility-provided cost data,’’
the Commission’s methodology
‘‘reflected its reasoned judgment as to
the best estimation of legitimate facility
costs related to inmate calling services
in the absence of cost data from
correctional facilities themselves.’’ The
Commission agreed with commenters
that it is ‘‘difficult to disentangle which
part of the site commission payment
goes towards reasonable facility costs
and which portion is due to the transfer
of market power.’’ The Commission
emphasized that its own analysis
‘‘reflect[ed] even lower estimates for
legitimate facility costs’’ but declined to
adopt an allowance lower than $0.02 at
that time.
263. Second, data from a survey of
facilities’ inmate calling services costs
that the National Sheriffs’ Association
had conducted in 2015 independently
supported the $0.02 allowance for
correctional facility costs at prisons and
larger jails. Though the Commission had
previously relied on these data in the
absence of any other data, the
Commission expressed continuing
concern about their reliability because
‘‘some of the facilities included in the
. . . survey [had] report[ed] an
exceedingly high number of hours of
correctional facility officials’ time
compared to most other reporting
facilities.’’ The Commission flagged one
facility with an average daily population
of approximately 1,500, which reported
approximately 694 total hours per week
on inmate calling services-related
activities, which was ‘‘roughly 400
hours more than the next highest facility
with an equal or lower average daily
population.’’ The Commission did ‘‘not
find these data credible when
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
comparing them to data of similarly
sized reporting facilities that have no
incentive to under-report their hours or
costs.’’ Notwithstanding these issues,
the Commission concluded that they
were ‘‘the best data available from
correctional facility representatives’’
that allowed the Commission to balance
the ‘‘objectives to ensure just and
reasonable rates under section 201 of
the Act with the requirement to ensure
fair compensation under section 276 of
the Act.’’ The Commission therefore
relied on the data from the National
Sheriffs’ Association survey in
addressing providers’ site commissions
payments to prisons and larger jails. The
Commission found, however, that the
survey data for jails having average
daily populations of fewer than 1,000
incarcerated people ‘‘varied far too
widely to comfortably estimate any
values’’ for correctional facility costs
‘‘that would withstand scrutiny today’’
(i.e., in May 2021). The Commission
circumscribed its interim treatment of
site commissions based on the record
and regulatory backdrop at that time,
and confirmed that nothing in the 2021
ICS Order would limit its ‘‘ability, on a
more complete record and with
sufficient notice, to reconsider [its]
treatment of site commission
payments.’’
264. In 2021, adopted at the same
time as the 2021 ICS Order, the
Commission sought comment on how
and where to draw the line between
legitimate and illegitimate portions of
site commission payments and asked for
specific data concerning legitimate
portions of those costs, if any.
Additionally, the Commission asked
commenters to provide methodologies
that the Commission could use to
identify legitimate site commission
expenses. The Commission also sought
comment on ‘‘prohibiting providers
from entering into any contract
requiring the payment of contractually
prescribed site commissions for
interstate and international calling
services’’ and ‘‘preempting state or local
laws that impose [legally mandated site
commission] payments on interstate or
international calling services.’’
(iv) The Martha Wright-Reed Act and
2023 Request for Comment
265. On December 22, 2022, Congress
passed the Martha Wright-Reed Act,
which was signed into law on January
5, 2023. Just slightly over two months
later, the Commission adopted 2023, in
which it sought comment on several
aspects of the effect of the Martha
Wright-Reed Act on the Commission’s
consideration of site commission
payments. First, as a general matter, the
PO 00000
Frm 00049
Fmt 4701
Sfmt 4700
77291
Commission incorporated its prior
questions on site commissions from
2021 into 2023. In particular, the
Commission asked whether its
ratemaking calculations should
‘‘include providers’ site commission
payments only to the extent, if any, that
they compensate facilities for used and
useful costs that the facilities
themselves incur.’’ Second, the
Commission requested comment on
how the dual requirements of section
276(b)(1)(A) to ensure just and
reasonable rates and charges for IPCS
consumers and providers and fair
compensation for IPCS providers should
affect its treatment of site commission
payments including any decision on
whether to preempt state and local laws
and regulations that impose site
commissions. And third, the
Commission invited comment ‘‘on the
relationship, if any, between safety and
security measures and site commission
payments.’’
(v) Other Trends in the Treatment of
Site Commissions
266. Broadly, the ‘‘structure of the
market for providing communications
services to incarcerated persons has
changed and continues to change.’’ This
is particularly true in the case of site
commissions. Indeed, ‘‘[t]here is already
a growing trend to eliminate the use of
site commissions.’’ One IPCS provider
explains that it offers ‘‘commission-less
options in its proposals to correctional
authorities’’ to ‘‘improve affordability
for consumers.’’ In addition to providerled efforts, ‘‘a number of states have
banned site commissions’’ or have made
IPCS free to end users driven, at least in
part, by the goal of protecting
incarcerated people and their loved
ones ‘‘from detrimental practices by
private corporations providing goods
and services to people confined in
carceral facilities.’’ States that have
eliminated site commissions include
California, Michigan, Missouri,
Nebraska, New Mexico, New York,
Rhode Island, and South Carolina. And
five states—Massachusetts, Connecticut,
California, Minnesota, and Colorado
have now enacted legislation providing
for free communications services for
incarcerated people, meaning that IPCS
consumers now pay nothing for IPCS
site commissions. More recently, other
states have introduced legislation
requiring IPCS to be provided free of
charge to incarcerated people and their
loved ones or have eliminated site
commission payments. This is also true
for some municipalities, for example,
San Diego and San Francisco. Together,
these trends point to a decreasing
E:\FR\FM\20SER2.SGM
20SER2
77292
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
reliance on site commission payments
in providing IPCS.
c. Discussion
ddrumheller on DSK120RN23PROD with RULES2
(i) Overview of Our Approach to Site
Commissions
267. In the Report and Order, we only
permit IPCS provider payments to
correctional facilities for costs used and
useful in the provision of IPCS. As Pay
Tel explains, facility cost recovery and
site commissions are ‘‘two separate (but
currently interrelated) issues.’’ Pay Tel
emphasizes that ‘‘site commission
payments often ultimately provide
facilities with necessary cost recovery
for their role in administering ICS’’ but
that ‘‘does not mean site commission
payments are necessary for—i.e., the
only means of ensuring—facility cost
recovery.’’ We agree. Decoupling the
conceptually distinct category of IPCS
provider payments to correctional
facilities for costs used and useful in the
provision of IPCS from other payments
IPCS providers have been asked—or
required—to make to correctional
facilities (i.e., ‘‘site commissions’’)
illuminates how those markedly
different categories of IPCS provider
payments can and should be treated
under our new regulatory approach.
268. We find that our rate caps will
allow for IPCS provider reimbursements
to correctional facilities for costs used
and useful in the provision of regulated
IPCS. In particular, we enable facilities
to be reimbursed for these costs by
including them in our rate caps and
allowing providers to compensate
facilities for them. At this time, we do
not see the need to amend the
Commission’s definition of site
commission to carve out the
reimbursement we permit. By adopting
a mechanism that enables correctional
facility cost recovery extending only to
used and useful costs reimbursed by
IPCS providers, we ensure that
correctional facilities will not be
without recourse to recover their
legitimate costs from providers within
the bounds of the rate caps we adopt
today. We also ensure that providers’
obligations to reimburse correctional
facilities will be limited to the used and
useful costs associated with the
provision of IPCS that they actually
incur.
269. We take a different approach
with respect to site commissions. Today
we conclude, based on the record and
consistent with precedent, that site
commission payments are not used and
useful in the provision of IPCS and must
therefore be excluded from the
calculation of the Commission’s rate
caps. We further prohibit site
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
commission payments to all facilities to
the extent those payments are associated
with intrastate, interstate, international,
jurisdictionally mixed, and
jurisdictionally indeterminate audio and
video IPCS, including all monetary and
in-kind site commissions. To effectuate
this prohibition we take two actions
consistent with 2021 and 2023. First, we
preempt state and local laws and
regulations allowing or requiring site
commission payments for IPCS. And
second, we prohibit IPCS providers
from entering into contracts allowing or
requiring the payment of site
commissions. We emphasize that the
actions we take today in eliminating site
commissions apply to all correctional
institutions: prisons, larger jails, smaller
jails, and other types of correctional
institutions.
(ii) Site Commissions Are Not Used and
Useful in the Provision of IPCS
270. Based on the record and core
ratemaking precedent, we find that site
commission payments are not used and
useful in the provision of IPCS and must
therefore be excluded from our rate and
fee cap calculations. As discussed
below, site commissions, whether
legally mandated or contractually
prescribed, do not satisfy any prong of
the used and useful framework as that
framework is applied by courts and the
Commission.
271. Securus argues that the used and
useful framework ‘‘is unsuited for the
purpose of determining cost recovery for
site commission payments’’ and is not
an ‘‘appropriate basis’’ to restrict or
eliminate site commissions. Securus
explains that the used and useful
framework ‘‘potentially leads to
unreasonable outcomes where the entity
that sets the requirements for service,
the correctional institution, is different
from the ‘‘rate payer.’’ In Securus’s
view, correctional facilities, not
incarcerated people, are the ‘‘direct
customer[s]’’ of IPCS and, as such,
prescribe the ‘‘features and functions’’
they deem used and useful to provide
the service. It is thus ‘‘untenable,’’
Securus argues, to suggest that all
features a correctional facility deems
used and useful must ‘‘inure directly to
the benefit of each caller.’’
272. While it is true that correctional
authorities contract with IPCS providers
for the provision of IPCS in their
facilities, we are not persuaded by
Securus’s arguments. IPCS are used and
paid for by incarcerated people and
their loved ones. In implementing
section 276(b)(1)(A)’s just and
reasonable and fair compensation
standards, ‘‘[t]he Commission’s duty is
to protect IPCS ratepayers and ensure
PO 00000
Frm 00050
Fmt 4701
Sfmt 4700
reasonable compensation for providers,
not to protect the interests and demands
of non-ratepaying stakeholders.’’ And it
is through the used and useful
framework that the Commission
balances the ‘‘equitable principle that
public utilities must be compensated for
the use of their property in providing
service to the public’’ with the
‘‘[e]qually central . . . equitable
principle that the ratepayers may not
fairly be forced to pay a return except
on investment which can be shown
directly to benefit them.’’ It is therefore
entirely appropriate to evaluate site
commission payments under the used
and useful framework.
273. To the extent Securus is
concerned that applying the used and
useful framework will somehow
interfere with the discretion of
correctional officials, we find those
concerns overstated. We do not limit the
ability of a correctional authority to
‘‘prescribe[ ] the features and functions
it deems necessary to provide the
service in its facilities.’’ Correctional
authorities remain free to contract for
the ‘‘equipment, network facilities,
operations and services’’ they deem
appropriate. All we do here is evaluate
site commission payments under longstanding principles the Commission
uses in evaluating whether rates and
charges are just and reasonable and
conclude, based on the record
developed over many years in these
proceedings, that those payments are
not used and useful in the provision of
IPCS and must therefore be excluded
from our rate cap calculations. Doing so
ensures that incarcerated people and
their loved ones ‘‘bear only legitimate
costs of providing service to them.’’
274. Securus also contends that the
‘‘used and useful’’ framework is
‘‘inapplicable to site commissions for
the further reason that it is a feature of
rate of return regulation’’ that is
‘‘unsuited for the purpose of
determining cost recovery for site
commission payments.’’ Securus
explains that the role of the ‘‘used and
useful’’ framework under rate-of-return
regulation is ‘‘to determine the rate base,
defined as net investment in plant and
equipment’’ and ‘‘plays no role in
determining appropriate operating
expenses, such as site commissions,’’
which may be recovered ‘‘unless totally
unrelated to the provision of service or
excessive.’’ Securus claims that because
the Commission has opted to use ‘‘a
form of price cap,’’ rather than ‘‘rate of
return regulation to set incarcerated
communications services rate caps,’’ the
used and useful framework should be
inapplicable. And even in the context of
rate-of-return regulation, Securus asserts
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
that regulators are not required to apply
the used and useful framework and may
instead use the prudent investment rule.
275. We find Securus’s arguments in
this regard unpersuasive. First, as the
Commission has explained, it has ‘‘not
only . . . applied [the used and useful
framework] in the context of carriers
operating under rate-of-return
regulation, but rates set on that basis
were also used as the foundation for the
price caps.’’ Indeed, the Commission’s
price cap regime for incumbent local
exchange carriers started with rates
‘‘generated by the conventional cost-ofservice formula,’’ an approach that has
become, over time, the prevailing
methodology to determine the rate base
and allowable expenses under rate-ofreturn regulation. Setting price caps
therefore involves some measure of the
cost of service that is the hallmark of
rate-of-return regulation.
Fundamentally, setting IPCS rates is an
‘‘exercise in cost-based ratemaking’’ that
‘‘requires a determination of the costs
providers incur in providing those
services.’’ And the used and useful
framework is the standard the
Commission has historically applied to
‘‘exclude[ ] certain impermissible costs
from any rate methodology.’’
Accordingly, we conclude that we may
apply the used and useful framework to
providers’ site commission payments.
276. Second, the used and useful
standard, and the just and reasonable
ratemaking standard more broadly, are
fundamentally concerned with
balancing the interests of ratepayers
with the need to compensate public
utilities for the use of their property.
The policy of allowing only investments
and expenses which are ‘‘used and
useful’’ to be recovered from ratepayers
‘‘is intended to ensure that current
ratepayers bear only legitimate costs of
providing service to them.’’ The concept
thus is not inherently limited to
physical plant owned by the provider
and irrelevant to expenses. The
Commission’s previous employment of
the ‘‘used and useful’’ framework to
evaluate recovery of site commissions
through just and reasonable rates as part
of the regulatory backdrop to the Martha
Wright-Reed Act’s addition of the ‘‘just
and reasonable’’ mandate to section
276(b)(1)(A) reinforces our conclusion
that it is reasonable for us to rely on that
approach again here. And the standard
is necessarily flexible, allowing the
Commission to analyze ‘‘[t]he particular
facts of each case . . . in order to
determine what part of a utility’s
investment is used and useful.’’ We rely
on this flexibility to ensure that IPCS
consumers bear ‘‘only legitimate costs of
providing service to them.’’ Importantly,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
however, we do not rely solely on the
used and useful framework to eliminate
site commissions. Instead, our actions
stem principally from the requirements
of section 276(b)(1)(A), as amended by
the Martha Wright-Reed Act, that we
ensure just and reasonable rates and
charges for consumers and providers
and fair compensation for providers. In
doing so, we do as Securus requests,
which is to exercise ‘‘the full degree of
[our] authority’’ to prohibit site
commission payments entirely.
(a) Used and Useful Assessment
277. In the 2021 ICS Order, the
Commission conducted a used and
useful analysis applying a prudent
investment standard and ultimately
permitted providers to pass through to
consumers, on an interim basis, the full
amount of their legally mandated site
commission payments up to a total
interstate rate cap of $0.21 per minute
and no more than $0.02 per minute for
their contractually prescribed site
commission payments for prisons and
larger jails. In conducting its cost
recovery analysis under the used and
useful framework, the Commission
explained that it did not consider site
commission payments of any kind to
‘‘involve[e] the use of provider property
and investment in a manner analogous
to the circumstances addressed in [its]
provider-based rate caps.’’ The
Commission reasoned that the site
commission payments, or the portions
thereof, that it allowed providers to
recover on an interim basis were ‘‘akin
to exogenous costs.’’ Separately, the
Commission independently justified its
decision ‘‘as a matter of the flexibility
provided by the ‘just and reasonable’
framework of section 201(b) of the
[Communications] Act under the
particular circumstances.’’ The
Commission concluded that allowing
only a pass-through of site commission
expenses it found to be prudently
incurred and used and useful
‘‘adequately accounts for the use of
providers’ property . . . balanced with
the equitable interest of customers of
interstate and international inmate
calling services.’’
278. Our approach here differs from
the Commission’s 2021 interim reforms
in which the Commission concluded
that a portion of some site commission
payments was used and useful in the
provision of calling services, and
therefore compensable for purposes of
the used and useful analysis. For one,
we separate out from our definition of
‘‘site commissions’’ the reimbursement
IPCS providers make to correctional
facilities for costs those facilities incur
that we have already found to be used
PO 00000
Frm 00051
Fmt 4701
Sfmt 4700
77293
and useful in the provision of IPCS
under our analysis above. The question
then turns to whether site commissions
as defined here separately are used and
useful in the provision of IPCS and thus
separately compensable under the just
and reasonable standard. We conclude
that they are not. Thus, in developing
the IPCS rate caps we adopt today, we
have identified, based on the record, all
of the used and useful costs and
expenses in the provision of intrastate,
interstate, international, and
jurisdictionally mixed audio and video
IPCS, regardless of whether those costs
are incurred by IPCS providers or
correctional facilities. Accordingly, we
have considered, consistent with this
element of the used and useful
framework, what is required to
compensate IPCS providers for offering
IPCS while safeguarding the interests of
incarcerated people and their loved
ones under the just and reasonable
mandate.
279. On the record now before us and
considering the requirements of section
276(b)(1)(A), as amended by the Martha
Wright-Reed Act, we find that, to the
extent they exceed the costs correctional
institutions prudently incur in the
provision of IPCS, site commissions,
whether contractually prescribed or
legally mandated, are not used and
useful in the provision of IPCS because
there is no indication that such
payments benefit IPCS consumers. To
begin with, the Commission predicated
its 2021 interim reforms on the
assumption that a portion of providers’
site commission payments provided a
benefit to IPCS consumers and was thus
recoverable ‘‘at least as long as the
Commission continues to permit
providers . . . to make site commission
payments.’’ That is, the Commission
assumed, on the record before it, that
some portion of providers’ site
commission payments compensated
correctional facilities for the costs they
incurred in enabling the provision of
ICS. But even in the 2021 ICS Order, the
Commission concluded that site
commission payments above that level
were not used and useful and/or not
prudently incurred and should not be
subject to recovery in order to ensure
just and reasonable rates. Nothing in the
record here persuades us to change our
mind in that respect, and we thus again
conclude that such costs are not used
and useful and/or prudently incurred,
and thus not recoverable through just
and reasonable rates. And, as discussed
below, absent any viable data that
demonstrate any portion of a site
commission in this context provides
compensable costs, we find that site
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77294
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
commissions are in their entirety not
recoverable.
280. As to those site commission
payments the Commission did allow to
be recovered under its used and useful
and prudent investment analysis in the
2021 ICS Order, the Commission relied,
in part, on the National Sheriffs’
Association 2015 survey as the best
available proxy for those costs and
limited recovery for contractually
prescribed site commission payments to
no more than $0.02 per minute at
prisons and larger jails, even though the
Commission’s independent estimates of
the portion of site commissions that
were legitimately related to inmate
calling services supported ‘‘even lower
potential estimates for legitimate facility
costs.’’ With respect to legally mandated
site commission payments, the
Commission assumed, on the record
before it at that time, that legally
mandated site commission payments at
the level required by the relevant statute
or regulation were used and useful. We
address certain particularities with
respect to legally mandated site
commissions below. The Commission
chose to rely on the National Sheriffs’
Association data—despite significant
reservations about their accuracy—in
large part due to ‘‘the absence of any
other facility-provided data’’ in the
record. Rather than delay much-needed
relief, the Commission chose to rely on
the ‘‘best data available’’ to estimate
facility costs used and useful in the
provision of communications services
‘‘until more updated facility-related data
are submitted into the record.’’ As
discussed above, however, no
commenter or other stakeholder has
provided updated facility-related cost
data sufficient to enable the
Commission to isolate the portions of
providers’ site commission payments, if
any, that actually compensate
correctional facilities for the costs they
incur in the provision of IPCS.
Accordingly, we decline to rely on those
data here to allow additional recovery
for providers’ site commission
payments.
281. Putting aside the lack of reliable
data, the record persuades us that site
commission payments primarily
compensate correctional facilities for
the transfer of their market power over
IPCS at a given facility or are used by
providers to ‘‘overcome . . .
competitors to become the exclusive
provider of multiple services, including
nonregulated services at a correctional
facility’’ while providing no clear
benefit to IPCS consumers. In the 2021
ICS Order, the Commission identified a
collective action problem ‘‘that makes
providers, as a group, reluctant to limit
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
or omit site commission payments in
their bids for fear that competitors fail
to do so, and that correctional
institutions will select competitors that
do offer site commissions (or offer
higher site commissions) instead.’’
Securus confirms that ‘‘[t]he problem
identified by the Commission is real,’’
suggesting that providers cannot
‘‘unilaterally end the established
practice of many local governments in
seeking site commission payments in
their negotiations with providers.’’
Thus, it appears that ‘‘when providers
offer site commission payments as part
of their bids, they do so to gain a benefit
for themselves, rather than to satisfy a
formal precondition of access to a
correctional facility.’’
282. Consider, for example, monetary
site commission payments. In certain
cases, contract language requiring the
payment of monetary site commissions
demonstrates that such payments
compensate correctional facilities ‘‘for
the transfer of their market power over
[IPCS] to the [IPCS] provider’’ and
cannot be shown to directly benefit
consumers of incarcerated people’s
communications services. For example,
the language in a contract between
CenturyLink Public Communications,
Inc., a former provider of incarcerated
people’s communications services, and
Milwaukee County, Wisconsin, explains
that ‘‘[i]n consideration of being granted
the right and obligation to operate the
Inmate Pay Telephone Concession at the
Correctional Facilities, CenturyLink
shall pay County a commission rate
equal to 70.1% of the Gross Revenue
generated from completed or accepted
calls made at the CenturyLink pay
phones covered by this agreement.’’ In
another case, the contract calls for the
payment of a percentage of gross
revenue ‘‘in return for the exclusive
right to install and operate the [p]hones
in the premises.’’
283. Provisions like these illustrate
that the site commission payments
benefit the facilities insofar as they
receive compensation for allowing the
provider (instead of the correctional
authority) to offer communications
services at the facility or facilities
covered by the contract. And, the site
commission payments benefit the
providers, which receive the exclusive
right to offer communication services
for the duration of the contract. There is
nothing in these contracts, or the record
generally, suggesting that such site
commission payments are conditioned
on, for example, improved service
quality or lower prices for consumers of
calling services or compensating the
correctional facility for any costs it
incurs in allowing IPCS. Thus, the
PO 00000
Frm 00052
Fmt 4701
Sfmt 4700
benefits flow first to the facility and
then to the provider, ‘‘all to the
detriment of [IPCS] customers.’’
284. Record evidence submitted by
Pay Tel also demonstrates the way in
which site commissions may be used by
IPCS providers to ‘‘increase the
probability with which they win [a]
contract.’’ Pay Tel provides
documentation relating to recent
requests for proposals ‘‘in which Pay
Tel competed but ultimately lost due to
site commission payment amounts.’’
Pay Tel notes that, in two instances, it
ranked higher in each scoring category
except for the site commission category
but still lost the bids. Indeed, the
winning bidders had proposed to pay
site commissions of 90% and 88.8% on
all calls. Thus, Pay Tel at least plausibly
lost those bids on the basis of its site
commission offerings indicating that
‘‘providers may feel compelled to offer
site commissions in order to remain
competitive’’ rather than to compensate
correctional facilities for the costs, if
any, they incur in making IPCS
available. To the extent these site
commissions were, in fact, related to
any legitimate IPCS costs, we would
have expected to see similar offers from
the other bidders. But we do not.
Instead, it appears that the winning
bidder used its site commission
offerings in this context ‘‘to overcome
its competitors’’ in the bidding process.
285. The National Sheriffs’
Association offers a different
explanation of Pay Tel’s data. It claims
that a high site commission percentage
does not ‘‘necessarily mean the
commission payment exceeds the cost
to the facility of allowing ICS or that the
rate charged for ICS service at the
facility is unreasonable.’’ In its view,
Pay Tel’s experience ‘‘may show that
the cost to serve the specific facility is
below the Commission’s nationwide
average rate and the dollar amount of
the revenues is significant enough that
ICS providers are willing to offer a
greater percentage of their profits to
capture that specific contract.’’ Or, it
‘‘may also reflect the fact that ICS
providers are not required to bid on
facility contracts or provide ICS at all
facilities and . . . can boost profit by
declining to provide service in higher
cost facilities.’’ These alternative
explanations are speculative and
otherwise unsupported by record
evidence. In contrast, Pay Tel provides
concrete evidence, including bid
evaluation forms used by the
correctional authorities, that portrays a
compelling, first-hand account of how
site commissions factored into the bid
evaluation processes. We find it highly
persuasive that Pay Tel obtained higher
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
scores across all bid scoring categories
except site commissions but still lost
those contracts. We believe these
outcomes clearly illustrate ‘‘the current
incentive for facilities to award
contracts based primarily (or, at times,
exclusively) on site commission
offerings’’ rather than on the basis of
price or quality of service, to the
detriment of IPCS consumers.
286. In-kind payments also
demonstrate that site commissions
primarily benefit correctional
authorities and IPCS providers but not
IPCS consumers, as they are often
wholly unrelated to the provision of
IPCS. This is because in-kind payments
from the IPCS provider can take varied
forms, including software packages,
{[REDACTED]} campaign contributions,
‘‘payments to influential sheriff-led
associations,’’ or anything else of value
to the correctional authority. One
provider describes the fluid nature of inkind site commissions noting that they
‘‘{[REDACTED]}.’’ For example, Smart
Communications offered, among other
inducements, an ‘‘Annual Technology
Training Summit Cruise’’ as part of its
proposal to a sheriff’s office. Those
cruises had a value of over $84,000 over
the contract term. Because these in-kind
contributions are often offered at low or
no cost to the correctional authority,
they clearly benefit the correctional
authority, which receives something of
value from the IPCS provider. And such
inducements also benefit the IPCS
provider to the extent they allow that
provider to surpass its competitors in
the bidding process. In contrast, there is
nothing in the record showing the
extent, if any, to which these types of
in-kind site commissions, whatever
form they may take, are used and useful
in the provision of IPCS and thus
benefit incarcerated people and other
ratepayers. Indeed, no commenter has
suggested as such. Rather, such
payments are more accurately
understood as inducements ‘‘designed
to influence a correctional authority’s
selection of its monopoly service
provider.’’ This is the kind of ‘‘excess
investment’’ that should not be
recoverable from ratepayers under the
used and useful framework.
287. We acknowledge, however, that
some portion of providers’ site
commission payments, whether
contractually prescribed or legally
mandated, may be used for socially
beneficial purposes when viewed from
a broader perspective. These may
include ‘‘inmate health and welfare
programs such as rehabilitation and
educational programs; programs to
assist inmates once they are released;
law libraries; recreation supplies;
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
alcohol and drug treatment programs;
transportation vouchers for inmates
being released from custody; or other
activities.’’ These causes, while worthy,
are unrelated to the provision of IPCS
and as such IPCS consumers do not bear
the responsibility to bear their costs
under the Communications Act. As
commenters have observed, such
programs could instead ‘‘be paid for
from general revenue sources’’ or other
state or local funding, enabling state and
local governments to continue to
advance the objectives of ‘‘reducing
recidivism and providing basic care’’
consistent with their existing efforts in
those areas. We agree. And as the
Commission has observed, the
Communications Act ‘‘does not provide
a mechanism for funding social welfare
programs or other costs unrelated to the
provision of ICS, no matter how
successful or worthy.’’ As such, we do
not dispute the notion that ‘‘there are
many factors that may be indicative of
a legitimate penological interest’’ such
as ‘‘crime interdiction, deterrence,
inmate management and . . . revenue
generation’’ but the costs associated
with pursuing these interests are not
costs used and useful in the provision
of communications services for
incarcerated people under the
Communications Act. Were we to find
such non-IPCS costs used and useful in
the provision of IPCS and therefore
recoverable from consumers, we would
be unable to ensure just and reasonable
IPCS rates and charges consistent with
section 276(b)(1)(A), as amended by the
Martha Wright-Reed Act. We recognize
that in GTL v. FCC, the D.C. Circuit
concluded that ‘‘it does not matter that
the states may use commissions for
purposes unrelated to the activities of
correctional facilities.’’ But, as we
explain below, the GTL decision was
premised on IPCS providers actually
paying site commissions as a condition
of doing business. In contrast, our
actions today prohibit the payment of
site commissions, thus eliminating the
concern expressed by the D.C. Circuit
about the use of site commissions as a
precondition to providing service in
correctional facilities. We therefore
conclude that we may, under these
circumstances, consider how site
commissions are used.
288. While we conclude that site
commissions, whether legally mandated
or contractually prescribed, are not used
and useful because they do not benefit
consumers, some further discussion of
legally mandated site commissions in
this context is necessary in light of the
Commission’s 2021 interim reforms. In
the 2021 ICS Order, the Commission
PO 00000
Frm 00053
Fmt 4701
Sfmt 4700
77295
assumed that legally mandated site
commission payments that ‘‘exceed the
level that simply compensates a
correctional institution for any costs the
institution incurs to enable interstate
and international inmate calling
service’’ were prudent expenses because
there was ‘‘no evidence that either the
provider or the correctional institution
could agree to a lower amount (or no
site commissions at all) based on the
current record and current law.’’ Thus,
the Commission concluded, on an
interim basis, that legally mandated site
commissions ‘‘at the level required by
the relevant statute or rule to be used
and useful in the provision of interstate
and international inmate calling
services at least as long as the
Commission continues to permit
providers . . . to continue to make these
site commission payments.’’ The
Commission made no determination
regarding how legally mandated site
commissions may ‘‘impact [the
Commission’s] ability to ensure just and
reasonable . . . rates.’’ The Commission
also emphasized that ‘‘this [was] a close
question’’ and that the record developed
in response to 2021 ‘‘may persuade [the
Commission] to reach a different
conclusion’’ in addressing site
commissions on a permanent basis. The
Commission’s interim approach to
legally mandated site commission
payments in the 2021 ICS Order thus
turned in significant part on the legal
backdrop that the Commission took as
given at that time, namely: (1) legally
mandated site commissions could not
be avoided; and (2) IPCS providers were
allowed to make those payments.
289. We no longer believe our used
and useful analysis should proceed
based on those assumptions. For one,
the Martha Wright-Reed Act added to
section 276(b)(1)(A) the requirement
that the Commission’s compensation
plan ‘‘ensure that . . . all rates and
charges’’ for intrastate and interstate
IPCS are ‘‘just and reasonable,’’ putting
that legal mandate on equal footing with
the preexisting ‘‘fair compensation’’
requirement and bringing it within the
purview of the express preemption
provision in section 276(c). In addition,
the Commission sought comment and
developed a record on whether to
prohibit site commission payments and
preempt contrary state and local laws
and regulations in light of that updated
legal authority. Because we conclude
that we are substantively and
procedurally in a position to prohibit
site commission payments and preempt
contrary state and local laws and
regulations, the better course is to
approach the used and useful analysis
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77296
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
without the presumption of inevitability
that so significantly influenced the
Commission’s prior assessment of
legally mandated site commission
payments.
290. Nothing in the record persuades
us that legally mandated site
commissions ‘‘reflect[ ] the actual costs
associated with the provision of [IPCS],
separate and apart from the legal
compulsion for facilities to collect it.’’
Particularly given that we no longer find
it warranted to assume the existence or
continuation of such a legal
requirement, we agree that ‘‘[t]here is
nothing with respect to [a] statutory
obligation that makes such a charge
‘used and useful’ under the
Commission’s obligation to ensure rates
are just and reasonable.’’ We also see no
evidence or support for the notion that
legally mandated site commissions flow
through to benefits in IPCS such that
users of those services should be
expected to bear those costs under a
used and useful analysis. This is
particularly true where state or local law
or regulation requires site commission
payments as a percentage of gross (i.e.,
total) revenue for a group of services
that is not restricted to IPCS. It is
difficult to see how a site commission
based on such a formula reflects any
relation to the underlying costs of
providing IPCS. But, on the record
before us, it is similarly difficult to tie
other types of site commissions, such as
those framed as per-call charges, to any
legitimate IPCS costs. In sum, the record
is devoid of any indication that legally
mandated site commissions are set at
levels that are designed simply to
reimburse correctional facilities for the
costs they incur in making IPCS
available such that their payment would
affect the provision of IPCS and that
IPCS customers reasonably should bear
those costs.
291. If anything, the record suggests
that legally mandated site commission
payments support activities that quite
clearly do not enable the provision of
the underlying communication services
that IPCS consumers pay for. In
Tennessee, for example, per-call fees are
required to be remitted by the provider
to the state treasurer on a quarterly basis
‘‘and credited to a special account in the
state general fund designated as the
local correctional officer training fund
to be used exclusively to fund
certification training provided through
the institute for local correctional
personnel within the state.’’ It is
difficult to see how funding officer
certification training enables or
improves the communications services
incarcerated people and their loved
ones use. Indeed, the training of
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
correctional officials is plainly
necessary to the general operation of a
correctional institution separate and
apart from the presence or absence of
IPCS. And yet, at least under Tennessee
law, IPCS consumers are subsidizing
these efforts. To allow such costs to be
recovered from those consumers would
be ‘‘at odds with well-established
principles of ratemaking’’ and directly
‘‘impact our ability to ensure just and
reasonable . . . rates.’’ Thus, given the
state of the record and the requirements
of the Martha Wright-Reed Act, we
conclude that because there is no
indication that legally mandated site
commission payments provide any
benefit to incarcerated people and their
loved ones who are the customers of
IPCS, they are not used and useful in
the provision of IPCS.
292. In concluding that legally
mandated site commissions are not used
and useful in the provision of IPCS, we
are mindful of the Commission’s
observations in the 2021 ICS Order, that
in jurisdictions that require legally
mandated site commission payments,
‘‘facilities have no immediate ability to
entertain offers from providers that wish
to supply a facility without paying the
site commission demanded’’ and that
‘‘absent further legislative process to
amend the government statute, facilities
would appear to have to forgo making
[communication] services available.’’
Rather than taking that as a given, today
we exercise our authority to preempt
state and local laws and regulations that
require IPCS providers to pay site
commissions associated with IPCS.
Such preemption will alleviate the
concerns the Commission expressed in
the 2021 ICS Order as to both IPCS
providers and the correctional facilities
themselves. Thus, both providers and
correctional facilities may pursue
commission-free contracts without
running afoul of contrary legal
mandates.
(b) Prudent Expenditure Analysis
293. Finally, because the forgoing
analysis demonstrates that site
commissions are not used and useful in
the provision of IPCS, that is sufficient
to exclude them from just and
reasonable rates. At times, the
Commission might elect to consider the
prudence of investments and expenses
as an independent alternative to its
decision that particular costs are not
used and useful. But the prudent
investment inquiry does not provide an
alternative ground for including costs in
provider rates when they are not used
and useful. In other words, once we
have determined that site commissions
are not used and useful, any provider
PO 00000
Frm 00054
Fmt 4701
Sfmt 4700
payment of site commissions is
necessarily imprudent.
(iii) Prohibiting Site Commission
Payments Associated With IPCS
294. Having found that site
commissions do not recover costs or
expenses used and useful in the
provision of IPCS, we now evaluate the
interplay between that determination
and the broader regulatory framework
specified by the Communications Act.
We conclude that the payment of site
commissions, whether legally mandated
or contractually prescribed, would
create a conflict between the dual
statutory requirements of ensuring fair
compensation for providers and just and
reasonable IPCS rates and charges for
consumers and providers. Accordingly,
pursuant to sections 276(b)(1)(A),
276(c), and 201(b) of the
Communications Act, we reconcile
these statutory objectives by prohibiting
site commissions associated with
intrastate, interstate, international,
jurisdictionally mixed, and
jurisdictionally indeterminate audio and
video IPCS.
295. Our Approach Best Reconciles
Our Statutory Duties In Light of the
Harms of Site Commissions. The Martha
Wright-Reed Act added to section
276(b)(1)(A) the requirement that the
Commission’s compensation plan
‘‘ensure that . . . all rates and charges’’
for intrastate and interstate IPCS are
‘‘just and reasonable.’’ Thus, section
276(b)(1)(A), as amended by the Martha
Wright-Reed Act, requires the
Commission to establish a
compensation plan to ensure that all
IPCS providers are ‘‘fairly
compensated’’ and that ‘‘all [IPCS] rates
and charges are just and reasonable.’’ As
stated above, we view the ‘‘just and
reasonable’’ and ‘‘fairly compensated’’
requirements as interdependent and
complementary statutory mandates,
which we must fully implement.
Section 201(b) of the Communications
Act also requires just and reasonable
rates and charges for interstate and
international IPCS.
296. Site commissions interfere with
the Commission’s ability to implement
these dual requirements of determining
‘‘just and reasonable’’ rates and charges
and ‘‘fair[ ] compensat[ion]’’ for IPCS
providers. To the extent that IPCS
providers face a legal necessity to pay
site commissions, the D.C. Circuit’s
decision in GTL v. FCC suggests that the
fair compensation requirement in
section 276(b)(1)(A) requires that IPCS
providers be able to recover those
payments through IPCS rates and
charges. We thus reject the argument
that a prohibition on site commissions
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
is beyond the scope of the Commission’s
authority. As we explain, the
prohibition on site commissions best
reconciles our statutory duties to ensure
both just and reasonable rates and
charges for IPCS consumers and
providers and fair compensation for
IPCS providers. Yet, allowing that
recovery would lead to unjust and
unreasonable IPCS rates and charges
given our finding that providers’ site
commission payments are expenditures
that are not used and useful in the
provision of IPCS. Even beyond that,
payment of site commissions introduces
competitive distortions in the bidding
market for IPCS. Thus, site commissions
create conflict between the fair
compensation and the just and
reasonable requirements in section
276(b)(1)(A). The policy harms arising
from site commissions likewise frustrate
the Commission’s ability to alleviate
competitive distortions and foster
greater competition in the IPCS
marketplace.
297. Site commissions historically
have been a major driver of excessive
IPCS rates. As discussed above, site
commissions have exerted ‘‘upward
pressure’’ on IPCS rates because by
proposing higher rates, IPCS providers
can afford to pay more in site
commissions to correctional authorities.
Site commission payments, however,
are used to fund a ‘‘wide and disparate’’
range of activities, including
educational and welfare programs, the
state or local government’s general
revenue fund, the costs of maintaining
correctional institutions, and, in
extreme cases, campaign contributions
or entertainment for correctional
officials. And ‘‘most or all’’ of these
functions ‘‘have no reasonable and
direct relation to the provision of ICS—
a historical assessment confirmed by
our used and useful analysis above.
Because IPCS consumers ‘‘are forced to
absorb . . . site commissions in the
rates they pay,’’ they ‘‘subsidize
everything from inmate welfare
programs, to salaries and benefits of
correctional facilities, states’ general
revenue funds, and personnel training.’’
As the Commission has observed,
‘‘[p]assing the non-ICS-related costs that
comprise site commission payments
. . . onto inmates and their families
. . . result[s] in rates . . . that are not
just and reasonable.’’
298. Site commissions also
historically have distorted the IPCS
marketplace. Commenters and the
Commission have long recognized that
site commissions undermine the
integrity of the bidding process for IPCS.
In a properly functioning marketplace,
correctional institutions would select an
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
IPCS provider based on the quality of
service the provider offered and on the
rates the provider would charge. But the
interests of correctional institutions
diverge from the interests of consumers
using IPCS. While IPCS consumers are
interested in lower prices for IPCS,
correctional institutions have an
incentive to maximize the revenues they
receive from providing access to the
correctional facility to an IPCS provider.
IPCS providers historically responded to
this state of affairs in the marketplace by
increasing IPCS rates, thereby enabling
them to offer higher site commissions
and increasing the likelihood they
would be chosen as the monopoly
provider for a facility for the term of a
multi-year contract. This market
distortion results in higher IPCS rates
for consumers, providing an additional,
independent basis for concluding that
site commissions are unjust and
unreasonable.
299. Securus acknowledges that
‘‘[t]here is no question that site
commissions continue to play a role in
the bidding process’’ but argues that the
Commission ‘‘overstates the case . . . to
the extent it claims that awards always
go to the provider offering the highest
site commissions.’’ Securus provides a
study based on data analyzing ‘‘the
contribution of price and site
commissions to the scoring criteria
utilized’’ by facilities. The study finds
that ‘‘[c]ontrary to what we may expect
based on suggestions that the entity
bidding the highest site commission
payment always or generally wins, the
bid evaluation criteria used by most RFP
issuers reflect a strong preference for
bids with high levels of performance on
the qualitative aspects of a bid, not
necessarily based on price or site
commission proposals.’’ Securus also
argues that site commissions ‘‘may
actually play some role in fostering
competition by enabling smaller
providers to successfully compete
against larger providers, particularly for
smaller facilities that may rely more on
site commission revenue.’’
300. At the same time, however,
Securus argues that ‘‘[t]o the extent site
commissions continue to distort
competition in the bidding market, the
solution is to further regulate site
commissions.’’ We agree. Even if site
commissions do not always or
exclusively result in problematic
distortions in the IPCS marketplace, the
record confirms that site commissions
create incentives ‘‘for facilities to award
contracts based primarily (or at times,
exclusively) on site commission
offerings.’’ Even if some correctional
facilities do not fully act on those
incentives at given points in time, as
PO 00000
Frm 00055
Fmt 4701
Sfmt 4700
77297
long as those incentives remain the risk
of marketplace distortions will persist
based on factors—i.e., correctional
facility decision-making preferences—
that are outside the control of the
Commission and IPCS consumers. And
where facilities do act on those financial
incentives, even assuming there was
perfect competition in the IPCS bidding
market, ‘‘[t]he benefit would be to . . .
providers and to facilities offering the
contracts, not to the people paying.’’
The solution, then, is to remove the
incentive to award contracts ‘‘based in
whole or in part on site commissions.’’
That is what we do today. Doing so
‘‘leave[s] facilities with only servicebased, competitive market factors [to
consider] when awarding contracts.’’
This, in turn, pushes providers to
‘‘compete to provide the best service for
the lowest consumer cost as the only
way to distinguish themselves and win
bids.’’ Our action to alleviate
competitive distortions in the IPCS
market through the elimination of site
commission payments thus advances
the purpose of section 276 to ‘‘promote
competition among payphone service
providers and promote widespread
deployment of payphone services to the
benefit of the general public.’’ Securus
argues that the Commission has not
accounted for the market effects of
eliminating site commissions. Securus
explains that ‘‘the Commission has
pointed to the existence of site
commissions and their alleged impact
on the IPCS market as creating the
conditions that require additional
regulation.’’ In eliminating site
commissions, Securus contends that the
Commission ‘‘removes the condition
purportedly justifying regulation over
the IPCS market and then proceeds to
continue and expand upon the
regulation that is allegedly justified by
the existence of site commissions that
are now removed.’’ Securus argues that
the Commission ‘‘should at least proffer
some justification why permanent,
highly prescriptive rate regulation must
continue even though it believes it has
created the conditions for a properly
functioning, competitive marketplace.’’
While the Commission has identified
site commissions as ‘‘the primary
reason’’ IPCS rates can be unjust and
unreasonable, the Commission has
never stated that they are the only
reason that IPCS rates can be unjust and
unreasonable. Indeed, the Commission
has specifically recognized that rate
regulation is needed because ‘‘no
competitive forces within the
[correctional] facility constrain
providers from charging rates that far
exceed the costs . . . providers incur in
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77298
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
offering service.’’ Rate regulation is thus
clearly necessary to, for example,
prevent IPCS providers from
overcharging consumers even in the
absence of site commission payments.
To suggest that the elimination of site
commissions should be the basis for
reduced rate regulation also ignores
abusive ancillary service charging
practices that have historically plagued
the industry.
301. There is significant support in
the record for our approach. In 2021,
recognizing ‘‘the difficulties and
complexities . . . in accounting for and
isolating what portion of site
commission payments may be related to
legitimate facility costs,’’ the
Commission sought comment on
prohibiting providers from entering
contracts requiring the payment of site
commissions and preempting state and
local laws and regulations requiring
providers to pay site commissions. A
variety of commenters support a
prohibition, primarily based on their
view that a rule against site
commissions is needed to ensure just
and reasonable IPCS rates and charges.
As Securus observes, ‘‘the use of site
commissions is inimical to the shared
goals of all stakeholders of improving
access to, and affordability of,
communications services for
incarcerated persons and their
families.’’ Many of these same
commenters support the Commission’s
identification of options in 2021 to
prohibit IPCS providers from entering
into contracts requiring the payment of
site commissions and preempting state
and local laws and regulations requiring
site commissions.
302. Consistent with the record and
the Martha Wright-Reed Act, we
prohibit all site commission payments
associated with IPCS. To effectuate this
prohibition we take two actions
consistent with 2023 and 2021. First, we
preempt state and local laws and
regulations allowing or requiring site
commission payments for IPCS. And
second, we prohibit IPCS providers
from entering into contracts allowing or
requiring the payment of site
commissions. The scope of site
commissions subject to the prohibition
and preemption include all monetary
payments, including lump-sum or
upfront payments, payments based on
percentage of revenue, and per-call
payments associated with IPCS or
associated ancillary services. It also
includes all in-kind payments and
contributions providers may offer
associated with IPCS or associated
ancillary services, including technology
grants, equipment, training programs, or
any other payment, gift, or donation
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
offered by an IPCS provider to a
correctional institution or a
representative of a correctional
institution.
303. In contrast, a minority of
commenters oppose further site
commission reforms. Praeses and NCIC
argue that rate caps sufficiently protect
consumers against unjust and
unreasonable rates while also allowing
facilities to recover the costs they incur
in providing IPCS. Praeses contends that
the Commission should continue to
adhere to its historically ‘‘permissive
position’’ towards site commissions in
which it concluded that it did not need
to prohibit or otherwise regulate site
commissions. NCIC and Praeses further
assert that the continued use of rate caps
‘‘will necessarily lead to fair and
reasonable site commissions’’ and will
protect consumers from unjust and
unreasonable rates and charges. And the
National Sheriffs’ Association asserts
that preempting laws requiring site
commissions and prohibiting providers
from entering into contracts requiring
the payment of site commissions is not
‘‘appropriate’’ because ‘‘facilities incur
costs to allow ICS in jails and . . . jails
require commission payments in
connection with allowing ICS in jails.’’
304. Restricting the recovery of IPCS
provider payments to correctional
facilities through regulated rates is at
best a highly imperfect tool so long as
site commissions are allowed to be paid.
For one, as discussed above, if IPCS
providers face a legal obligation to pay
site commissions, the D.C. Circuit’s
decision in GTL v. FCC suggests that the
fair compensation requirement in
section 276(b)(1)(A) requires that IPCS
providers be able to recover those
payments through IPCS rates and
charges. That scenario leaves the door
open to the full panoply of excessive
rates and charges along with the
marketplace distortions that historically
have plagued IPCS.
305. Marketplace distortions also are
likely to remain so long as site
commissions are permissible. Rate caps
set based on industry-wide average costs
are likely to leave headroom for
additional profit by providers with
below-average costs. As long as site
commissions remain permissible, such
providers can use that headroom to, in
effect, pay higher site commissions by
using excess revenues earned from
regulated rates. This is likely to result in
marketplace distortions similar to those
historically experienced in the IPCS
marketplace, as discussed above—i.e.,
correctional facilities choosing
providers for paying higher site
commissions, and the benefits of
efficiency improvements and cost
PO 00000
Frm 00056
Fmt 4701
Sfmt 4700
savings thus flowing to correctional
facilities and winning bidders but not
IPCS consumers. These harmful effects
would be even more extreme if, rather
than relying on industry-wide average
costs, the Commission relied on costs
just from higher-cost or highest-cost
providers. These effects could be
mitigated to some degree by the use of
more granular categories of providers
when averaging costs and setting rates if
that resulted in less disparity in the
range between the highest- and lowestcost providers included in the category.
But to go further in mitigating those
concerns would require a shift to
provider-by-provider, ongoing rate-ofreturn rate regulation. However, the
Commission has previously disavowed
any willingness to conduct full-blown
rate regulation for individual IPCS
providers, nor is it clear how viable
provider-by-provider rate-of-return
regulation even would be in a context
where rates typically are specified in
multi-year RFPs rather than biennial (or
more frequent) tariff filings. Thus, we
think it is all too likely that, despite our
best efforts, distortions in the IPCS
marketplace would remain as long as
the traditional array of site commission
payments are allowed.
306. We also disagree with Praeses
that the Commission should continue to
decline to prohibit site commissions as
it has in the past. Praeses contends that
the Commission has ‘‘repeatedly and
expressly declined to interfere with the
often complex and multi-faceted private
contractual negotiations between
Providers and Facilities.’’ It relies on
statements in the 2013 ICS Order, 2015
ICS Order, and the 2016 ICS
Reconsideration Order, in which the
Commission concluded that it did not
need to prohibit or otherwise directly
regulate site commissions. But those
decisions were a function of the
circumstances and limited record before
the Commission during that period. The
Commission’s previous decisions not to
prohibit site commissions do not
foreclose it from doing so on the basis
of the circumstances and the record
before it now, particularly in light of the
requirements of the Martha Wright-Reed
Act to ensure that IPCS providers are
fairly compensated and that all rates
and charges are just and reasonable. As
our analysis above indicates, we now
are persuaded that simply regulating
recovery of site commission payments
through regulated rates to the extent
permitted by the ‘‘fair compensation’’
standard—while leaving IPCS providers
free to pay site commission as a general
matter—would not be ‘‘just and
reasonable.’’ Nor are we persuaded that
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
it would be workable to address such
concerns through case-by-case
evaluations. Our analysis indicates that
legally-mandated site commissions lead
to the full array of harms historically
experienced in this context. And even
in the case of contractually-prescribed
site commissions, case-by-case
evaluations would be burdensome for
everyone involved—including the
Commission and private parties.
Further, it is not clear how such caseby-case evaluations could be sufficiently
timely to avoid delaying the typical RFP
process yet still guard against the risk of
marketplace distortions before they
occur. Thus, we conclude that our
bright-line prohibition on site
commissions reflects the best way of
dealing with these problems.
307. Our Approach Is Consistent with
GTL v. FCC. Some commenters argue
that the Commission’s actions today
conflict with GTL v. FCC. These
commenters contend that the D.C.
Circuit ‘‘expressly recognized that site
commissions are legitimate costs of ICS
providers’’ and thus the Commission
could not categorically exclude them
from its rate methodology. This has led
some to argue that ‘‘[t]he Commission
must . . . ensure its rate caps allow ICS
providers to recover all of their costs
associated with the payment of site
commissions.’’ But, as the Wright
Petitioners explain, the decision in GTL
v. FCC ‘‘was made against background
conditions in which ICS providers were
actually paying those site commissions
pursuant to negotiated agreements to
provide ICS at facilities or in
compliance with legal mandates’’ and
not in a regulatory environment in
which site commissions were
prohibited. The court had ‘‘no occasion
to consider the Commission’s authority
to prohibit negotiated agreements . . .
or its authority to preempt state and
local requirements.’’ And the court
‘‘never suggested that the Commission
lacked authority to take such actions to
fulfill its statutory mandate.’’ By
precluding providers from paying site
commissions altogether, we eliminate
the factual predicate—the payment of
site commissions as a condition
precedent to providing IPCS—which led
the court in GTL to hold that site
commissions could not be wholly
excluded from the Commission’s
ratemaking calculus. Thus, we conclude
that GTL v. FCC is no bar to our actions
today, particularly since our rate cap
calculations incorporate, to the extent
the record permits, the costs facilities
incur that are used and useful and/or
necessary in providing IPCS. And, in
any event, the Martha Wright-Reed Act
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
is an intervening development that
reinforces the Commission’s mandate to
ensure just and reasonable rates and
charges for IPCS that also afford fair
compensation.
308. Our Approach Accounts For
Legitimate Interests of Correctional
Facilities Associated with IPCS.
Separate from the issue of site
commission payments, the rate caps we
adopt today recognize, consistent with
the record, that correctional facilities
may incur some used and useful costs
in their provision of IPCS. Because we
allow providers to reimburse
correctional facilities for the used and
useful costs, if any, they incur, we have
thus afforded correctional facilities an
avenue to facilitate recovery of their
used and useful costs associated with
allowing access to IPCS in their
facilities.
309. We emphasize that the actions
we take today in eliminating site
commissions apply to all correctional
institutions: prisons, larger and smaller
jails, and other correctional institutions.
The facility-related rate components
that the Commission adopted in the
2021 ICS Order apply only to prisons
and jails with average daily populations
of 1,000 or more incarcerated people.
Because of the ‘‘concern raised in the
record about facility size variations in
facility-related costs for [smaller] jails’’
the Commission left the existing $0.21
per-minute rate cap in effect for
facilities whose average daily
populations were below 1,000
incarcerated people. Thus, providers
serving these relatively small jails could
continue to recover site commissions as
long as they did not exceed the $0.21
cap applicable to those jails. The
Commission, however, sought comment
in 2021 on facility costs for jails with
average daily populations below 1,000,
and asked commenters to ‘‘provide
detailed descriptions and analyses of
the cost drivers’’ for these facilities. The
National Sheriffs’ Association and Pay
Tel assert that facility costs per
incarcerated person are higher for
smaller jails than for larger jails. They
urge continued reliance on the National
Sheriffs’ Association 2015 survey to
justify higher facility-related cost
recovery for smaller jails, but otherwise
provide no responsive data. For the
reasons discussed above, we reject
continued reliance on the National
Sheriffs’ Association 2015 survey.
Because we now can accommodate
smaller jails in the same overall
regulatory approach as prisons and
larger jails, it best advances our
statutory mandates of ensuring just and
reasonable rates and charges consistent
PO 00000
Frm 00057
Fmt 4701
Sfmt 4700
77299
with fair compensation for IPCS
providers for us to do so.
310. To the extent commenters’
arguments against the elimination of site
commissions are premised on the loss or
depletion of state programs currently
funded by site commission payments,
the ‘‘just and reasonable’’ standard of
the Communications Act does not
contemplate funding such programs that
are unrelated to the provision of IPCS
through regulated rates, regardless of
how worthy those programs may be. In
support of site commissions, ViaPath
contends that ‘‘IPCS ‘providers who are
required to pay site commissions as a
condition of doing business have no
control over the funds once they are
paid,’ which does not change the record
evidence that site commissions are a
cost of providing IPCS.’’ ViaPath has not
articulated why provider-control over
such funds after payment has been
made has any bearing on why the
practice is beneficial, nor why the
practice should continue. We find this
argument unpersuasive. And, in any
event, we expect that the
implementation period applicable to the
reforms we adopt today will be
sufficient to allow state and local
governments time to adjust to an
environment without site commissions.
311. Given the availability of
reimbursement from IPCS providers for
costs that are used and useful in the
provision of IPCS, consistent with our
statutory duties, we see no reason to
believe that correctional institutions
will decrease or limit access to IPCS as
some commenters assert. Some
commenters allege that ‘‘if
compensation for . . . providers and
Sheriffs is not adequate, access to ICS is
likely to decrease’’ or be disallowed. In
NCIC’s view, ‘‘there is almost no
scenario in which a correctional agency
could lose site commission revenue and
continue to provide the critical services
and programs funded by that revenue.’’
312. We find it highly unlikely that
correctional facilities would limit or
deny access to IPCS as a result of the
elimination of site commission
payments. As the Commission has
observed, there are ‘‘well-documented
benefits, for communities and
correctional institutions alike, in
allowing incarcerated people access to’’
IPCS. Further, the record contains no
indication that IPCS deployment has
decreased or been eliminated in states
that have eliminated site commissions.
And, as the Commission has previously
noted, arguments premised on a denial
or reduction of access to IPCS are likely
to elicit an ‘‘intensely negative
backlash.’’ Thus, we see no reason to
believe that correctional institutions
E:\FR\FM\20SER2.SGM
20SER2
77300
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
will curtail or eliminate access to IPCS
simply because they no longer receive
site commission payments. In fact, given
the generally lower rates we adopt in
the Report and Order, it is reasonable
for us to anticipate increased usage of
IPCS once the Report and Order takes
effect.
(a) Preempting State and Local Laws
and Regulations Requiring or Allowing
Site Commissions Associated With IPCS
313. As part of the overall prohibition
on site commissions we adopt today, we
preempt state and local laws and
regulations allowing or requiring the
payment of monetary site commissions
or the provision of in-kind site
commissions associated with the
provision of IPCS regulated pursuant to
sections 201(b) and 276(c) of the
Communications Act and consistent
with 2023 and 2021. As explained
above, our actions preempting state and
local laws and regulations allowing or
requiring the payment of monetary site
commissions or the provision of in-kind
site commissions associated with the
provision of IPCS and prohibiting IPCS
providers from entering into contracts
requiring or allowing them to pay site
commissions are necessary because they
best ensure the harmonization of both
the ‘‘just and reasonable’’ and ‘‘fair
compensation’’ mandates of section
276(b)(1)(A). Our actions not only
benefit individual ratepayers, but also
the public and the IPCS marketplace
more generally. As an additional matter,
we note that our actions also give timely
effect to our findings under section
276(b)(1)(A), consistent with Congress’
objective as revealed by its
establishment of a statutory deadline for
the Commission to ‘‘promulgate any
regulations necessary to implement this
Act and any amendments made by this
Act.’’ It is well established that ‘‘a
federal agency may pre-empt state law
only when and if it is acting within the
scope of its congressionally delegated
authority.’’ Section 201(b) of the
Communications Act gives the
Commission authority over interstate
and international IPCS. And as
explained above, the Martha WrightReed Act amended section 276(b)(1)(A)
to clearly establish the Commission’s
authority to ensure just and reasonable
rates for intrastate as well as other
jurisdictional inmate communications.
The Martha Wright-Reed Act also
expanded the Commission’s section 276
authority over ‘‘payphone service’’ in
correctional institutions to include
‘‘advanced communications services,’’
as defined in sections 3(1)(A), 3(1)(B),
3(1)(D), and new (3)(1)(E) of the
Communications Act. Furthermore,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
while the Martha Wright-Reed Act
decisively expands the scope of the
Commission’s authority over IPCS, it
retained section 276(c), which provides
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.’’ Further, the record also
reflects that a variety of stakeholders
believe the Commission should preempt
state and local laws that require or allow
site commissions.
314. We find that state and local laws
and regulations authorizing or requiring
site commissions conflict with the
Commission’s regulations adopted in
the Report and Order to ensure just and
reasonable rates and charges for IPCS
and fair compensation for IPCS
providers under section 276(b)(1)(A)
and to ensure just and reasonable rates
and charges for interstate and
international IPCS under section 201(b)
of the Communications Act. In
particular, state and local laws and
regulations requiring or allowing
providers to pay site commissions
associated with IPCS lead to unjust and
unreasonable rates and charges insofar
as consumers are being charged for nonIPCS costs where providers pay site
commissions. Those laws and
regulations also lead to unjust and
unreasonable rates and charges through
the resulting marketplace distortions.
Such laws and regulations are therefore
in conflict with the ‘‘just and
reasonable’’ requirement in section
276(b)(1)(A) of the Communications Act
and our implementation of those
mandates through regulations adopted
in the Report and Order. Precluding
providers from paying site commissions
pursuant to state and local law will
enable us to address one of the ‘‘primary
reason[s] [IPCS] rates are unjust and
unreasonable.’’ We therefore agree with
those commenters arguing that the
Commission should exercise its
authority to preempt laws and
regulations that require providers to pay
site commissions associated with IPCS.
315. At the same time, commenters
point out that preemption is relevant to
ensuring that IPCS providers are fairly
compensated as required by section
276(b)(1)(A), as interpreted by the D.C.
Circuit in GTL v. FCC. Commenters
explain that ‘‘[a]s long as local
governments are allowed to require site
commissions as a condition of providing
service . . . GTL teaches that section
276 and section 201 require that they be
recoverable.’’ Separately, experience has
shown that when recovery of site
commissions associated with IPCS is
constrained by regulation, correctional
PO 00000
Frm 00058
Fmt 4701
Sfmt 4700
facilities can attempt to maintain those
revenue streams by shifting the nature
of site commission arrangements.
Absent a prohibition on site
commissions, we anticipate correctional
facilities seeking increasingly creative
ways to maintain monetary or in-kind
payments, with the Commission (and
IPCS providers) playing an endless
game of ‘whack-a-mole’ in an effort to
enforce section 276(b)(1)(A)’s fair
compensation mandate. Thus,
preemption is ‘‘preferable to the
Commission’s efforts to regulate . . .
site commissions through regulation of
provider rates’’ alone. Indeed, according
to Securus ‘‘[d]irectly addressing site
commissions through preemption is
. . . consistent with GTL.’’ We agree.
316. Commenters have extensively
reviewed the Commission’s authority to
preempt site commissions in these
proceedings. Prior to the enactment of
the Martha Wright-Reed Act, arguments
regarding the Commission’s preemption
authority focused on the Commission’s
jurisdiction over interstate and
international communications under
section 2(a) of the Communications Act.
Other commenters have argued that
section 276(c) gives the Commission
‘‘express authority’’ to preempt
inconsistent state requirements. The
Wright Petitioners explain that
‘‘[s]ection 276 of the Communications
Act gives the Commission the authority
to preempt state requirements that are
‘inconsistent with the Commission’s
regulations.’ ’’ As explained below, we
are persuaded that the Communications
Act provides the Commission the
necessary authority to adopt regulations
addressing the problems caused by site
commissions in the IPCS marketplace,
which requires preemption of state and
local laws and regulations requiring or
authorizing the site commission
payments.
317. Preemption of State
Requirements. Section 276(c) contains
an express preemption provision upon
which we rely to preempt state laws and
regulations that allow or require the
payment of site commissions associated
with IPCS. Because we conclude that
section 276(c) provides the Commission
the necessary preemption authority, we
decline to invoke the Commission’s
authority under section 253, including
the preemption provision of section
253(d). Section 276(c) states 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.’’ As
part of the reforms we adopt today, we
adopt a rule prohibiting the payment of
site commissions as set forth in the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Report and Order. When a federal law
contains an express preemption clause,
the courts ‘‘focus on the plain wording
of the clause, which necessarily
contains the best evidence of Congress’
preemptive intent.’’ The Supreme Court
has explained that where a ‘‘statute
‘contains an express pre-emption
clause,’ we do not invoke any
presumption against pre-emption but
instead ‘focus on the plain wording of
the clause, which necessarily contains
the best evidence of Congress’ preemptive intent.’ ’’ Independently, even
assuming arguendo that any preemption
analysis should begin ‘‘with the
assumption that the historic police
powers of the States [are] not to be
superseded by the Federal Act unless
that was the clear and manifest purpose
of Congress’’—particularly where
‘‘Congress has ‘legislated . . . in a field
which the States have traditionally
occupied’ ’’—it nonetheless remains the
case that ‘‘Congress’ intent, of course,
primarily is discerned from the language
of the pre-emption statute and the
‘statutory framework’ surrounding it.’’
318. Here, the express preemption
clause in section 276(c) applies to ‘‘State
requirements’’ to the extent they are
‘‘inconsistent with the Commission’s
regulations.’’ This is consistent with
how the Commission has applied
section 276(c) in the past. The term
‘‘state requirements’’ in express
preemption provisions has been
interpreted by the Supreme Court more
broadly than terms like ‘‘laws or
regulations.’’ For example, the Court has
concluded that ‘‘[a]bsent other
indication, reference to a State’s
‘requirements’ in an express preemption
provision includes its common-law
duties.’’ By contrast, the Court has
found that references to state ‘‘laws or
regulations’’ preempt only ‘‘positive
enactments.’’ Consistent with this
precedent, we find that the reference to
‘‘state requirements’’ in section 276(c) is
broad enough to reach state laws and
regulations requiring or allowing the
payment of site commissions associated
with IPCS.
319. The surrounding statutory
framework also demonstrates that
preemption of laws and regulations
requiring or allowing site commissions
is authorized by section 276(c). Section
276(b)(1)(A) always has been clear that
the Commission has authority to
establish compensation plans for
‘‘intrastate and interstate’’ payphone
calls, and as explained above, the
Martha Wright-Reed Act amended that
provision to clearly establish the
Commission’s authority to ensure just
and reasonable rates for all
communications now encompassed by
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
section 276(d). And as we have found,
the regulations authorized under section
276(b)(1)(A) to ‘‘establish a
compensation plan’’ to achieve the goals
of fair compensation for providers and
just and reasonable rates and charges for
consumers and providers requires more
of the Commission than the simple act
of capping rates and charges. In
amending section 276, Congress left the
express preemption provision in section
276(c) unaltered, revealing Congress’
understanding that Commission
regulations implementing the full scope
of amended section 276(b)(1)(A) would
be subject to that express preemption
provision.
320. This point was further
emphasized by the amendment of
section 2(b) of the Communications Act
to expressly exempt section 276 from
the preservation of state authority over
intrastate communications under that
provision. In the Martha Wright-Reed
Act, Congress expressly considered the
potential effect of that statute on other
laws, and only disclaimed the intent to
‘‘modify or affect any’’ state or local law
‘‘to require telephone service or
advanced communications services at a
State or local prison, jail, or detention
facility or prohibit the implementation
of any safety and security measures
related to such services at such
facilities.’’ That narrow express
preservation of existing law—which is
not implicated by our preemption
here—came against the backdrop of
Commission and judicial grappling with
the interplay between site commission
payments and IPCS rates and charges, as
well as longstanding Commission
consideration of whether and when to
prohibit and preempt site commissions.
The statutory context provided by
section 276 as a whole, coupled with
the Martha Wright-Reed Act, thus
reinforces our understanding of the
scope of preemption encompassed by
section 276(c).
321. Relatedly, we conclude that
preemption is consistent with section 4
of the Martha Wright-Reed Act, which
states that nothing in that Act ‘‘shall be
construed to modify or affect any
Federal, State, or local law to require
telephone service or advanced
communications services at a State or
local prison, jail, or detention facility or
prohibit the implementation of any
safety and security measures related to
such services at such facilities.’’ We
preempt only those state laws and
regulations that require or permit the
payment of monetary site commissions
or the provision of in-kind site
commissions associated with IPCS. To
the extent federal, state, or local laws or
regulations require IPCS to be provided
PO 00000
Frm 00059
Fmt 4701
Sfmt 4700
77301
to incarcerated people at state or local
correctional facilities, such laws and
regulations are not preempted by our
actions here. Similarly, we do not
prohibit the implementation of any
safety and security measures related to
IPCS at any state or local correctional
facility. As we explain above, section 4
of the Martha Wright-Reed Act is ‘‘not
intended to interfere with any
correctional official’s decision on
whether to implement any type of safety
and security measure that the official
desires in conjunction with audio or
video communications services.’’
Consistent with that interpretation, here
we preempt state laws and regulations
requiring or allowing the payment of
site commissions associated with IPCS,
a pre-emption that we conclude is
necessary to achieve the statutory
requirements of section 276(b)(1)(A) to
ensure just and reasonable rates and
charges for IPCS consumers and fair
compensation for providers.
Correctional officials remain free to
implement desired safety and security
measures.
322. The conflict between IPCS
providers’ payment of site commissions
and the ‘‘just and reasonable’’ mandate
implicates the Commission’s oversight
of interstate and international IPCS
under section 201(b), as well. The
Supreme Court has explained that
‘‘[e]ven where Congress has not
completely displaced state regulation in
a specific area, state law is nullified to
the extent that it actually conflicts with
federal law.’’ Such a conflict can arise
when a law ‘‘stands as an obstacle to the
accomplishment and execution of the
full purposes and objectives of
Congress.’’ While there are no ‘‘precise
guidelines’’ governing when state law
creates such an obstacle, the Supreme
Court has acknowledged that federal
agencies ‘‘have a unique understanding
of the statutes they administer and an
attendant ability to make informed
determinations about how state
requirements may pose’’ such an
obstacle. Additionally, the Supreme
Court has found that the inquiry into
whether state law poses an obstacle
sufficient to allow preemption requires
consideration of ‘‘the relationship
between state and federal laws as they
are interpreted and applied, not merely
as they are written.’’ One situation in
which the Supreme Court has
determined that state law can interfere
with federal goals is when such a law
is at odds with Congress’s intent to
create a uniform system of federal
regulation.
323. Furthermore, a federal agency
acting within the scope of its authority
may preempt state law. ‘‘[I]n a situation
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77302
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
where state law is claimed to be preempted by federal regulation, a ‘narrow
focus on Congress’ intent to supersede
state law [is] misdirected,’ for ‘[a] preemptive regulation’s force does not
depend on express congressional
authorization to displace state law.’ ’’
Instead, the question is whether
Congress has delegated the authority to
act in a sphere, and whether the agency
has exercised that authority in a manner
that preempts state law. The Supreme
Court also has explained that ‘‘an
‘assumption’ of nonpre-emption [sic] is
not triggered when the State regulates in
an area where there has been a history
of significant federal presence.’’
324. The Commission undoubtedly
has authority under section 201(b) to
ensure that rates and practices for and
in connection with certain interstate
and international incarcerated people’s
communications services are just and
reasonable. The Commission’s actions
in this regard also involve an area that
has long been subject to extensive
federal regulation. Since the original
enactment of the Communications Act,
section 2(a) has made clear that the
Communications Act applies to ‘‘all
interstate and foreign communication by
wire or radio,’’ and section 201(b) has
directed the Commission to ensure that
rates and practices for and in
connection with interstate and foreign
communication services are just and
reasonable. We thus find that section
201(b) provides us with independent
authority, alternative to section 276, to
preempt laws and regulations allowing
or requiring site commissions associated
with interstate and international
telecommunications for incarcerated
people.
325. Preemption of Local
Requirements. Our analysis of our
preemptive authority is somewhat
different when it comes to local
requirements that may permit or require
the payment of site commissions
because section 276(c) does not
expressly reference ‘‘local’’ laws or
regulations. Nonetheless, we conclude
that principles of conflict preemption
allow us to also preempt local laws and
regulations requiring or authorizing
IPCS providers to pay site commissions
associated with IPCS. As an initial
matter, we note that ‘‘for purposes of the
Supremacy Clause, the constitutionality
of local ordinances is analyzed in the
same way as that of statewide laws.’’
Thus, relevant precedent concerning
state law is equally applicable to local
law.
326. As a threshold matter, we find
that local laws and regulations requiring
or authorizing site commissions stand as
an obstacle to our regulation of IPCS.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
We explained above the conflict that
occurs as a result of state requirements,
and that conclusion is not altered if the
requirements originate instead at the
local level. Consequently, under
sections 276(b)(1)(A) and 201(b)—
coupled with standard conflict
preemption principles—we preempt
local laws and regulations that permit or
require site commissions.
327. Our conflict preemption
determination is bolstered by the
enactment of the Martha Wright-Reed
Act, which modified the
Communications Act in a manner that
we see as intended to establish a
uniform system of federal regulation for
all IPCS under section 276(b)(1)(A). As
explained above, the Martha WrightReed Act was enacted against the
regulatory backdrop of—and in response
to—the GTL v. FCC decision, where the
D.C. Circuit found that the Commission
had unreasonably relied on the ‘‘just
and reasonable’’ standard of section
201(b) when implementing the
differently-worded language of section
276. Insofar as that left the Commission
to rely on section 201(b) to ensure IPCS
rates and charges were not too high, it
generally precluded the Commission
from addressing excessive intrastate
IPCS rates. The Martha Wright-Reed
Act’s amendment of section 276(b)(1)(A)
gave the Commission clear authority to
ensure just and reasonable rates under
that provision, which always has
encompassed both intrastate and
interstate services. Given the legal and
regulatory backdrop, that persuades us
that Congress envisioned a uniform
system of federal regulation as far as
IPCS rates and charges are concerned.
328. Scope of Preemption. At this
time, our preemption extends only to
those state and local laws and
regulations that permit or require IPCS
providers to pay site commissions
associated with IPCS, and does not
extend to site commissions associated
with other services or activities insofar
as the effect of those site commissions
can be segregated from the IPCS subject
to Commission regulation. To the extent
there are laws and regulations that
permit or require the payment of site
commissions associated with non-IPCS
services, including nonregulated
services, we do not preempt those laws
or regulations, provided that neither the
costs of such services nor any site
commissions associated with them are
passed on to IPCS consumers through
IPCS rates or charges, and that the
offering of non-IPCS services is not a
precondition to offering IPCS at a
correctional institution. Consistent with
this policy, if there are state
requirements that encompass both IPCS
PO 00000
Frm 00060
Fmt 4701
Sfmt 4700
and non-IPCS services, our preemption
actions extend only to the part of such
requirements implicating IPCS. At this
time, we are not persuaded that site
commissions in those scenarios are
likely to directly affect the
reasonableness of rates and charges and
fairness of compensation for the IPCS
we regulate, either directly (through
inflated IPCS rates and charges) or
indirectly (through competitive
distortions in the IPCS marketplace).
Our approach flows from the conditions
we adopt to ensure that such site
commissions do not implicate IPCS.
And it also flows in part from the broad
scope of IPCS subject to our regulation,
which, at this time, leaves a much
smaller universe of services or activity
potentially subject to site commissions,
which we currently expect to have
minimal potential to distort the IPCS
marketplace, particularly given the
segregation from IPCS that we adopt.
Should circumstances warrant, we can
revisit this issue in the future.
329. Additionally, as explained above,
today we adopt IPCS rate caps that
account for all used and useful IPCS
costs, whether they are incurred by
providers or correctional facilities. To
facilitate the ability of correctional
facilities to recover used and useful
IPCS costs they may incur, we permit
IPCS providers to reimburse
correctional facilities for the used and
useful costs they prudently incur in the
provision of IPCS, as calculated in
accordance with the standards set forth
in the Report and Order. Such
reimbursements fall outside the scope of
what we describe as ‘‘site commissions’’
under the regulatory framework of the
Report and Order. To the extent state
laws or regulations allow or require
correctional facilities to obtain
reimbursement from providers for those
costs that fall outside the scope of our
understanding of ‘‘site commissions’’
(whatever terminology the state law or
regulation might use), we do not
preempt such laws or regulations.
(b) Prohibiting IPCS Providers From
Entering Into Contracts Allowing or
Requiring Them To Pay Site
Commissions Associated With IPCS
330. As part of the prohibition against
paying site commissions we adopt
today, we also prohibit providers from
entering into contracts allowing or
requiring them to pay site commissions
associated with IPCS, consistent with
2021. We agree with the Wright
Petitioners that doing so is ‘‘the simplest
and most-wide ranging method to
ensure IPCS rates are just and
reasonable and fairly compensate
providers.’’ As discussed above, we
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
have concluded that the Martha WrightReed Act provides us with limited
authority to regulate IPCS providers’
practices, classifications, and
regulations (collectively, ‘‘practices’’)
associated with IPCS as a necessary part
of our obligation to establish a
compensation plan to ensure fair
compensation to providers and just and
reasonable rates and charges for
consumers. This authority derives from
section 276(b)(1)(A)’s mandate that we
establish a compensation plan
addressing IPCS and, in certain
circumstances, we also exercise section
201(b)’s grant of authority over practices
associated with interstate and
international IPCS. We address these
two sources of authority below.
331. In defining the contours of the
prohibition on paying site commissions,
we mirror the carve-outs specified in the
case of our preemption of laws and
regulations permitting or requiring site
commissions. In particular, IPCS
providers remain free to contract for the
provision of non-IPCS services with
correctional institutions following our
actions today. However, under no
circumstances may providers enter into
a contract with a correctional facility for
the provision of IPCS where, as a
condition precedent to providing IPCS,
the provider must agree to pay a site
commission of any kind. To the extent
IPCS providers contract with
correctional institutions for the
provision of non-IPCS services, neither
the costs of those services nor any site
commissions associated with them may
be passed on to consumers through IPCS
rates or charges. Such limitations are
necessary to protect IPCS consumers
from unjust and unreasonable IPCS rates
and to ensure that providers receive fair
compensation, consistent with section
276(b)(1)(A) as amended by the Martha
Wright-Reed Act, as well as our
obligation to ensure just and reasonable
rates under section 201(b). Finally,
consistent with our policy of allowing
IPCS providers to reimburse
correctional facilities for their used and
useful costs consistent with the
standards in the Report and Order, we
do not bar contractual provisions that
require such reimbursement.
(i) Section 276(b)(1)(A)
332. We conclude that the practice of
paying site commissions undermines
the Commission’s ability to establish
just and reasonable rates for IPCS
consumers and providers and ensure
fair compensation for providers. To best
ensure fair compensation and just and
reasonable rates and charges for IPCS,
we thus adopt a compensation plan
under section 276(b)(1)(A) that
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
precludes IPCS providers from paying
site commissions associated with IPCS
subject to that provision. As we explain
above, the section 276 requirement that
the Commission establish a
compensation plan to ensure fair
compensation for IPCS providers and
just and reasonable rates and charges for
consumers necessarily carries with it
the authority to prescribe regulations
governing providers’ practices to the
extent those practices relate to the rates
and charges applied to consumers. This
authority not only allows us to preclude
practices that work to undermine the
rate and fee caps we set but also allows
us to adopt affirmative requirements
that help ensure that rates and charges
as implemented are just and reasonable
as applied to consumers. Accordingly,
in specifying a compensation plan to
implement section 276(b)(1)(A), as
amended by the Martha Wright-Reed
Act, we find it necessary to preclude
providers from entering into contracts
that require or allow them to pay site
commissions associated with IPCS.
333. Commenters highlight that the
Commission ‘‘has exercised similar
authority over telecommunications
service providers by barring their entry
into contracts, or enforcing existing
contracts, with entities over whom the
Commission has no direct jurisdiction
in order to promote the Commission’s
regulatory objectives.’’ In the context of
multiple tenant environments, the
Commission has long prohibited
providers of certain communications
services from entering or enforcing
agreements with property owners that
grant the provider exclusive access and
rights to provide service to the multiple
tenant environment. Multiple tenant
environments are ‘‘commercial or
residential premises such as apartment
buildings, condominium buildings,
shopping malls, or cooperatives that are
occupied by multiple entities.’’ The
Commission has also adopted rules
prohibiting telecommunications carriers
and multichannel video programming
distributors from entering into or
enforcing certain types of revenue
sharing agreements with the owners or
multiple tenant environments. And, in
the international settlements context,
the Commission has limited the
settlement rates that U.S. carriers may
pay foreign carriers to terminate
international traffic originating in the
United States. In each of these cases, the
Commission’s regulation of the entities
subject to its jurisdiction has affected
entities over which the Commission has
no direct jurisdiction. More importantly,
where challenged by parties claiming
that the Commission was impermissibly
PO 00000
Frm 00061
Fmt 4701
Sfmt 4700
77303
regulating parties over which it has no
jurisdiction, the D.C. Circuit has upheld
the Commission’s actions.
334. While we prohibit IPCS
providers from entering into contracts
requiring or allowing them to pay site
commissions associated with IPCS, we
recognize that there are likely
enforceable contracts that currently
require the payment of site
commissions. In such circumstances, we
rely on contractual change of law
provisions. Commenters and the
Commission have noted that IPCS
contracts ‘‘typically include change of
law provisions.’’ We expect that our site
commission reforms adopted in the
Report and Order ‘‘constitute regulatory
changes sufficient to trigger contractual
change-in-law provisions that will allow
[IPCS] providers to void, modify or
renegotiate aspects of their existing
contract to the extent necessary to
comply’’ with our reforms today. As we
explain, providers and correctional
authorities have long been on notice
that the Commission might act to
prohibit site commissions. To the
extent, however, that providers ‘‘have
entered into contracts without changeof-law provisions,’’ those providers ‘‘did
so with full knowledge’’ that the
Commission might act to prohibit site
commissions, and have been on notice
that the Commission could act in this
regard, particularly in light of 2021.
Thus, we believe that relevant changeof-law provisions will enable parties to
amend their contracts to the extent
necessary and we strongly encourage
parties to work cooperatively to resolve
any issues. To the extent contractual
disputes arise, including in
circumstances where contracts do not
have change-of-law provisions, parties
may seek resolution of those disputes in
court. We reject NCIC’s suggestion that
our actions ‘‘abrogate’’ contracts. To the
contrary, even for contracts that lack
change-of-law provisions, the failure to
pay a site commission required by a
still-valid contract term is an issue to be
resolved through a breach of contract
action in court if the parties cannot
negotiate a resolution on their own. In
addition, since 2013, the Commission
has proceeded with IPCS reforms
notwithstanding the potential interplay
with existing IPCS agreements.
Continuing to do so here is consistent
with Commission precedent, including
our decision to defer to change-of-law
provisions or otherwise-applicable legal
frameworks governing the enforcement
of existing contracts.
335. Praeses contends that section
276(b)(1)(A) does not give the
Commission authority over ‘‘private
contractual payments’’ by IPCS
E:\FR\FM\20SER2.SGM
20SER2
77304
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
providers and correctional institutions.
Praeses focuses on statements from GTL
v. FCC in which the D.C. Circuit
explained that section 276 ‘‘merely’’
directs the Commission ensure that
providers are fairly compensated.
Praeses’ comments, however, do not
account for the amendments to section
276(b)(1)(A) made by the Martha
Wright-Reed Act. Rather than focusing
solely on fair compensation, the Martha
Wright-Reed Act added the requirement
that the Commission ensure that all
rates and charges are just and
reasonable. We find that the best way to
reconcile both requirements is to
prohibit site commission payments as
part of our compensation plan
implementing section 276(b)(1)(A). This
persuades us that we have authority to
prohibit providers from entering into
contracts requiring or permitting the
payment of site commissions.
Separately, however, we are
unpersuaded by Praeses’ argument
given the Commission’s history,
detailed above, of exercising similar
authority over providers in the past.
(ii) Section 201(b)
336. Separately, we conclude that
paying site commissions is an unjust
and unreasonable practice pursuant to
our authority under section 201(b) and
the impossibility exception. Section
201(b) of the Communications Act
provides an independent statutory basis
for regulating providers’ practices for or
in connection with the interstate and
international telecommunications
services that are within our section
201(b) authority. Acting pursuant to
section 201(b) of the Communications
Act, the Commission has generally
found carrier practices unjust and
unreasonable where necessary to protect
competition and consumers against
carrier practices for which there was
either no cognizable justification or
where the public interest in banning the
practice outweighed any countervailing
policy concerns. As explained above,
allowing recovery of site commissions
would lead to unjust and unreasonable
IPCS rates and charges given our finding
that the providers’ site commission
payments are expenditures that are not
used and useful in the provision of
IPCS. Even beyond that, payment of site
commissions introduces competitive
distortions in the bidding market for
IPCS. Although some commenters argue
that site commissions may enable
correctional facilities to recover the
costs they incur in making IPCS
available, as we have discussed above,
these commenters have not been able to
precisely articulate these costs to the
Commission. Over the course of the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
many years that the Commission has
been examining this issue, commenters
have failed to come forward with
meaningful data regarding the portions
of providers’ site commission payments
that may be used and useful. Under
these circumstances, we find no
countervailing policy concerns or
cognizable justification for the practice
of paying site commissions given their
detrimental effects on consumers and on
the IPCS market in general. For these
reasons, we conclude that the practice
of paying site commissions associated
with interstate and international
telecommunications services is an
unjust and unreasonable practice and
prohibit it.
337. Our section 201(b) authority also
enables us to regulate practices
associated with other IPCS services
within our section 276 authority to the
extent those practices cannot be
practicably separated from practices
applicable to services within our section
201(b) authority, pursuant to the
impossibility exception. For example,
when the Commission exercised its
section 201(b) authority to prohibit
carriers from entering or enforcing
exclusivity provisions in contracts with
residential building owners, the
Commission applied that ban even
where agreements affected the viability
of competitors offering bundles of
services—of which telecommunications
services were only one part—in order to
fully address practices for or in
connection with the
telecommunications services directly
subject to section 201(b). Thus, the
Commission’s section 201(b) authority
extends to the full range of ‘‘payphone
service[s],’’ as defined in section 276(d),
to the extent the practices for or in
connection with the payphone services
outside of our separate section 201(b)
authority cannot be separated from
practices for or in connection with the
payphone services within this authority.
338. The record contains no evidence
that IPCS providers can practicably
separate the practice of paying site
commissions in connection with the
interstate and international payphone
services within our section 201(b)
authority from the practice of paying
site commissions for or in connection
with the other payphone services within
the Commission’s section 276(d)
authority, including advanced
communications services, in order to
isolate the harms of such practices. As
explained above, payment of site
commissions undermines just and
reasonable rates not only when
providers directly increase IPCS rates to
pass through site commission payments,
but also through the marketplace
PO 00000
Frm 00062
Fmt 4701
Sfmt 4700
distortions that result. There is no
evidence that the marketplace
distortions arising from the practice of
paying site commissions can practicably
be separated into interstate, intrastate,
international or non-section 201(b)
regulated services components. Indeed,
as the Wright Petitioners explain, ‘‘IPCS
providers cannot practicably separate
the general practices that may apply
broadly to IPCS providers, which all
offer both interstate and intrastate
services, themselves into interstate and
intrastate components.’’ Further, we
anticipate that enough aggregate
revenues are potentially at stake for
those services outside of our direct
authority under section 201(b) that even
allowing carriers’ continued payments
of site commissions only associated
with those services is likely to lead to
marketplace distortions that undermine
our ability to ensure just and reasonable
interstate and international IPCS rates.
Thus, consistent with the precedent
discussed above, we conclude that this
inseverability allows us to prohibit the
practice of paying site commissions in
connection with intrastate, interstate,
international, jurisdictionally mixed, or
jurisdictionally indeterminate audio or
video IPCS under section 201(b).
7. Safety and Security Costs
339. Historically, the Commission has
recognized that communications
services for incarcerated people are
different than communications services
offered to the general public due, in
part, to certain safety and security
measures needed to adapt
communications services to the carceral
context. The Martha Wright-Reed Act
not only requires that the Commission
adopt a compensation plan ensuring
that IPCS rates and charges are just and
reasonable, but also mandates that in
determining those rates the Commission
‘‘shall consider costs associated with
any safety and security measures
necessary to provide’’ IPCS. We find
that, in order to give effect to the
requirements of the Martha Wright-Reed
Act, we must apply the Commission’s
traditional ratemaking standard, the
used and useful standard, to determine
whether any costs of safety and security
measures are properly recoverable
through regulated rates. Based on the
record and data submitted in response
to the 2023 Mandatory Data Collection,
we determine that safety and security
costs related to compliance with
CALEA, as well as those incurred for
communications security services, are
generally appropriate for recovery
through regulated IPCS rates, consistent
with the Martha Wright-Reed Act. In the
instructions to the 2023 Mandatory Data
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Collection, WCB and OEA divided
potential safety and security measures
into seven categories and requested that
providers submit data allocating their
safety and security costs among the
categories. We also find that other types
of safety and security measures,
including law enforcement support
services, communications recording
services, communications monitoring
services, and voice biometrics services,
are generally not appropriate for
recovery through regulated IPCS rates.
Finally, learning from the 2023
Mandatory Data Collection, we make
modest adjustments in our rate-setting
process to ensure that the costs of all
safety and security measures that are
properly included in regulated IPCS
rates are, in fact, recoverable.
ddrumheller on DSK120RN23PROD with RULES2
a. Background
340. Prior to the 1984 breakup of
AT&T, pricing for communications for
incarcerated people largely mirrored
that of the broader market. After the
breakup, however, former safety and
security service providers began
providing communications services,
using ‘‘their security and surveillance
services to carve out this niche micromarket for themselves.’’ As Worth Rises
explains, since that time, ‘‘the
corrections landscape [has seen] the
widespread adoption of an increasing
array of security and surveillance
services, with IPCS consumers bearing
the costs.’’ As the 2023 Mandatory Data
Collection amply demonstrates, costs
broadly understood as reflecting safety
and security measures now represent
the largest single component of reported
costs in the IPCS industry.
(i) The Commission’s Historical
Consideration of Safety and Security
Measures
341. The Commission first began to
assess the role safety and security
measures play in the provision of
inmate calling services in the 1990s. In
a 1996 declaratory ruling, it determined
the proper regulatory treatment of
certain safety and security measures
such as call blocking, restricting called
parties, and call tracking under the
then-relevant regulatory framework. The
then-relevant regulatory framework,
commonly known as the Computer II
framework, distinguished between two
types of computer processing
applications offered over common
carrier transmission facilities: ‘‘basic
services,’’ which were defined ‘‘as the
provision of ‘pure transmission
capability over a communications path
that is virtually transparent in terms of
its interaction with customer supplied
information’’; and ‘‘enhanced services,’’
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
which were defined as services that
‘‘employ computer processing
applications that act on the format,
content, code, protocol or similar
aspects of the subscriber’s transmitted
information; provide the subscriber
additional, different, or restructured
information; or involve subscriber
interaction with stored information.’’ In
analyzing these functionalities, the
Commission framed such measures as
services that ‘‘essentially help[ ]
corrections officials to determine
whether a transmission path may be
established.’’ The Commission
compared ‘‘screening and blocking
features employed by correctional
officials to monitor inmate telephone
usage’’ to ‘‘services offered in the
network that help customers screen or
pre-select callers for acceptance or
rejection do not go beyond providing a
basic transmission channel and
facilitating the customer’s use of that
transmission channel.’’ The
Commission viewed these services as
contributing to the provision of the
underlying communications service. In
that same timeframe, however, the
Commission began to raise concerns
about the costs of safety and security
measures when it sought comment on
whether it should implement ‘‘rate caps,
to remedy high charges to the billed
party for collect calls initiated by prison
inmates.’’ The Commission described
possible security measures as including
call blocking, approved number lists,
call length limitations, and total calls
permitted to specific individuals. It
contemplated that ‘‘[p]risons may also
need to be able to monitor calls and
even tape them.’’
342. A few years later, in the 2002 Pay
Telephone Order (67 FR 17009, April 9,
2002), the Commission began to address
the increasing number and type of safety
and security measures available to
correctional facilities and their
associated costs. While the Commission
considered traditional security
measures, such as call blocking,
restrictions on three-way calling, and
approved number lists, the Commission
addressed, for the first time, security
services that primarily served basic law
enforcement functions such as
providing ‘‘detailed, customized reports
for correctional facility officials.’’ The
record then before the Commission
showed a shift from selective, targeted
surveillance services to requirements for
‘‘listening and recording capabilities for
all calls.’’ The Commission also
addressed the issue of the costs of these
measures. While recognizing that ‘‘the
provision of inmate calling services
implicates important security concerns
PO 00000
Frm 00063
Fmt 4701
Sfmt 4700
77305
and, therefore, involves costs unique to
the prison environment,’’ the
Commission nonetheless declined to
raise rates relating to inmate calling
services based on safety and security
costs, expressing the hope that lower
rates might lead to ‘‘more cost-effective
security protections.’’ Raising concerns
about the imposition of ‘‘expensive
security costs,’’ the Commission sought
comment on ‘‘inmate calling service
practices that may serve legitimate
security needs but have the unintended,
and perhaps unnecessary, effect of
increasing the costs incurred by inmates
and their families.’’ The Commission
likewise sought comment on
‘‘alternatives to collect calling in the
inmate environment that might result in
lower rates for inmate calls while
continuing to satisfy security concerns.’’
343. In the 2013 ICS Order, the
Commission again acknowledged the
importance of security features in the
provision of inmate calling services,
while emphasizing that ‘‘ICS rate reform
has not compromised the security
requirements of correctional facilities.’’
In establishing ‘‘conservative’’ interim
ICS rates, the Commission, on the
record before it, took into account
‘‘security needs as part of the ICS rates
as well as the statutory commitment to
fair compensation.’’ These interim rates
were based on the requirement of fair
compensation in the language of section
276 at the time. Based on data in the
record, the interim rates
‘‘demonstrate[d] the feasibility of
providing ICS on an on-going basis to
hundreds of thousands of inmates
without compromising the levels of
security.’’ The record led the
Commission to include in the rates the
costs of ‘‘sophisticated security
features—including biometric caller
verification based on voice analysis, and
sophisticated tracking tools for law
enforcement.’’ While traditional security
measures were still deployed virtually
universally, the record indicated that
additional security features had become
available and were primarily designed
to assist law enforcement in discharging
its core functions, including
investigative work, gathering evidence,
storing call recordings for use in court
proceedings, and preparing reports for
facilities. The Commission was
cognizant of the ‘‘critical security needs
of correctional facilities,’’ particularly
used to aid law enforcement in the
successful prosecution of ‘‘hundreds’’ of
crimes. The Commission nevertheless
added the limiting principle that
security costs must have an appropriate
nexus to the provision of ICS to be
recoverable through ICS rates. Such
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77306
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
costs likely included the costs of
security features inherent in the
network, including ‘‘the costs of
recording and screening calls, as well as
the blocking mechanisms the ICS
provider must employ to ensure that
inmates cannot call prohibited parties.’’
The Commission also referenced ‘‘more
sophisticated security features’’ such as
‘‘biometric caller verification based on
voice analysis and sophisticated
tracking tools for law enforcement.’’
While the Commission ultimately
included the costs of advanced security
features such as continuous voice
biometric identification in the interim
rates it adopted, it did so on the basis
of limited data on industry costs since
the Commission had not yet conducted
a data collection to obtain
comprehensive industry data. Contrary
to what Securus claims, we do not
improperly reverse findings in the 2013
ICS Order regarding safety and security
costs with our actions today. Given the
nature of the highly circumscribed
record at the time of the 2013 ICS Order,
it does not follow—and the Martha
Wright-Reed Act does not say—that the
Commission must include safety and
security costs it has previously included
in the rates in the rate caps it adopts
today pursuant to the Martha WrightReed Act. In any event, as set forth in
the analysis that follows, the record now
before us, which is far more robust than
the record that existed at the time of the
2013 ICS Order, persuades us to reach
a different conclusion regarding certain
safety and security measures than the
Commission may have reached
previously.
344. By 2020, the Commission had
begun to give increased scrutiny to the
role safety and security measures played
in the provision of IPCS and the extent
to which cost recovery for the increasing
array of security and surveillance
measures was appropriate through
inmate calling services rates. In the 2020
ICS Notice, the Commission sought
comment on whether ‘‘safety and
surveillance costs in connection with
inmate calling services should be
recovered through inmate calling
service rates.’’ It noted that ‘‘[a]s public
interest groups [had] pointed out,
correctional facilities did not pass on
the costs of other security measures,
such as scrutinizing physical mail, to
incarcerated people and their families.’’
345. In the 2021 ICS Order, the
Commission observed that the record
provided in response to the 2020 ICS
Notice did not allow it to determine
‘‘whether security and surveillance
costs that correctional facilities claim to
incur in providing inmate calling
services are ‘legitimate’ inmate calling
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
services costs that should be
recoverable.’’ Some commenters
encouraged the Commission to exclude
all such costs, arguing that security
services were ‘‘not related to the
provision of communication service and
provide[d] no benefit to consumers’’ and
‘‘not related to [the] ‘communications
functions’ ’’ of ICS. Certain providers
and the National Sheriffs’ Association
called for the opposite, arguing that
‘‘correctional facilities incur
administrative and security costs to
provide incarcerated people with access
to [inmate calling services]’’ and that
these costs should be recovered through
calling rates. The Commission found,
however, that the data provided in
support of this position did not allow it
to ‘‘isolate legitimate telephone callingrelated’’ costs from ‘‘general security
and surveillance costs in correctional
facilities that would exist regardless of
inmate calling services.’’ Based on the
unreliability of the data provided, the
Commission found that it had no
‘‘plausible method’’ for determining
recoverable security and surveillance
costs.
346. At the same time, in 2021, the
Commission sought comment on
security and surveillance costs and
specifically whether some securityrelated costs should ‘‘more
appropriately be deemed to be general
security services that are added on to
inmate calling services but not actually
necessary to the provision of the calling
service itself.’’ The Commission asked
whether providers are in fact providing
‘‘two different services,’’ including ‘‘a
communication service that enables
incarcerated people to make telephone
calls’’ and ‘‘a separate security service
that aids the facility’s general security
efforts but would more appropriately be
paid for directly by the facility rather
than by the users of the communications
service who receive no benefit from
these security features that are
unnecessary to enable them to use the
calling service.’’ The Commission also
referenced a representation made by one
provider listing the basic security
measures required to provide service
and acknowledging that ‘‘anything more
than this is not required for secure
calling and that additional products are
‘gold-plated offerings.’’ The provider
suggested that ‘‘a basic phone system
requires security related to identifying
the incarcerated individual placing a
call, restricting who that individual can
and cannot call, providing the called
party with the ability to accept, reject,
or block the caller, and providing the
facility with the ability to monitor and
record calls.’’ As a result, the
PO 00000
Frm 00064
Fmt 4701
Sfmt 4700
Commission sought comment on
‘‘legitimate’’ security features, how to
distinguish such features from security
relating to the facility as a whole, and
how to isolate and quantify such costs.
In 2022, the Commission reiterated
these requests for comment and asked
about the extent to which ‘‘the security
and surveillance costs that providers
[had] included’’ in their responses to the
Third Mandatory Data Collection
‘‘relate[d] to functions that meet the
used and useful standard.’’
(ii) The Martha Wright-Reed Act and
Safety and Security
347. Section 3(b)(2) of the Martha
Wright-Reed Act requires that the
Commission, in implementing the Act
including promulgating regulations and
determining just and reasonable rates,
‘‘consider costs associated with any
safety and security measures necessary
to provide’’ IPCS. As a result, in 2023,
the Commission sought comment on
this directive. It requested comment on
how the term ‘‘necessary’’ should be
interpreted, particularly asking whether
it should follow D.C. Circuit precedent
finding that ‘‘necessary’’ ‘‘must be
construed in a fashion that is consistent
with the ordinary and fair meaning of
the word, i.e., so as to limit ‘necessary’
to that which is required to achieve a
desired goal.’’ The Commission also
asked for detailed, specific comment on
which safety and security measures are
‘‘necessary,’’ as contemplated by the
Act, to the provision of IPCS and why
those measures are ‘‘necessary.’’ Finally,
it sought comment on whether it
‘‘should interpret the Martha WrightReed Act’s use of the term ‘safety and
security’ as having the same or different
meaning as the term ‘security and
surveillance’ previously used in this
proceeding.’’
(iii) 2023 Mandatory Data Collection
348. Pursuant to a delegation of
authority from the Commission, WCB
and OEA gathered data to attempt to
understand what safety and security
measures were offered by IPCS
providers, as well as their functions and
costs, among other purposes. The data
collection required that the providers
isolate the costs they incur in providing
safety and security measures from their
other costs, and then allocate their
safety and security measure costs into
seven categories on a company-wide
level, with an accompanying narrative
description of the services included in
each category. Providers were required
‘‘to allocate the annual total expenses
they incurred in providing safety and
security measures among seven
categories using the provider’s best
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
estimate of the percentage of those
expenses attributable to each category.’’
The providers were then required to
allocate all reported safety and security
costs at the facility level. Additionally,
they were required to allocate the
expenses in each category to four types
of services—audio IPCS, video IPCS,
ancillary services, and other products
and services.
349. These seven categories were
designed to ‘‘provide a comprehensive
and workable framework for dividing
safety and security measure costs into
reasonably homogenous groupings that
‘should capture all [safety and] security
costs,’ particularly with the addition of
multiple examples of costs for each
category.’’ A catch-all category for any
costs that did not fit within the other
categories was also added to ensure
completeness. The categories are: (1)
CALEA compliance measures, (2) law
enforcement support services, (3)
communications security services, (4)
communication recording services, (5)
communication monitoring services, (6)
voice biometrics services, and (7) other
safety and security measures.
350. Providers were required to
submit information regarding safety and
security measures in both cost data
format and narrative responses to an
excel and word template. For purposes
of the collection, ‘‘safety and security
measures’’ were defined as:
[A]ny safety or security surveillance
system, product, or service, including
any such system, product, or service
that helps the Facility ensure that
Incarcerated People do not
communicate with persons they are not
allowed to communicate with; helps
monitor and record on-going
communications; or inspects and
analyzes recorded communications.
Safety and Security Measures also
include other related systems, products,
and services, such as a voice biometrics
system, a personal identification
number system, or a system concerning
the administration of subpoenas
concerning communications. The
classification of a system, product, or
service as a Safety and Security Measure
does not mean that it is part of a
Provider’s IPCS-Related Operations.
351. Providers were then instructed to
provide a variety of information,
including whether safety and security
measures differed among facilities,
contracts, audio/video services, or other
factors. Total annual expenses, billed
revenues, company-wide financial
information, and service-specific
financial information were requested, as
well as allocations of such data among
the seven safety and security categories.
Providers were instructed ‘‘to report in
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the Excel template, for each category,
the Company’s best estimate of the
percentage of its total Annual Total
Expenses for Safety and Security
Measures that is attributable to the
measures within that category.’’ Safety
and security measures were to be
identified and described based on these
categories.
352. Providers’ responses give for the
first time a comprehensive picture of the
dominant role that the costs of safety
and security measures now play in the
IPCS industry’s cost structure. Reported
safety and security measure costs now
represent the single largest category of
reported costs. The industry reported
total safety and security costs of
approximately {[REDACTED]}. The
providers’ data show that those costs
now represent approximately
{[REDACTED]} of all reported IPCS
costs and that reported safety and
security measure costs significantly
exceed the total costs of providing both
audio and video IPCS combined. Audio
and video IPCS combined represent
approximately {[REDACTED]} of all
reported IPCS costs, inclusive of site
commissions. On a total industry cost
per-minute basis, reported safety and
security costs are {[REDACTED]}, while
reported costs of providing IPCS are
{[REDACTED]}.
353. The reported data also indicate
that different-sized providers incur
markedly different safety and security
measure costs on a per-minute basis. For
example, the two largest providers
reported incurring {[REDACTED]} per
minute in costs for safety and security
measures, whereas the range for the rest
of the industry is between $0.001 and
$0.006 per minute for audio IPCS and
between $0.0001 and $0.024 per minute
for video IPCS.
(b) Our Approach To Considering Safety
and Security Costs Under Section
3(b)(2) of the Martha Wright-Reed Act
354. Before reaching our assessment
of providers’ separately reported costs of
safety and security measures, we
address the statutory interpretation
underlying our consideration of these
matters under the Martha Wright-Reed
Act and the Communications Act.
(i) The Directive To ‘‘Consider’’ Safety
and Security Costs Under Section
3(b)(2) of the Martha Wright-Reed Act
355. Pursuant to section 3(b)(2) of the
Martha Wright-Reed Act, we will
evaluate as part of our ratemaking
exercise under section 276(b)(1)(A) of
the Communications Act ‘‘costs
associated with any safety and security
measures necessary to provide’’ IPCS.
This is a familiar task of the sort the
PO 00000
Frm 00065
Fmt 4701
Sfmt 4700
77307
Commission has long undertaken when
seeking to ensure just and reasonable
rates, where it has evaluated costs and
expenses of various kinds for which
providers sought recovery through
regulated rates. The Commission
likewise has historical experience with
similar assessments of safety and
security measures raised in the IPCS
context specifically. Our conclusion that
section 3(b)(2) of the Martha WrightReed Act simply informs how we
approach our traditional rate-setting
function—rather than establishing some
kind of unique or anomalous approach
specific to safety and security—flows
from the statutory text and context,
along with the relevant regulatory
history that served as the backdrop to
the Martha Wright-Reed Act.
356. In 2023, the Commission sought
comment on the meaning of ‘‘shall
consider’’ as used in section 3(b)(2) of
the Martha Wright-Reed Act, and on
what discretion, if any, that phrase gives
the Commission in its ratemaking
determinations. We agree with Pay Tel
that the word ‘‘shall,’’ is mandatory, not
permissive, such that we ‘‘must
consider costs associated with necessary
safety and security measures in setting
just and reasonable rates.’’ We conclude
that the requirement that we ‘‘consider’’
the costs of safety and security measures
means that we must ‘‘reach . . . express
and reasoned conclusion[s]’’ regarding
such costs—as relevant here, as part of
the process of determining just and
reasonable rates for IPCS. Consistent
with prior interpretations of similar
statutory language, we do not read
section 3(b)(2) of the Martha WrightReed Act as a directive mandating the
recovery of the costs of all safety and
security measures identified by
providers or facilities; or as inherently
requiring the Commission ‘‘to give any
specific weight’’ to such costs as a
statutory matter. Instead, the text of that
provision merely requires us to examine
available evidence regarding ‘‘costs
associated with any safety and security
measures necessary to provide’’ IPCS
along with the various other cost claims
we review as part of our overall
approach to ensuring just and
reasonable rates and charges for IPCS
that also yield fair compensation for
providers. Contrary to the National
Sheriffs’ Association’s characterization
of 2023, nowhere in that Notice did we
interpret ‘‘consider’’ to mean that we are
‘‘required to treat all safety and security
costs identified by providers . . . as
costs recoverable through rates for
communications services for
incarcerated people.’’ Rather, the
Commission sought comment on
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77308
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
whether such an interpretation would
be appropriate, or whether another,
contrary interpretation would be
correct.
357. Commenters generally support
this interpretation. As the Public
Interest Parties explain, Congress did
not say that the Commission ‘must
include’ or ‘shall allow for the recovery
of’ the safety and security costs claimed
by IPCS providers. Instead, it deferred to
the Commission’s expertise and
discretion, requiring only that it
consider costs associated with safety
and security measures when developing
rate caps. While the Commission must
therefore consider these costs, it is
plainly not obligated to pass them
through in the rate caps ultimately
adopted.
We agree with these views.
358. Our interpretation of section
3(b)(2) is reinforced by the broader
statutory context. In particular, section
4 of the Martha Wright-Reed Act
provides that nothing in that Act ‘‘shall
be construed to . . . prohibit the
implementation of any safety and
security measures related to [IPCS]
services at [correctional] facilities.’’ As
we explain above, when read together,
section 3(b)(2) of the Martha WrightReed Act is best understood as merely
requiring the Commission to evaluate
such costs as part of its just and
reasonable rate analysis, while section 4
simply makes clear that, in directing the
Commission to develop a compensation
plan to ensure just and reasonable IPCS
rates and charges, Congress did not
intend to prohibit correctional
institutions from adopting policies that,
in their judgment, are needed to
preserve safety and security.
359. Our understanding of section
3(b)(2) harmonizes it with the broader
regulatory history here, as well.
Considering costs associated with any
safety and security measures necessary
to provide IPCS as part of our used and
useful analysis reflects a continuation of
the sort of analyses the Commission has
long undertaken in the IPCS context.
And even apart from that particular sort
of evaluation, the Commission
otherwise also has long been involved
in assessing the technological
relationship between communications
service and safety and security measures
associated with IPCS. For example, in
the 2013 ICS Order, the Commission
explained that it would ‘‘likely’’ find it
appropriate to include costs—including
some safety and security costs—‘‘that
are closely related to the provision of
interstate ICS’’ in setting rates. And, in
2021, to help it determine the extent to
which certain security and surveillance
costs may be recovered through calling
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
services rates, the Commission sought
comment on the ‘‘types of security and
surveillance functions, if any, [that] are
appropriately and directly related to
inmate calling.’’ Thus, the focus of the
Commission’s inquiry has been to
identify costs associated with safety and
security measures that have a sufficient
nexus to IPCS to justify recovery of the
relevant costs or expenses through IPCS
rates.
360. The Commission’s evaluation of
the nexus between safety and security
measures and the provision of IPCS
evolved over time as the industry’s use
of such measures increased. The
Commission also has grappled with
limited data and record comment in
attempting these analyses. For instance,
in setting interim rate caps in the 2021
ICS Order, the Commission recognized
that the record then before it made it
impossible to determine the extent to
which security and surveillance costs
should be recovered through inmate
calling services rates. The Commission
therefore sought comment in 2021 on
the extent to which the services that
providers and facilities had identified as
security-related services should ‘‘be
deemed to be general security services
that are added onto inmate calling
services but not actually necessary to
the provision of the calling service
itself.’’ The Commission also sought
comment in that Notice on
methodologies that would help it isolate
and quantify ‘‘calling-related security
and surveillance costs from general
security and surveillance costs’’ that
providers and facilities incur. In 2022
the Commission reiterated its requests
for comment that would help it identify,
and quantify, the distinction between
safety and security measures directly
related to the provision of
communications services in correctional
institutions and the general provision of
safety and security in those institutions.
361. In sum, we read section 3(b)(2)
simply to direct the Commission to
evaluate the evidence before it regarding
the costs associated with any safety and
security measures necessary to provide
IPCS and make a reasoned judgment
about whether and to what extent such
costs should be included in just and
reasonable IPCS rates, consistent with
fair compensation for providers. This
flows from the statutory text and
context, and represents a continuation
of the ratemaking role the Commission
long has played in this context (and
others).
362. In light of what we see as the best
reading of section 3(b)(2) of the Martha
Wright-Reed Act, we are unpersuaded
by arguments that, as a statutory matter,
we must allow recovery of all costs
PO 00000
Frm 00066
Fmt 4701
Sfmt 4700
associated with safety and security
measures in IPCS rates. Some
commenters misunderstand section
3(b)(2) and argue that all safety and
security measures a facility identifies
are automatically necessary and
recoverable through regulated rates by
virtue of being selected by ‘‘experts.’’
The National Sheriffs’ Association
argues that ‘‘[t]he fact that a security or
safety measure is implemented in
connection with IPCS service makes it
a recoverable cost.’’ We disagree with
these contentions. Although section
3(b)(2) requires the Commission to
‘‘consider’’ costs associated with safety
and security measures necessary in
providing IPCS when determining just
and reasonable rates, commenters do
not persuasively demonstrate that, as a
textual matter, this requires more than
evaluating the available information in
the record and reaching a reasoned
decision. Consequently, we reject
commenters’ contrary interpretations
insofar as they would, as a statutory
matter, necessarily require recovery
through regulated IPCS rates of all costs
of safety and security measures
‘‘necessary’’ within the meaning of
section 3(b)(2), irrespective of the
specific basis for that ‘‘necessary’’
determination—whether giving
preclusive weight to correctional
facilities’ judgements, or some other
level of weight, or making the
determination on other grounds. And as
discussed above, our reading of section
3(b)(2) best accords with the statutory
context and the relevant regulatory
history. Indeed, contrary arguments
would require us to interpret section
3(b)(2) as establishing an anomalous
approach to ratemaking under the
Communications Act that would, at
least with respect to the costs of safety
and security measures, effectively
eliminate the role Congress intended the
Commission to play in determining just
and reasonable rates and, instead, place
that role in the hands of the providers
and facilities. While correctional
authorities certainly have expertise on
safety and security as a general matter,
Congress has not vested the authority in
them to decide which safety and
security costs should be recoverable in
IPCS rates—and a contrary reading of
section 3(b)(2) that took the issue of
safety and security cost recovery
through regulated IPCS rates out of the
Commission’s hands and placed it in
the control of providers and facilities
would raise private nondelegation
concerns. The Constitution limits the
government’s ability to empower a
private entity ‘‘to regulate the affairs’’ of
other private parties. The Constitution
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
permits such an assignment of authority
only if the entity ‘‘function[s]
subordinately’’ to a federal agency and
is subject to the agency’s ‘‘authority and
surveillance.’’ Of course, correctional
authorities remain free to determine and
implement whatever safety and security
measures they deem appropriate at the
correctional facility. Contrary to
assertions made by FDC, nothing in the
Report and Order prevents facilities
from implementing the safety and
security measures of their choice. But
under the statutory scheme, it is for the
Commission to determine any extent to
which the costs of such measures are
recoverable through regulated IPCS
rates. We consequently reject arguments
that section 3(b)(2) of the Martha
Wright-Reed Act requires recovery of all
costs associated with safety and security
measures in regulated IPCS rates.
(ii) The Scope of ‘‘Safety and Security
Measures’’ Under Section 3(b)(2) of the
Martha Wright-Reed Act
363. Section 3(b)(2) of the Martha
Wright-Reed Act requires us to consider
costs ‘‘associated with any safety and
security measures necessary to provide’’
IPCS. In 2023, the Commission sought
comment on whether it ‘‘should
interpret the Martha Wright-Reed Act’s
use of the term ‘safety and security’ as
having the same or different meaning as
the term ‘security and surveillance’
previously used in this proceeding.’’
The Commission has at different times
variously referred to the universe of
measures at issue as ‘‘security
measures,’’ ‘‘security features,’’
‘‘monitoring,’’ ‘‘security monitoring,’’
and ‘‘security and surveillance.’’ The
record before us is mixed. One
commenter suggests that ‘‘safety and
security’’ differs from ‘‘security and
surveillance’’ such that ‘‘it relieves the
Commission of considering surveillance
measures at all.’’ Others argue that
‘‘[t]he Commission should not interpret
‘safety and security’ to mean something
different than the term ‘security and
surveillance’ previously used in the
Commission’s IPCS proceedings.’’
364. We find that the best
interpretation of the two phrases is that
the ‘‘security and surveillance’’
measures of the sort that historically
have been the focus of this proceeding
fall within the scope of ‘‘safety and
security’’ measures under section
3(b)(2), and that we need not go further
at this time to more precisely define
whether the two phrases are
coextensive. The services previously at
issue in the Inmate Calling Services
proceeding, such as call blocking,
recording, and monitoring, are now
before us for consideration, and fit
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
within the scope of ‘‘safety and
security.’’ Although there is no express
reference to ‘‘surveillance’’ measures in
section 3(b)(2), the Commission not only
has considered such costs in the
proceedings that formed the backdrop
for the Martha Wright-Reed Act, but at
times suggested that ‘‘security and
surveillance’’ measures collectively
could be seen as involving ‘‘security.’’
Against that backdrop—and absent more
detailed textual arguments that the
language ‘‘safety and security’’ should
not be read to encompass surveillance of
the sort we historically have
considered—we find such surveillance
measures fall within the scope of ‘‘safety
and security measures’’ under section
3(b)(2) of the Martha Wright-Reed Act.
Because we do, in fact, consider the
relevant cost evidence in the record here
that even arguably could fall within the
scope of costs of ‘‘safety and security
measures’’ under section 3(b)(2), we
find it unnecessary to more precisely
define the ultimate scope and contours
of that statutory language at this time.
(iii) Which ‘‘Safety and Security
Measures’’ Are ‘‘Necessary To Provide’’
IPCS Under Section 3(b)(2) of the
Martha Wright-Reed Act
365. Section 3(b)(2) of the Martha
Wright-Reed Act mandates that, in
‘‘promulgating regulations necessary to
implement this Act and the
amendments made by this Act’’ and
‘‘determining just and reasonable rates,’’
the Commission ‘‘shall consider costs
associated with any safety and security
measures necessary to provide’’ IPCS. In
2023, the Commission requested
comment on how it should interpret the
term ‘‘necessary.’’ Consistent with
judicial precedent interpreting other
statutory uses of the term ‘‘necessary,’’
we interpret the term ‘‘necessary’’ in
section 3(b)(2) to mean ‘‘that which is
required to achieve a desired goal.’’
Commenters generally support this
interpretation. Commenters rely on both
judicial precedent and dictionary
definitions of the term ‘‘necessary.’’
366. Securus points out that this
interpretation of ‘‘necessary’’ ‘‘requires
identification of a desired goal.’’ We
agree and find that the Martha WrightReed Act identifies the ‘‘desired goal.’’
In pertinent part, section 3(b) of the
Martha Wright-Reed Act states that in
‘‘determining just and reasonable rates,’’
the Commission ‘‘shall consider costs
associated with any safety and security
measures necessary to provide’’ IPCS.
Those IPCS services, in turn, are
‘‘telephone service and advanced
communications services.’’ Based on
this language, we conclude that, for a
safety and security measure to be
PO 00000
Frm 00067
Fmt 4701
Sfmt 4700
77309
necessary, it must be required ‘‘for the
provision of telephone service and
advanced communications services to
incarcerated people.’’ In other words,
for a safety and security measure to be
necessary, it must be required for the
provision of communications services in
correctional institutions.
367. Some commenters claim that the
goal of safety and security measures ‘‘is
to prevent communications services
from being used to commit or facilitate
potential crimes, fraud, or other
abuses.’’ Commenters focusing on the
relationship between safety and security
measures and the commission of crimes
using IPCS fail to acknowledge the
benefits that increased communications
have on the incarcerated population and
the resulting impact on facility safety.
We do not dispute, and indeed the
Commission has long recognized, that
communications services for
incarcerated people occur in a unique
context that ‘‘implicate[] important
security concerns.’’ To that end, the
Commission has recognized that there
are certain features that ensure these
communications services are available
to incarcerated people and can be used
safely. The Martha Wright-Reed Act
envisions such an outcome by directing
the Commission to consider safety and
security measures ‘‘necessary to
provide’’ communications services ‘‘in
correctional institutions.’’
368. We part ways with ViaPath and
other commenters who assert that all
safety and security measures are
necessary to provide IPCS. The Act’s
use of the limiting term ‘‘necessary’’
implies that Congress did not intend all
safety and security measures would be
treated as necessary but rather
implicitly suggests some limitation on
the scope of measures the Commission
is to consider. Thus, while we do not
dispute the notion that the general goal
of safety and security measures is to
ensure that IPCS are used safely, it does
not follow that any and all safety and
security measures are necessary to
achieve that goal as Securus and others
would suggest. We find certain
commenters’ invocation of ‘‘contraband
devices’’ in connection with its
discussion of safety and security for
IPCS to be inapt. The issue of
contraband devices in correctional
institutions is the subject of a separate
proceeding at the Commission and is
unrelated to our implementation of the
Martha Wright-Reed Act or the
consideration of the costs of necessary
safety and security measures for
inclusion in just and reasonable rates for
IPCS. Nevertheless, the record suggests
that one of reasons for the proliferation
of contraband devices are the high IPCS
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77310
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
rates that the families of incarcerated
people cannot afford to pay. We
similarly find inapposite the National
Sheriffs’ Association’s contention that
because ‘‘security and safety measures
protect inmates by reducing crime
within the facility,’’ such services are
necessarily related to the provision of
IPCS. Finally, we find inapposite some
providers’ contentions that the
Commission has rejected the protection
of the public as a permissible safety and
security function. While section 1 of the
Communications Act makes clear that
the Commission was created to promote
the public safety, among other purposes,
those other purposes include ‘‘mak[ing]
available, so far as possible . . .
communication service . . . at
reasonable charges’’ and promoting ‘‘the
national defense.’’ It does not follow
that in mandating that we ensure just
and reasonable rates and charges for all
incarcerated people’s communication
services and that we promote the
‘‘widespread deployment of payphone
services to the benefit of the general
public,’’ Congress intended that IPCS
consumers should finance any measure
that generally promotes public safety or
the national defense. Instead, we think
that Congress intended a narrower
focus, one in which we determine
which costs IPCS consumers can justly
and reasonably be required to finance.
That type of determination is one well
known to the Commission and under
which we must evaluate different types
of capital costs and expenses to
determine which are recoverable
through regulated rates.
369. Although commenters that
address the interplay between the
‘‘necessary’’ standard and ‘‘used and
useful’’ framework contend that
‘‘necessary’’ is more limited than ‘‘used
and useful,’’ we need not resolve that
ultimate interplay here. Although we
agree with commenters that GTE Serv.
Corp. is relevant precedent regarding
the interpretation of the term
‘‘necessary’’ in a statute, we are not
persuaded that it resolves the question
of the interplay between ‘‘necessary’’ in
section 3(b)(2) of the Martha WrightReed Act and the ‘‘used and useful’’
standard we employ when setting just
and reasonable rates. We see no
indication on the face of that opinion
that the Commission’s use of the
terminology ‘‘used or useful’’ in
assessing whether collocation
obligations should apply under section
251(c)(6) of the Communications Act
was intended to draw upon, or overlap
with, the ‘‘used and useful’’ analysis
historically employed in the ratemaking
context. Independently, the D.C. Circuit
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
subsequently has read GTE Serv. Corp.
(as well as Iowa Util. Board) as fully
consistent with the notion that the
statutory context is relevant when
interpreting the term ‘‘necessary.’’ And
without definitively resolving the
interplay of terms, we note that in a
statutory context where Congress has
directed the Commission to merely
‘‘consider’’ certain costs when setting
just and reasonable rates, it would not
be an absurd result for the universe of
costs subject to consideration to be
broader than the universe of costs
ultimately allowed for recovery in
regulated rates. Thus, although we find
GTE Serv. Corp. to be relevant to the
interpretation of ‘‘necessary’’ in a
general way, we are not currently
persuaded to rely on it in the more
specific manner that some commenters
have advocated. We disagree with
Securus’s claim that by not reaching a
determination on which safety and
security costs are ‘‘necessary’’ to the
provision of IPCS, we have somehow
‘‘render[ed] the entire ‘necessary’
provision found at section 3(b)(2) of the
MWR Act superfluous.’’ As we have just
explained, by considering all safety and
security costs, it necessarily follows that
we have complied with the Martha
Wright-Reed Act’s mandate that we
‘‘consider costs associated with any
safety and security measures necessary
to provide’’ IPCS in setting just and
reasonable rates. Our mode of
‘‘considering’’ such costs via the ‘‘used
and useful’’ framework thus is distinct
from the identification of the universe
costs to be considered in the first
instance—and our approach therefore
does not conflate the terms ‘‘necessary’’
and ‘‘used and useful’’ as Securus
contends. Consistent with our
conclusion in the prior section
regarding the interpretation of ‘‘safety
and security,’’ we have no need to more
precisely define the ultimate scope and
contours of the statutory language
‘‘necessary’’ at this time because we do,
in fact, consider the relevant cost
evidence in the record here that even
arguably could fall within the scope of
costs of safety and security measures
required to be considered as
‘‘necessary’’ under section 3(b)(2).
Stated differently, the cost of any safety
and security measure that even arguably
could be viewed as necessary to the
provision of IPCS—under any
understanding of ‘‘necessary’’—is a cost
that we evaluate, and reach a reasoned
decision about, under the used and
useful framework that we employ to
determine just and reasonable IPCS
rates in the Report and Order. Because
we evaluate the costs of all safety and
PO 00000
Frm 00068
Fmt 4701
Sfmt 4700
security measures that could arguably
fall within the scope of the term
‘‘necessary,’’ we do not opine on the
necessity of safety and security
measures that correctional facilities may
implement.
(iv) Consideration of Safety and Security
Costs Under the Used and Useful
Framework
370. While section 3(b)(2) of the
Martha Wright-Reed Act requires us to
‘‘consider’’ certain safety and security
costs when determining just and
reasonable rates, as we explain above,
we employ the ‘‘used and useful’’
framework to determine what costs and
expenses can be recovered through just
and reasonable IPCS rates.
Consequently, our consideration of
safety and security costs as required by
section 3(b)(2)—and with respect to
other safety and security costs raised in
the record—occurs within the context of
that ‘‘used and useful’’ analysis. In
particular, we rely on the ‘‘used and
useful’’ framework and its associated
prudent expenditure standard to assess
which costs should be included in the
rate caps we adopt to determine just and
reasonable IPCS rates. In applying the
used and useful standard, we consider
whether a cost ‘‘promotes customer
benefits, or is primarily for the benefit
of the carrier,’’ as well as whether that
cost was prudently incurred. There are
several elements of the Commission’s
used and useful analysis. First, the
Commission considers the need to
compensate providers ‘‘for the use of
their property and expenses incurred in
providing the regulated service.’’
Second, the Commission looks to the
‘‘equitable principle that ratepayers
should not be forced to pay a return
except on investments that can be
shown to benefit them.’’ In this regard,
the Commission considers ‘‘whether the
expense was necessary to the provision
of’’ the services subject to the ‘‘just and
reasonable’’ standard. And third, the
Commission considers ‘‘whether a
carrier’s investments and expenses were
prudent (rather than excessive).’’ We
note that in considering whether
expenses are ‘‘necessary to the provision
of’’ the services subject to the ‘‘just and
reasonable standard,’’ the used and
useful framework accords with the
Commission’s prior analysis of safety
and security measures which sought to
determine the extent to which those
measures were ‘‘directly related to the
provision of IPCS.’’
371. Since 2002, the Commission has
recognized the need to ‘‘balance the
laudable goal of making calling services
available to inmates at reasonable rates,
so that they may contact their families
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
and attorneys, with necessary security
measures and costs related to those
measures.’’ Security measures that
might have ‘‘the unintended, and
perhaps unnecessary, effect of
increasing the costs incurred by inmates
and their families’’ have long concerned
the Commission, as has the lack of data
to properly analyze these costs. For
years, stakeholders have debated
whether various safety and security
measures are part of inmate calling
services, as certain providers and the
National Sheriffs’ Association contend,
or are ‘‘not related to the provision of
communication service’’ and of ‘‘no
benefit to consumers.’’ Prior
deficiencies in the record, including the
absence of any meaningful data on the
costs incurred in providing safety and
security measures, have prevented the
Commission from determining the
extent to which safety and security costs
may be recovered through inmate
calling services rates.
372. We now have a sufficiently
robust record to apply the used and
useful framework for the first time to the
safety and security measures that
providers and the National Sheriffs’
Association claim are part of IPCS and
to quantify, to the extent the data
permit, the costs providers and facilities
incur in implementing those safety and
security measures. Though far from
perfect, that record allows us to
establish zones of reasonableness that
capture, for each rate cap tier, the
approximate range within which the
providers’ and facilities’ used and
useful safety and security fall. The
record provides discrete data on the
costs providers claim to incur in
providing seven categories of safety and
security measures and allows us to
make reasoned decisions about whether
the measures in each category are
generally used and useful in the
provision of IPCS. And the record
allows us to compensate for the
imprecisions in the data before us—
regarding both providers’ and facilities’
costs of providing used and useful
safety and security measures—in
selecting ‘‘just and reasonable’’ rate caps
from within the zones of
reasonableness. The record before us
now thus provides far greater detail on
the nature and purposes of the safety
and security measures that providers
deploy, the extent of that deployment,
and the measures’ underlying costs than
was previously available to the
Commission. Consistent with this
expanded record, our analysis builds
upon and, in certain instances where
appropriate, departs from the
Commission’s prior analyses of safety
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
and security measures in the inmate
calling services context.
373. As discussed below, application
of the used and useful framework to the
safety and security costs that providers
and the National Sheriffs’ Association
claim are IPCS costs helps us balance
the need to ensure reasonable recovery
of providers’ investments and expenses
used in providing IPCS with the
requirement that we provide for
recovery through regulated rates when
the costs incurred are used and useful
to the provision of IPCS and therefore
promote customer benefits. Securus
criticizes the Commission’s application
of the used and useful framework to
safety and security costs as being solely
focused on whether a given cost or
expense benefits IPCS consumers. We
disagree. As previously explained,
application of the used and useful
framework balances the need to ensure
that IPCS providers receive reasonable
recovery of their investments and
expenses in providing IPCS with the
need to ensure that ratepayers bear only
the costs of providing the regulated
service to them. This is what we do here
in evaluating all of the safety and
security costs IPCS providers have
reported and determining the extent to
which tasks associated with those costs
provide a benefit to IPCS consumers
such that they may be recovered
through regulated rates. In allowing,
within the limits of the record before us,
only those investments and expenses
which are used and useful to be
recovered from ratepayers, we ‘‘ensure
that current ratepayers bear only
legitimate costs of providing service to
them.’’ As one commenter explains,
‘‘[t]he Commission has applied the used
and useful standard for decades when
considering whether a provider can
recover costs for an asset or service, or
in this case, necessary safety and
security measures.’’ This is particularly
relevant with regard to the safety and
security measures that providers furnish
pursuant to their contracts with
correctional institutions, the purposes
and scope of which have evolved from
simply facilitating the provision of voice
communications in correctional
institutions to broader measures
designed to detect potential criminal
activity and enforce the criminal laws,
among other non-communications
purposes. For example, in responses to
the 2023 Mandatory Data Collection,
when asked to describe various safety
and security measures, providers
explain how these measures assist law
enforcement in investigating potential
criminal activity and building cases,
create reports for facilities and law
PO 00000
Frm 00069
Fmt 4701
Sfmt 4700
77311
enforcement, analyze data, and store
records for use in court. Securus makes
clear that its subpoena and warrant
services respond to requests by
‘‘prosecutors, investigators, district
attorneys, police officers, [and]
detectives.’’
374. The record is replete with
examples of costly services that are
unrelated (or only marginally related) to
providing IPCS and thus provide no (or
only marginal) benefits to ratepayers in
their capacity as consumers of IPCS.
Safety and security measures that do not
facilitate the provision of underlying
communications services in correctional
institutions are not used and useful.
While law enforcement, correctional
facilities, and the public at large may
benefit from these measures, the Martha
Wright-Reed Act mandates that we
ensure just and reasonable IPCS rates for
incarcerated people and their loved
ones. Allowing the costs of measures
that are not used and useful in the
provision of IPCS to be recovered
through IPCS rates would be
inconsistent with that mandate.
Similarly, the costs of safety and
security measures that provide a dual
purpose—that are both used and useful
in providing IPCS and in furthering
another purpose—should be borne by
both ratepayers and facilities.
375. Although the Commission has
historically recognized that safety and
security measures were, at least in some
sense, inherent in providing
communications services for
incarcerated people, it has been clear
from the outset that only certain safety
and security costs should be recovered
through regulated rates. In the 2013 ICS
Order, for example, the Commission
determined that recovery of the costs of
safety and security measures should be
limited to ‘‘costs that are reasonably and
directly related to the provision of ICS’’
and indicated that such recovery
‘‘would likely include . . . costs
associated with security features
relating to the provision of ICS,’’ but
that ‘‘costs relating to general security
features of the correctional facility
unrelated to ICS’’ would be excluded.
This dichotomy has remained a staple of
Commission decisions attempting to
‘‘balance[e] the unique security needs
related to providing
telecommunications service in
correctional institutions,’’ with the
statutory requirements of fair
compensation for providers, and, to the
extent interstate and international audio
services were involved, just and
reasonable rates for consumers and
providers. The Commission did not then
and has not since made a determination
of which safety and security measure
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77312
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
costs should be recoverable in IPCS
rates. We therefore reject Securus’s
suggestion that ‘‘Commission precedent
is crystal clear that the costs of safety
and security measures such as
recording, monitoring, biometrics, and
related services are inherent in the
provision of communications services to
the incarcerated.’’ The mandate in
section 276(b)(1)(A) that we ensure just
and reasonable rates for consumers, in
conjunction with the Martha WrightReed Act’s requirements that we
consider safety and security costs
‘‘necessary’’ to the provision of IPCS,
requires that we reevaluate this
precedent at any rate.
376. In arguing that all safety and
security costs must be recoverable
through IPCS rates, some commenters
ignore the context of the Commission’s
prior discussion of safety and security
measures. Instead, they rely on the fact
that the Commission has previously
recognized the relationship between
safety and security measures and IPCS,
but ignore that this relationship was
always predicated on a direct link to the
provision of the underlying
communications service. Thus, while
the Commission has previously
recognized that communications
services for incarcerated people
‘‘implicate[ ] important security
concerns,’’ and that ‘‘costs associated
with security features relating to the
provision of ICS’’ may constitute
recoverable costs, the Commission has
never concluded that the costs of all—
or even a substantial portion—of the
safety and security measures that
providers often voluntarily choose to
offer or correctional facilities may
choose to require should be recovered
from consumers. On the contrary, while
the precise formulation for inclusion
has varied, Commission precedent
establishes that only the costs of those
safety and security measures with a
sufficient nexus to the provision of IPCS
should be recovered through inmate
calling services rates. Allowing recovery
of the costs associated with all safety
and security measures that providers
decide to offer or that facilities choose
to deploy would be inconsistent with
that precedent and, more broadly, with
the requirement that our compensation
plan for IPCS ensure ‘‘just and
reasonable’’ rates and charges.
377. We similarly find overbroad
Securus’s suggestion that we must
‘‘include safety and security costs in
IPCS rates absent a finding that those
costs bear no relation to the provision of
telephone or video services.’’ As an
initial matter, nothing in the statute
suggests such a presumption. In fact, the
statute implies the opposite—while it
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
requires the Commission to consider
these costs, in doing so, it gives the
Commission latitude to exercise its
judgment regarding the ultimate just
and reasonable rate determination.
Thus, we agree with Securus that the
Commission does not have ‘‘unfettered
discretion to reject necessary costs.’’
And we do not reject any necessary
costs that also satisfy the used and
useful standard. As we explain above,
we consider all cost evidence in the
record regarding any safety and security
measures that could be viewed as
necessary to the provision of IPCS,
under any understanding of the term
‘‘necessary.’’ We evaluate those costs
under our traditional used and useful
ratemaking standard to determine the
extent to which those costs are
recoverable from IPCS consumers
through regulated rates. Securus’s
approach also incorrectly presumes that
any cost that a provider or a correctional
institution reports as having been
incurred for safety and security
measures must automatically be
included in our rate cap calculations.
We find instead that those calculations
should reflect, to the extent the record
permits us to make such a
determination, only those costs that we
affirmatively find are used and useful in
the provision of IPCS. More
fundamentally, Securus’s test would
require IPCS consumers to bear the full
costs of safety and security measures
that are not directly related to the
provision of IPCS, but rather are more
related to the costs of incarceration
generally, or are used principally for
broader law enforcement or
investigative purposes.
378. To the extent correctional
facilities contract with IPCS providers
for safety and security measures that do
not facilitate the provision of
communications services, the costs of
those measures should not be passed on
to IPCS consumers. We find overbroad
the National Sheriffs’ Association’s
argument that because jails generally
have statutory obligations that require
safety and security measures, that it
necessarily follows that IPCS consumers
must bear the cost of such measures. For
example, the National Sheriff’s
Association concludes that because the
Death in Custody Reporting Act requires
facilities to ‘‘report on the
circumstances surrounding the death of
an incarcerated person (such as whether
the cause of death was mental health
related),’’ and because monitoring IPCS
may identify persons having mental
health crises that could lead to suicide,
IPCS consumers must therefore pay for
all safety and security costs related to
PO 00000
Frm 00070
Fmt 4701
Sfmt 4700
monitoring. As discussed above,
facilities’ obligation to care for the safety
and wellbeing of incarcerated people, as
well as comply with statutes that are
unrelated to the provision of
communications, are the responsibility
of facilities—as are the costs associated
with such obligations. IPCS consumers
are not required to shoulder the burden
of paying for each and every facility cost
whether related to the provision of
communications or not. For similar
reasons, we find inapposite some
commenters’ argument that not allowing
the recovery of certain safety and
security costs through IPCS rates would
necessarily lead to ‘‘increased taxes or
an unnecessary reallocation of general
funds.’’ Aside from the speculative
nature of this claim, we have explained
why IPCS consumers should not bear
the cost of services that are unrelated to
the provision of IPCS, nor should they
be responsible for services whose
purpose is to serve law enforcement. For
example, customized reports for
correctional facilities, long term storage
of recordings of communications,
creating searchable databases of these
recordings, and voice biometrics that are
used for law enforcement purposes are
measures that facilitate law enforcement
but are not required to restrict
communications to permitted
individuals. If they were unavailable,
incarcerated people would still be able
to place telephone calls or use advanced
communications because these safety
and security measures serve almost
exclusively law enforcement functions.
As the United Church of Christ and
Public Knowledge explain, ‘‘[t]he
customer of carceral functions is the
carceral institution. The customers of
the communication are the two people
using a service to communicate with
each other.’’ Services that serve
predominately law enforcement
purposes provide only marginal benefits
to incarcerated people and their families
in their use of IPCS, and only a small
portion of the costs of those services are
used and useful in the provision of
IPCS. The bulk of those costs related to
incarceration, generally—like feeding
and housing—and, like those costs,
cannot justly and reasonably be
imposed on incarcerated persons and
their loved ones. Correctional facilities
are free to adopt any safety and security
measures they deem appropriate, but
may not rely on IPCS ratepayers to
defray all the costs providers and
facilities incur in providing those
measures. Instead, only the used and
useful portion of those costs should be
recovered through IPCS rates.
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
379. Some commenters raise concerns
that the used and useful standard is
inappropriate specifically when applied
to safety and security measures. We
disagree. We are not persuaded that the
application of the used and useful
standard to safety and security costs
would prohibit facilities’
implementation of safety and security
measures in violation of section 4 of the
Martha Wright-Reed Act. Rather, we
find that this argument conflates our
authority over what the facility and its
service providers may charge ratepayers
with the facilities’ authority over what
safety and security measures ‘‘the
facility and its service providers may
choose to employ at their own expense.’’
Although section 4 of the Martha
Wright-Reed Act bars the Commission
from prohibiting safety and security
measures related to IPCS in correctional
facilities, nothing in the Martha WrightReed Act requires that IPCS consumers
pay for such measures through IPCS
rates. To the contrary, section 3(b)(2) of
that Act indicates otherwise by obliging
the Commission merely to ‘‘consider’’
such costs without requiring a particular
outcome. While our rate-making process
may result in changing how some of
those measures are funded, our
application of the used and useful
framework in discharging this mandate
simply does not prohibit correctional
officials, law enforcement officials, or
IPCS providers from implementing any
safety and security measures at any
correctional facility. Correctional
facilities remain free to implement any
safety and security measures of their
choosing; they just cannot expect the
IPCS consumer to bear the cost of all of
those choices. The National Sheriffs’
Association, in its arguments against
relying on the used and useful standard,
suggests that instead, ‘‘the principle of
cost causation, which states that those
who cause costs should pay for them’’
should be used. The National Sheriffs’
Association argues that, for example, if
a crime is committed using IPCS, the
incarcerated person should pay for all
related safety and security costs because
without IPCS, the crime could not have
been committed. The Commission has
previously rejected such unpersuasive
‘‘but for’’ arguments, most recently in
the Open Internet proceeding. The
National Sheriffs’ Association’s logic is
flawed. Simply because a crime
occurred using a phone call does not
mean that the phone call was the cause
of the crime, nor that IPCS consumers
are responsible for the associated safety
and security costs. Law enforcement
activities are the responsibility of law
enforcement. As such, the costs
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
associated with those activities are
appropriately borne by correctional
facilities, not IPCS consumers. The used
and useful framework and cost
causation principles both aim at
ensuring that ratepayers do not bear
costs that were not incurred for the
ratepayers’ benefit. Since the sole
purpose of many of these safety and
security measures is to benefit law
enforcement, we would allocate the
costs of these measures to the providers’
non-IPCS operations even if we were to
employ a cost causation approach.
380. The ‘‘Customer’’ Under the Used
and Useful Framework. In applying the
used and useful framework, ‘‘the
Commission considers whether the
investment or expense ‘promotes
customer benefits, or is primarily for the
benefit of the carrier.’ ’’ In applying that
framework to IPCS, we make clear that
the ‘‘customers’’ referred to under this
analysis are the IPCS ratepayers in their
status as consumers of communications
services in correctional institutions.
Securus encourages a broader
interpretation of ‘‘customer’’ that would
include correctional facilities, as well as
ratepayers, because correctional
facilities are ‘‘necessary part[ies]’’ to
IPCS. Under this logic, the providers
themselves would also be included as
beneficiaries in the used and useful test.
It suggests that the Commission has a
‘‘general responsibility’’ to protect the
general public and ‘‘ensure a safe
environment’’ for accessing
communications services. Pay Tel
mischaracterizes our rejection of
Securus’s overbroad interpretation of
‘‘customer’’ as a more general rejection
of the need to provide appropriate safety
and security measures as part of the
provision of IPCS. As discussed above,
and consistent with section 1 of the
Communications Act, the Commission
has long embraced the inclusion of
safety and security measures as an
integral part of the provision of IPCS
and incorporated the relevant costs in
its approach to rates for these services.
These arguments do not overcome our
responsibility here where incarcerated
people or their loved ones are the ones
paying for and using IPCS subject to
Commission-specified rate regulations.
Although correctional institutions
contract with providers for the
provision of IPCS, such services are
used, and paid for, by incarcerated
people and their loved ones. As Worth
Rises explains, the ‘‘Commission’s duty
is to protect IPCS ratepayers and ensure
reasonable compensation for providers,
not to protect the interests and demands
of non-ratepaying stakeholders.’’ We
rely on the used and useful framework
PO 00000
Frm 00071
Fmt 4701
Sfmt 4700
77313
because it balances the ‘‘equitable
principle that the ratepayers may not
fairly be forced to pay a return except
on investment which can be shown
directly to benefit them,’’ with ensuring
fair compensation for providers. It
therefore would be inappropriate—and,
ultimately inconsistent with our
mandate to ensure just and reasonable
IPCS rates—to evaluate safety and
security costs under a framework that
characterized correctional institutions
as the customers. There are indeed
scenarios where the facility or
governmental body may be the customer
in jurisdictions where free calling for
incarcerated persons has been
implemented. That is not the scenario
we are addressing in this Order.
Although Securus is correct that the
used and useful framework is flexible, it
is not all encompassing, and we decline
to expand that framework to include
non-ratepayers. Rather, we rely on this
flexibility to ensure that IPCS
consumers ‘‘bear only legitimate costs of
providing service to them.’’
381. Our focus on incarcerated people
and their loved ones as the customers of
IPCS has several cross-cutting
implications for our application of the
used and useful standard to safety and
security measures broadly. For one,
safety and security measures that serve
predominantly law enforcement
functions do not yield sufficient (if any)
benefit to IPCS customers to warrant
more than a marginal (or any) recovery
through just and reasonable IPCS rates.
In this vein, in the case of safety and
security measures that are not
universally or nearly universally
employed by IPCS providers, we are not
persuaded that they meet the used and
useful standard for cost recovery
through IPCS rates. As explained by the
Public Interest Parties, ‘‘safety and
security features that are not universally
used across facilities suggests that they
cannot be ‘necessary,’ as some providers
do offer IPCS without needing to use
such features.’’ Safety and security
measures cannot be both required to
provide IPCS and elective. The National
Sheriffs’ Association unwittingly makes
this point by explaining that ‘‘different
facilities have different security
requirements.’’ While we agree with the
National Sheriffs’ Association that
correctional institutions that have
relatively large proportions of ‘‘violent
offenders’’ generally impose more
extensive safety and security measures
that other correctional institutions, the
record contains no information tying
those measures specifically to the
provision of IPCS. Absent such
information, we conclude that those
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77314
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
measures are part of the correctional
institutions’ overall safety and security
operations, rather than an essential
element of the provision of
communications services in a
correctional environment. Such a focus
on safety and security measures shown
to be deployed on a widespread basis
makes most sense when setting IPCS
rate caps, rather than prejudging
whether and to what extent less
commonly-employed measures
ultimately might someday be proven of
sufficient necessity—and benefit to IPCS
customers—to warrant recovery in
regulated IPCS rates and charges.
Independently, we conclude that those
atypical costs or expenses are excessive,
and thus imprudent under the ‘‘used
and useful’’ framework, and thus not
appropriate for inclusion in regulated
IPCS rates.
382. We also find that safety and
security features offered solely or
chiefly to win contracts do not warrant
recovery through regulated IPCS rates. It
is not uncommon for providers
responding to requests for proposals to
offer enhanced safety and security
measures that are not specifically
demanded by the correctional authority.
Measures that correctional institutions
accept for free or in lieu of monetary site
commissions payments do not become a
benefit to IPCS ratepayers by virtue of
that correctional facility’s acceptance.
Features not included in requests for
bids were clearly not considered critical
to IPCS by the correctional institutions
themselves. We find persuasive Worth
Rises’ reasoning that ‘‘[t]he broad
spectrum of elective safety and security
measures that IPCS providers offer’’
have ‘‘no demonstrated, or at times even
articulated, public benefit. These other
elective measures are nice-to-haves for
corrections agencies, law enforcement,
and prosecutors and vary from agency to
agency.’’ Indeed, we find that the costs
of ‘‘safety and security [that] are for the
benefit of ‘investigators, correctional
administrators, prosecutors, and other
law enforcement officers’’’ are not
appropriately borne by IPCS ratepayers.
We note that such features are also not
used and useful. Our evaluation of the
2023 Mandatory Data Collection
responses also supports assertions in the
record that offering advanced safety and
security measures has become a chief
means by which the largest providers
dominate the process correctional
institutions use to select IPCS providers.
Indeed, while certain safety and security
measures are undoubtedly both used
and useful in, and necessary for, the
provision of IPCS, the data raise
questions whether and to what extent
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
many of the advanced safety and
security measures may be more
reflective of the broken nature of
competition in the dysfunctional IPCS
marketplace and tools certain providers
use to gain advantages in winning
contracts.
c. Assessing the Costs of Safety and
Security Measures
383. Applying the standards
described above, we reach reasoned
conclusions regarding the safety and
security measures that primarily benefit
consumers and appropriately are
included in regulated rates under our
used and useful analysis. Measures that
serve only a law enforcement function
or provide no benefit to IPCS consumers
are not used and useful in the provision
of IPCS. Costs that are used and useful
are used to calculate just and reasonable
IPCS rate caps. Thus, we do not exclude
all safety and security costs from our
ratemaking calculus.
(i) Application of the Used and Useful
Framework
384. We evaluate whether the costs of
the seven categories of safety and
security measures set forth in the 2023
Mandatory Data Collection should be
included in IPCS rates by applying the
used and useful framework. As an
initial matter, we reiterate that the used
and useful framework is flexible.
Although the Commission has identified
‘‘general principles regarding what
constitutes ‘used and useful’
investment,’’ it ‘‘has recognized ‘that
these guidelines are general and subject
to modification, addition, or deletion.’’
The Commission emphasized that ‘‘[t]he
particular facts of each case must be
ascertained in order to determine what
part of a utility’s investment is used and
useful.’ ’’ The Commission ‘‘may, in its
reasonable discretion, fashion an
appropriate resolution that is tailored to
the specific circumstances before it.’’
Moreover, courts typically defer to the
Commission’s discretion on rate-related
determinations. Pay Tel overlooks this
flexibility in arguing we have applied a
‘‘newly-minted ‘user benefit’ standard’’
in our application of the used and
useful framework to safety and security
measures. As we have explained, the
used and useful framework, as applied
for decades by the Commission in its
familiar ratemaking functions, is an
equitable principle that prevents
ratepayers from having to pay for costs
that are primarily incurred for the
benefit of the provider, while allowing
regulated entities to be compensated for
providing service. We do not, as Pay Tel
suggests, depart from these core
ratemaking principles in evaluating
PO 00000
Frm 00072
Fmt 4701
Sfmt 4700
safety and security measures under the
used and useful framework here.
385. Additionally, to account for the
facts that the categories of safety and
security costs in the 2023 Mandatory
Data Collection are imprecise, and that
providers’ allocations of their safety and
security costs are at times inexact
among these categories, we evaluate
categories based on the nature of the
preponderance of tasks or functions
within each category. If the
predominant use of tasks and functions
within a category are not used and
useful, the entire category will be
treated as not used and useful and
excluded from the lower bound of our
zone of reasonableness. In addition to
relying on this procedure only for
setting the lower bound for our range of
reasonable rates, we also note that we
are adopting a waiver process to
accommodate providers in atypical
circumstances that can demonstrate
grounds for recovery beyond that
provided by our rate caps. We
acknowledge that the nature of safety
and security measures is evolving such
that some measures that we determine
are not generally used and useful may
be ‘‘second or third generation
implementations of the same measures’’
the Commission has found to be used
and useful. As we explain below,
however, our conclusions in this regard
are part of the larger task of setting IPCS
rate caps that are just and reasonable for
consumers and providers and that afford
fair compensation to providers. This
task necessarily requires us to arrive at
a reasonable end result based on the
record before us. And due to the
imprecise nature of the categories of
safety and security measures and
providers’ reporting of those costs, we
find that, based on the record and core
ratemaking precedent, some costs of
safety and security measures are not
generally used and useful. This is
particularly true in situations where
providers allege that additional safety
and security measures are necessary to
ensure that the safety and security
measures we conclude are used and
useful function properly. We are
skeptical of such claims. For example,
while certain providers claim that voice
biometrics services can be used to
prevent fraud or the circumvention of
calling restrictions, the record does not
indicate that voice biometrics services
primarily ensure the proper functioning
of providers’ communications security
services.
386. We find two categories of safety
and security costs to be generally used
and useful—Category 1: CALEA
compliance measures; and Category 3:
communications security services. We
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
conclude that the remaining five
categories of safety and security
measures should not be treated as used
and useful in setting a lower bound on
the range of reasonable rates.
Specifically, categories 2 (law
enforcement support services); 4
(communication recording services); 5
(communication monitoring services); 6
(voice biometrics services); and 7 (other
safety and security measures). In
particular, in setting IPCS rate caps, we
include the costs of all safety and
security categories in the upper bounds
of our zones of reasonableness, but
include only the costs of the two
categories found to be generally used
and useful in the lower bounds of our
zones of reasonableness.
387. We also adjust our rate setting
within the zones of reasonableness to
develop overall rate caps that recognize
the imprecision of both the seven
defined safety and security categories in
the 2023 Mandatory Data Collection,
and the inconsistencies in the narrative
descriptions and varied allocations
made in provider responses. Securus
overlooks this fact in complaining that
the Commission relies on the seven
defined safety and security categories in
the 2023 Mandatory Data Collection. To
the extent Securus’s issue is with the
seven categories of safety and security
measures from the 2023 Mandatory Data
Collection, Securus and other interested
parties were free at any time, but
particularly in response to the
Commission’s Public Notice seeking
comment on the 2023 Mandatory Data
Collection, to propose another method
of collecting cost data regarding safety
and security measures. But Securus did
not do so and actually conceded that the
cost categories the Commission
proposed were ‘‘similar to categories
employed in the Third Mandatory Data
Collection.’’ To the extent IPCS
providers did not allocate costs to those
seven categories (despite being
instructed to perform allocations using
their best estimate), they did so with full
knowledge that the Commission would
use the results of the data collection as
a critical part of its efforts to fulfill its
obligations under the Martha WrightReed Act. For example, IPCS providers’
narrative responses to our request for
CALEA compliance information
revealed confusion regarding which
safety and security measures were
related to CALEA compliance, and few
providers identified any associated
costs. CALEA requires that
telecommunications carriers and
manufacturers of telecommunications
equipment design their equipment,
facilities, and services to ensure that
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
they have the necessary surveillance
capabilities to comply with legal
requests for information.
Telecommunications carriers must
‘‘ensure that [they] are capable of
accommodating simultaneously the
number of interceptions, pen registers,
and trap and trace devices’’ as requested
by the Attorney General. The
Commission has found that
interconnected VoIP providers also
must comply with CALEA
requirements. However, it appears that
some providers have allocated certain
functions, such as portions of call
monitoring and recording, to other
categories, i.e., Category 4
(communications recording services)
and Category 5 (communications
monitoring services), that likely should
have been allocated to the CALEA
category insofar as they facilitate the
type of electronic surveillance required
by CALEA. As referenced above, CALEA
was designed to ensure that law
enforcement could conduct electronic
surveillance by requiring
telecommunications carriers and
manufacturers of telecommunications
equipment to ensure they have the
necessary surveillance capabilities.
Because we are unable to disaggregate
the costs reported to these other
categories to identify precisely which
portions of call monitoring and
recording costs should have been
appropriately included in the CALEA
category, we account for these underreported CALEA costs in setting our
overall rate caps, which have been
adjusted accordingly. The same is true
for safety and security measures that
providers have described as ‘‘inherent’’
or built into their systems such that they
do not have separate costs to allocate.
Because our upper and lower bounds
include the costs of safety and security
measures that are inherent in IPCS
providers’ platforms and which serve
both IPCS-related and other purposes,
we make adjustments in setting our rate
caps to reasonably attempt to ensure
that those caps do not over-recover or
under-recover the costs of safety and
security measures.
388. In sum, we find that this threestep process—including all reported
safety and security measure costs in our
upper bounds, including only a portion
of those costs in our lower bounds, and
taking the imprecision of those bounds
into account in setting rate caps—
reasonably applies the used and useful
framework to the record before us. The
resulting rate caps—the ‘‘end result’’ of
our ratemaking—reflect a balance that
recognizes both the merits and
shortcomings of the commenters’
PO 00000
Frm 00073
Fmt 4701
Sfmt 4700
77315
positions on whether the costs of safety
and security measures should be
recovered through IPCS rates. At one
end of the spectrum, some commenters
urge us to set rate caps at levels that
would allow providers and facilities to
recover all (or virtually all) the costs
they incur in providing safety and
security measures. These commenters
correctly recognize that, for the most
part, the safety and security measures
on which we need to make a judgment
contribute toward the provision of
‘‘inmate telephone services and
advanced communications services’’ in
correctional institutions. But these
commenters fail to recognize that many
of these measures also contribute
toward other purposes, including law
enforcement and investigative purposes
that are only circumstantially related to
the provision of IPCS. At the other end
of the spectrum, other commenters
would exclude virtually all safety and
security measure costs from our
ratemaking calculus. These commenters
focus on the law enforcement and
investigative purposes served by the
safety and security measures before us,
while deemphasizing or ignoring the
contributions the measures make toward
the safe provision of IPCS.
389. We do not adopt either extreme
position. Instead, we apply the used and
useful standard, as articulated in core
ratemaking precedent, to evaluate all of
the arguably recoverable costs in the
record, including costs associated with
safety and security measures, to
distinguish those costs that should be
included in our ratemaking calculus
from those that should not. In doing so,
we arrive at a middle ground that
properly balances the ‘‘equitable
principle that public utilities must be
compensated for the use of their
property in providing service to the
public’’ with the ‘‘[e]qually central . . .
equitable principle that the ratepayers
may not fairly be forced to pay a return
except on investment which can be
shown directly to benefit them.’’
390. Contrary to the characterizations
of some commenters, our actions today,
and in particular our actions regarding
safety and security measures, are about
fulfilling our obligation under the
Martha Wright-Reed Act to adopt a
compensation plan for IPCS that ensures
just and reasonable rates and charges for
IPCS consumers and providers and fair
compensation for IPCS providers. Our
actions are not about questioning or
overriding the judgment of correctional
officials or ‘‘evaluat[ing] the credibility
of [correctional officials’] decisions
regarding safety and security of [their]
institutions.’’ Nor do our actions bar
correctional authorities from
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77316
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
implementing any safety and security
measures they deem necessary. Our task
is a narrow one: to determine the extent
to which claimed IPCS costs can be
recovered through regulated rates
charged to consumers. And that is
exactly what we do in applying bedrock
ratemaking precedent to evaluate all of
the claimed IPCS costs and expenses in
the record before us to determine the
extent to which consumers should bear
those costs. We reject as unsupported
and speculative suggestions that our
approach to safety and security
measures will result in less security of
IPCS communications generally and
will facilitate criminal activity using
IPCS. We next discuss the application of
the used and useful standard to each
category of safety and security costs.
391. Category 1: CALEA Compliance
Measures. The instructions for the 2023
Mandatory Data Collection directed
providers to identify and describe each
of the safety and security measures that
they took to comply with CALEA.
CALEA mandates that certain
communications services providers
‘‘ensure that [their] equipment,
facilities, or services that provide a
customer or subscriber with the ability
to originate, terminate, or direct
communications are capable of’’
intercepting communications, providing
the Federal government with access
call-identifying information, and
delivering intercepted communications
and call-identifying information to the
Federal government. Although we are
not persuaded that the functionalities
associated with CALEA compliance
generally would directly benefit IPCS
users, under the current regulatory
status quo we nonetheless find that the
costs related to CALEA compliance
measures are used and useful in the
provision of IPCS. Pay Tel takes issue
with the Commission’s determination
that costs associated with CALEA
compliance measures are used and
useful while indicating that these
measures generally may not directly
benefit IPCS consumers. As we note
above, however, the used and useful
standard is a flexible standard, allowing
the Commission to ‘‘fashion an
appropriate resolution that is tailored to
the specific circumstances before it.’’
Here, given the legal obligations
associated with CALEA, we determine
that such costs are used and useful in
the provision of IPCS. Pay Tel further
argues that in the same way CALEA is
a legal requirement, IPCS providers ‘‘are
also required by the facilities which
they seek to serve to employ a range of
safety and security measures.’’ This
argument is unavailing. A requirement
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
imposed by a law passed by Congress is
quite different from a contractual
‘‘requirement’’ that results from the
commercial negotiations between
parties to a contract. First, without
CALEA compliance, IPCS providers
could not offer their audio or certain
advanced communications services.
CALEA requires that
telecommunications carriers and
manufacturers of telecommunications
equipment design their equipment,
facilities, and services to ensure that
they have the necessary surveillance
capabilities to comply with legal
requests for information. The
Commission has found that
interconnected VoIP providers also
must comply with CALEA
requirements. We thus disagree that
IPCS providers, to the extent they
provide telecommunications services
and VoIP services, are exempt from
CALEA compliance. When the
Commission considered payphone
providers, generally, as exempt from
CALEA, the Commission was not
intending to sweep in those same
payphone providers to the extent they
were also telecommunications services
providers or VoIP providers. Contrary to
Securus’s claim that we have departed
from Commission precedent without
proper notice, we are not modifying
such precedent. To the extent that IPCS
providers offer both payphone services
and audio communications services,
including telecommunications services
and VoIP, they have been, and remain,
subject to CALEA requirements. This
includes the ability to enable the
government to monitor and record
communications ‘‘pursuant to a court
order or other lawful authorization.’’ We
note that the monitoring and recording
requirements associated with CALEA
are significantly more limited than those
services included in Categories 4 and 5.
We find the costs of those limited
monitoring or recording services to be
used and useful in the provision of
IPCS. This is in stark contrast to the
constant and pervasive communications
recording and monitoring within
correctional facilities for all
communications—services that far
exceed the requirements of CALEA. As
Worth Rises explains, ‘‘CALEA
compliance is required of all
telecommunications carriers and
providers of interconnected voice over
internet protocol services, not just
providers of IPCS.’’
392. Second, under the regulatory
status quo the Commission previously
has held that CALEA compliance costs
appropriately can be recovered through
user charges. In particular, the
PO 00000
Frm 00074
Fmt 4701
Sfmt 4700
Commission has previously held that
telecommunications carriers and
interconnected VoIP providers ‘‘may
absorb the costs of CALEA compliance
as a necessary cost of doing business, or,
where appropriate, recover some
portion of their CALEA . . .
implementation costs from their
subscribers’’ for compliance measures
taken after January 1, 1995. To the
extent IPCS providers obtain
transmission services from third parties,
the rates they pay likely include charges
for those third parties’ CALEA
compliance costs.
393. IPCS providers also may be
required to perform discrete tasks to
comply with CALEA. Any such tasks
also facilitate the provision of IPCS
because IPCS providers must comply
with CALEA as a precondition to
offering audio services and certain
advanced communications. We,
therefore, conclude, based on the
record, that costs providers incur as a
result of CALEA compliance are used
and useful in the provision of IPCS.
Securus argues that the Commission’s
conclusion that CALEA costs are used
and useful ‘‘adds nothing to the rate
caps’’ because providers allocated
relatively small amounts of such costs to
CALEA in the 2023 Mandatory Data
Collection. Simply because providers
did not allocate significant amounts to
CALEA compliance is not a basis on
which to conclude that such costs are
irrelevant to our ratemaking. As noted
above, we evaluate all safety and
security cost data in the record before
us. For the same reasons, we also
conclude that costs IPCS providers
incur in complying with CALEA are
prudently incurred.
394. Category 2: Law Enforcement
Support Services. The instructions for
the 2023 Mandatory Data Collection
directed providers to identify and
describe each of their safety and
security measures that they classified as
a law enforcement support service.
These ‘‘services include, but are not
limited to, the administration of
subpoenas, the administration of crime
tip lines, the administration of
informant lines, and the maintenance of
data repositories for use by law
enforcement personnel.’’ In their
responses to the 2023 Mandatory Data
Collection, providers identified certain
law enforcement support services. We
find that law enforcement support
services are generally not used and
useful in the provision of IPCS because
they do not facilitate the provision of
IPCS. Rather, as the record makes clear,
these services are primarily intended to
serve law enforcement purposes.
Providers’ own descriptions of their law
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
enforcement support services support
this conclusion. For example, the record
shows that such services include tasks
such as ‘‘search warrant processing’’
and ‘‘Freedom of Information Act
(FOIA) request processing.’’ Also
included in this category are call
transcription services, which are
primarily used to create databases for
law enforcement to conduct
investigations and assist with case
building. Some commenters claim these
services assist in minimizing crime and
identifying potential violators, functions
that primarily serve law enforcement
purposes and do not facilitate or enable
the provision of IPCS. We recognize that
some functions within this category may
provide a benefit to incarcerated people,
such as the administration of tiplines to
anonymously report crimes and connect
incarcerated people with Prison Rape
Elimination Act (PREA) report centers;
however, they do not facilitate the
provision of IPCS and are therefore not
used and useful in the provision of
IPCS. In other words, communications
services for incarcerated people are able
to take place without these services and
we generally do not find that these
functions benefit IPCS users in their use
of IPCS in a way that makes it equitable
for them to bear the costs of these
functions in regulated IPCS rates.
395. Category 3: Communications
Security Services. The instructions for
the 2023 Mandatory Data Collection
directed providers to identify and
describe each of their safety and
security measures that they classified as
a communications security service.
These ‘‘services include, but are not
limited to, implementing measures that
allow an Incarcerated Person to call
only certain individuals or numbers;
implementing measures that limit the
individuals or numbers an incarcerated
person may call; providing personal
identification numbers (PINs) to
incarcerated people; providing
disclaimers to called parties regarding
communication origination;
implementing communicationacceptance procedures; preventing
three-way communications; preventing
chain communications; dual-tone
multifrequency detection; manual call
control for the Facility; tracking
frequently called numbers;
implementing incoming communication
restrictions; and fraud management.’’ In
their 2023 Mandatory Data Collection
responses, providers identified certain
communications security services.
Based on the record, we find that the
functions included in the
communications security services
category are generally used and useful
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
in the provision of IPCS. Most of the
functions that providers classify as
communications security services are
safety and security measures that the
Commission has traditionally found to
be ‘‘inherent’’ in communications
services for incarcerated people. Such
functions include the development of
pre-approved ‘‘allow’’ lists, preventing
three-way communications, and fraud
management. These basic functions are
directly related to the underlying
communications service and do not go
beyond that required to enable or
appropriately limit the customer’s use of
the underlying communications service
in a correctional institution. These basic
safety and security functions prevent
witness tampering and violations of nocontact orders, and protect consumer
accounts from being used unlawfully.
They also benefit consumers of IPCS by
ensuring that communications services
can be safely and securely offered in an
incarceration setting. Contrary to
Securus’s claim that we ignore the
benefits of such safety and security
measures to ‘‘incarcerated people and
their friends and family,’’ we recognize
that the ‘‘establishment of PIN numbers,
limiting calls to certain preapproved
numbers, and preventing call
forwarding or three-way calling’’ are
used and useful to the provision of IPCS
and are recoverable in our rate caps. We
find that costs associated with this
category of basic safety and security
measures are generally used and useful.
At the same time, the record does not
provide a reason to question the
communications security services costs
reported in the 2023 Mandatory Data
Collection or otherwise determine them
imprudent.
396. The Commission has long held
that there are legitimate reasons for
certain safety and security measures that
facilitate or enable the provision of
communications services in the
correctional environment. Services in
this category appear to be universally
offered by IPCS providers and are a
standard part of all IPCS offerings.
Based on the record before us, and
consistent with the Commission’s
previous discussions, we find that these
communications security services are
inherent in the provision of IPCS and
are the key factors distinguishing IPCS
communications from those
communications of the general public,
which do not require such services. For
example, measures such as preapproved numbers lists, blocking threeway communications, and the use of
PIN numbers to help ensure that the
incarcerated individual associated with
the account is initiating the
PO 00000
Frm 00075
Fmt 4701
Sfmt 4700
77317
communication facilitate the provision
of communications services in
correctional institutions by preventing
calls to inappropriate parties such as
judges or witnesses and protecting
against fraud. These functions are
distinguished however from other
duplicative and expensive functions
that go way beyond what is necessary to
accomplish these objectives and that we
consider not used and useful.
397. One commenter argues that
communications security services are
not used and useful ‘‘as they are
designed and intended to restrict the
access that incarcerated people and
their loved ones have to
communications.’’ While we agree that
call blocking functionalities impose
restrictions on who incarcerated people
can communicate with, such measures
are required to facilitate the provision of
communications services in the carceral
setting. As the Commission explained in
the 2013 ICS Order, ‘‘a
disproportionately large percentage of
ICS-enabled crimes target and victimize
vulnerable populations consisting of
victims, witnesses, jurors, inmates, and
family members of these individuals.’’
We find that the safety and security
measures included in the
communications security services
category, such as blocking mechanisms
and call allow lists, ensure the safety
and security of IPCS by appropriately
balancing the need to protect public
safety against ensuring that incarcerated
people can stay connected with their
loved ones.
398. Category 4: Communications
Recording Services. The instructions for
the 2023 Mandatory Data Collection
directed providers to identify and
describe each of their safety and
security measures that they classified as
a communications recording service.
These category 4 services ‘‘include, but
are not limited to, providing a
disclaimer regarding recording of
communications, recording of
communications, and storage of
recorded communications.’’ In their
2023 Mandatory Data Collection
responses, providers identified a
number of specific communications
recording services. We find that
communications recording services
included in this category generally are
not used and useful in the provision of
IPCS. These services are primarily used
to police the contents of all
communications or to gather
information for law enforcement
purposes. Providers describe these
services as including functions such as
storing recorded communications,
transcribing such recordings, and
converting recordings into digital
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77318
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
formats to support investigation and
litigation activities. None of these
services actually facilitate the provision
of IPCS. Further, certain providers’
communications recordings services
{[REDACTED]} and create
downloadable recordings of all IPCS in
a variety of digital formats. These latter
functions are wholly avoidable to the
provision of communications services in
correctional institutions and are
therefore not used and useful.
399. Some commenters explain that
the cost of storing these recordings is
ever increasing, particularly for video
communications. Although the
Commission suggested in the 2013 ICS
Order that it would ‘‘likely find the
costs of the storage of inmate call
recordings’’ recoverable in the context
of those recordings being used in court
proceedings, the Commission
subsequently questioned that position
based on several factors reflecting the
significant evolution of the industry
since that time. First, the Commission
could not have predicted that audio
recordings would be stored for years or
in perpetuity and the cost of that storage
would be rolled into IPCS consumer
rates. Also, video communications were
not even within the scope of the
Commission’s inmate calling services
regulations; nor was the use of video
communications as prevalent as it is
today. Finally, the Commission has a
considerably more developed
perspective on the industry given the
current, more extensive record,
including its recent mandatory data
collections. With this more complete
record and exercising our full authority
over video communications services
consistent with the Martha Wright-Reed
Act, we are not persuaded that the costs
of storing communications recordings
for which we are not generally
including the costs of the recordings in
the first place, are generally used and
useful in the provision of IPCS.
Similarly, we share Worth Rises’s
concerns that the high cost of storage
could incentivize providers to
‘‘artificially cause calls to drop, which
allows them to collect the full cost of a
video call and save on the storage that
full video call recording would cost
them.’’ Nor do we conclude that the
rising costs of these features justify
including them in the rates paid by the
IPCS consumers.
400. Next, some providers argue that
communications recording services
facilitate the provision of IPCS. For
example, one provider explains that it
uses ‘‘call recording analysis’’ to ensure
that incarcerated people are not using
its communications services to
intimidate judges and witnesses. Other
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
providers use call recordings to verify
that the incarcerated person
participating in a communication was
the person whose PIN was used to
originate the communication and to
resolve complaints regarding the
charges for specific communications.
While such uses of communication
recording services may be generally
beneficial, the record contains no
evidence to suggest that these services
actually facilitate the provision of IPCS
and are not just redundant features to
the blocking and PIN number
administration purposes that we do
recognize as recoverable costs. On
balance, then, we conclude that for the
most part these functions suit general
law enforcement needs rather than
providing capabilities necessary or
beneficial to IPCS ratepayers in their
capacity as IPCS users. Consequently,
we conclude this category generally fails
to meet the used and useful test. As an
independent, alternative basis for our
decision, to the extent that these
features are supplemental ways of
addressing concerns already addressed
by safety and security measures the
costs of which we have found used and
useful above, we conclude that
incurring these additional costs to serve
the same ends are excessive as far as
IPCS is concerned, and thus imprudent.
401. Category 5: Communications
Monitoring Services. The instructions
for the 2023 Mandatory Data Collection
directed providers to identify and
describe each of their safety and
security measures that they classified as
a communications monitoring service.
These services ‘‘include, but are not
limited to, live or real-time monitoring
of communications; automatic word
detection; communication transcription;
and analysis of recordings, which may
also include keyword searches.’’ In their
2023 Mandatory Data Collection
responses, providers identified a
number of specific communications
monitoring services. We find that
communications monitoring services
generally are not used and useful in the
provision of IPCS because they
primarily serve a law enforcement
purpose, not a communications
purpose, and they generally do not
benefit ratepayers in their capacity as
consumers of IPCS. As the record makes
clear, communications monitoring costs
are ‘‘part of carceral functions, not
communications functions.’’ Indeed,
IPCS providers ‘‘advertise their
surveillance add-ons as ‘investigative’
tools ‘designed to identify potential
criminal activity.’ ’’ And, despite
claiming that ‘‘surveillance fits
comfortably within the rubric of safety
PO 00000
Frm 00076
Fmt 4701
Sfmt 4700
and security measures,’’ the National
Sheriffs’ Association acknowledges that
‘‘surveillance is not necessarily
conducted expressly or solely for safety
or security purposes.’’
402. One commenter notes that the
Commission has previously recognized
that ‘‘ ‘security features such as call
recording and monitoring’ . . .
‘advance[ ] the safety and security of the
general public.’ ’’ The National Sheriffs’
Association argues that ‘‘surveillance
fits comfortably within the rubric of
safety and security measures.’’ We find
the National Sheriffs’ Association’s
reliance on the Second Circuit’s
decision in Amen to be misplaced. That
court’s finding, after considering the
Fourth Amendment, that there is a
legitimate security concern linked to
call monitoring is distinct from whether
the IPCS consumers must pay for call
monitoring costs through IPCS rates. For
the same reason, we find unpersuasive
FDC’s reliance on other judicial
precedent and Florida law for the same
reason. While we accept as true that the
Florida legislature has granted FDC
jurisdiction over all matters related to
correctional institutions in Florida,
nothing in these cases or Florida law
requires that IPCS consumers bear the
costs of any particular safety and
security measure that facilities choose to
implement. The Commission has also
described the monitoring of frequently
called numbers to prevent incarcerated
people from ‘‘evad[ing] calling
restrictions via call-forwarding or threeway calling’’ as being part of inmate
calling services. We are not persuaded
by these arguments because these
statements were based on the record at
the time they were made and do not
reflect the evolution of the industry and
the proliferation of such services during
the course of this proceeding.
403. The current record, including
data and information submitted by IPCS
providers, reveals that call monitoring
has evolved and expanded significantly
and is now predominantly ‘‘used to aid
investigations related to detention
facilities,’’ ‘‘aid corrections agencies and
law enforcement in ‘investigation and
litigation activities,’ ’’ and ‘‘provide[ ] for
skilled investigators.’’ One provider
describes its audio monitoring services
as including an alert system ‘‘mostly
configured before the incarcerated
person has been prosecuted and
evidence is still being gathered.’’ Not
surprisingly, the data submitted by IPCS
providers demonstrate that
communications monitoring services
have become a significant profit center
for at least some providers. While
communications monitoring services are
argued to be a tool for keeping
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
incarcerated people from calling
blocked numbers and from engaging in
three-way calling, enabling the full
recovery of costs for these monitoring
services would amount to significant
over-recovery for providers, given that
we already include the recovery for the
costs of providing the call blocking and
limitation on three-way calling
capabilities in our rate caps. We find, on
balance, that call monitoring services,
for the most part, are primarily used for
law enforcement or investigative
purposes, and therefore are generally
not used and useful in the provision of
IPCS. As an independent, alternative
basis for our decision, to the extent that
call monitoring services are, in part,
used to supplement measures like call
blocking and limitation on three-way
calling capabilities for which we already
allow recovery, we conclude that
incurring these additional costs to serve
the same ends are excessive as far as
IPCS is concerned, and thus imprudent.
404. Category 6: Voice Biometrics
Services. The instructions for the 2023
Mandatory Data Collection directed
providers to identify and describe each
of their safety and security measures
that they classified as a voice biometrics
service. These category 6 services
‘‘include, but are not limited to, voice
printing, voice identification,
continuous voice verification, and voice
databasing. In their 2023 Mandatory
Data Collection responses, providers
identified a number of specific voice
biometrics services. We next conclude
that voice biometrics services are
elective safety and security measures
used predominantly for general law
enforcement purposes that do not
facilitate the provision of IPCS. Inmate
calling services pre-date the availability
of Voice Biometrics. Voice biometrics
services are likewise not used, or even
offered, universally, in many cases
being an elective feature only. As such,
they generally are not used and useful
in the provision of IPCS. This treatment
of voice biometrics services is also
supported by several commenters that
expressly oppose recovery of the costs
of voice biometrics services through our
rate caps.
405. Certain providers claim that their
voice biometrics services are used and
useful in the provision of IPCS in that
they help prevent fraud and the
circumvention of calling restrictions by
preventing incarcerated people from
passing a call to another person, and
they help validate that the ‘‘rightful
owner of [a] PIN’’ is placing the call.
Some of those same providers, however,
also describe using these services as
furthering more general law
enforcement purposes, including
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
‘‘generati[ng] targeted investigative
leads,’’ ‘‘help[ing] investigators find
correlations among calls,’’ and
{[REDACTED]}. Voice biometrics
recordings also are subject to being
rolled up into voice print databases and
marketed as a broader investigative tool
for general law enforcement and
surveillance purposes.
406. As Securus explains, ‘‘[e]arly
IPCS was typically provided by on-site
operators that would handle the
approval and connection of collect calls
placed by incarcerated persons.’’ Over
time, the market for safety and security
measures has evolved with one of those
‘‘advances’’ being the development of
voice biometrics. The fact that IPCS has
historically been offered without
capabilities like voice biometrics
undercuts the notion that these
capabilities are required for the
provision of IPCS. And, as Securus
notes, demand for features like voice
biometrics ‘‘has largely been driven by
facilities,’’ suggesting that these
measures are elective and do not
actually prevent consumers from using
IPCS if they are not available or used.
For these reasons, we find that voice
biometrics services as a category
generally are not used and useful in the
provision of IPCS. As an independent,
alternative basis for our decision, to the
extent that voice biometrics services are,
in part, used to supplement fraud
prevention and calling restriction
measures for which we already allow
recovery, we conclude that incurring
these additional costs to serve the same
ends are excessive as far as IPCS is
concerned, and thus imprudent.
407. Category 7: Other Safety and
Security Measures. The instructions for
the 2023 Mandatory Data Collection
directed providers to identify and
describe each of their safety and
security measures that were not
included in any of the prior six
categories. These services ‘‘include, but
are not limited to, reporting obligations,
acquisition of patents to support safety
and security technologies, and research
and development of new safety and
security technologies.’’ In their 2023
Mandatory Data Collection responses,
providers identified a number of
specific safety and security measures.
We find that other safety and security
measures as a category are generally not
used and useful in the provision of
IPCS. The instructions to the 2023
Mandatory Data Collection established
this category as a catch-all category for
providers to allocate the costs of safety
and security measures that did not fit
into the other categories and to ensure
that providers reported the costs of all
their safety and security measures. As a
PO 00000
Frm 00077
Fmt 4701
Sfmt 4700
77319
result, the tasks or functions reported in
this category are varied and diverse.
However, few, if any, of the safety and
security measures reported in this
category serve even a nominal
communications function. For example,
one provider includes access to a free
law library, while another reports that it
provides ‘‘a postal mail scanning service
in some facilities.’’ These services also
‘‘help[ ] correctional agencies generate
targeted investigative leads . . . create
‘actionable intelligence’ for federal law
enforcement . . . [and] flag calls in
which incarcerated people discussed
contacting media about cover-ups of
COVID–19 outbreaks.’’ Based on the
record, we are persuaded that the safety
and security measures included in this
category either largely serve a law
enforcement function or, to the extent
they do not serve a law enforcement
function, also do not facilitate the
provision of IPCS. As a result, we
conclude that the safety and security
measures included in this category
generally are not used and useful.
8. Ancillary Service Charges
408. We eliminate all separately
assessed ancillary service charges for
IPCS and, instead, allow for the
recovery of the costs of ancillary
services as reported by providers
through the rate caps we adopt today. In
2022, the Commission sought comment
on whether some or all ancillary
services are inherently part of inmate
calling services and, if so, whether it
should include the costs of those
services in its rate cap calculations and
preclude providers from imposing
separate charges in connection with
those services. Based on the record, we
conclude that the best means of
discharging our mandate to establish a
compensation plan that ensures both
just and reasonable IPCS rates and
charges, as well as fair compensation for
providers is to allow recovery of the
costs of ancillary services within our
overall IPCS rate caps. In doing so, we
eliminate a source of consumer
confusion and detrimental provider
practices while ensuring that providers
have the opportunity to recover their
used and useful costs of providing
ancillary services.
a. The Commission’s Prior Treatment of
Ancillary Service Charges
409. The Commission has long
recognized the economic burden that
unreasonably high ancillary service
charges impose on incarcerated people
and their loved ones. Those charges
have been a continuous source of
confusion and gamesmanship,
significantly increasing the costs of IPCS
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77320
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
‘‘because incarcerated people and their
families must either incur them when
making a call or forego contact with
their loved ones.’’ As one commenter
explains, ancillary service charges ‘‘can
increase the cost of staying in touch
with loved ones by 40%.’’ Deposits
consumers make in their accounts can
be ‘‘consumed’’ by ancillary service
charges, which can dramatically reduce
the amount of call time available to
consumers for a given amount of
account funds.
410. The Commission’s prior reform
efforts limited the ancillary services for
which providers could assess separate
charges and capped those ‘‘permissible’’
charges, in an effort to foreclose
providers’ ‘‘incentive and ability to
continue to extract unjust and
unreasonable ancillary service charges.’’
The Commission permitted five types of
ancillary service charges—automated
payment fees, third-party financial
transaction fees, live agent fees, paper
bill/statement fees, and single-call and
related services fees. As examples,
under the 2015 ICS Order, the cap for
single-call and related services was ‘‘the
exact transaction fee charged by the
third-party provider, with no markup,
plus the adopted per-minute rate,’’ and
the capped third-party financial
transaction fee was ‘‘the exact fees, with
no markup that result from the
transaction.’’ The Commission
cautioned that it was ‘‘mindful of and
concerned about the potential for
continued abuse of ancillary service
charges, and [would] monitor the
implementation of these caps and
determine if additional reforms are
necessary in the future.’’
411. In the 2021 ICS Order, in
response to allegations of inmate calling
service provider abuses, the
Commission responded to the need for
further ancillary service charge reform
specifically for the third-party fees for
single-call and related services and
third-party financial transactions. The
Commission reasoned that fixed,
interim caps of ‘‘$6.95 per transaction’’
were necessary to discourage providers
from seeking out, as part of revenuesharing schemes, artificially high rates
for these services from third parties. In
2021, the Commission highlighted
record evidence concerning the
assessment of duplicate ancillary
service charges for individual
transactions and sought comment on
whether providers were assessing both
automated payment fees and third-party
transaction fees for individual credit
card or debit card transactions. The
Commission expressed concern that
providers were exploiting ambiguities in
the rules to engage in such ‘‘double
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
dipping,’’ and sought comment on
whether the Commission’s rules were
sufficiently clear in prohibiting
providers from assessing multiple
ancillary service charges per transaction
or should be amended to implement
such a prohibition.
412. In the 2022 ICS Order, in
response to further allegations of
harmful provider practices associated
with third-party fees, the Commission
set $3.00 as the maximum amount that
providers could pass through to
consumers for single-call and related
services and any third-party financial
transactions where the transaction
involves the use of an automated
payment system, and set $5.95 as the
maximum pass-through amount where
the transaction involves the use of a live
agent. In setting these caps, the
Commission sought to address concerns
raised by commenters that the caps on
third-party fees adopted in 2021
‘‘simply encourage[d] some carriers to
steer customers toward unnecessarily
expensive calling options.’’
413. In 2022, the Commission sought
comment on whether it should
eliminate ancillary service charges as
separate fees and instead include the
costs of those services in its overall rate
cap calculations. The Commission also
sought comment on how it might use
data from the Third Mandatory Data
Collection to set reasonable ancillary
service caps in the event it decided to
continue to allow separate ancillary
service charges. The Commission asked,
in particular, whether the data providers
had submitted in response to the Third
Mandatory Data Collection ‘‘provide[d]
a reasonable allocation of costs between
inmate calling services and various
ancillary services’’ that would allow it
to set reasonable cost-based ancillary
service caps. Finally, the Commission
asked how it should revise its rules to
prevent detrimental practices, such as
‘‘double dipping,’’ associated with any
ancillary service charges that it
continued to permit. In 2023, the
Commission reiterated these requests for
comment in light of enactment of the
Martha Wright-Reed Act, and sought
comment on whether ancillary service
charge caps should apply uniformly to
all audio and video incarcerated
people’s communications services.
b. Eliminating All Separate Ancillary
Service Charges
414. We conclude that our
compensation plan for IPCS should
allow providers to recover their costs of
providing ancillary services through
per-minute rate caps, rather than
through separate ancillary service
charges. We therefore eliminate all
PO 00000
Frm 00078
Fmt 4701
Sfmt 4700
separately assessed ancillary service
charges for IPCS, including any
ancillary service charges associated with
intrastate IPCS. To the extent that
providers assess ancillary services
charges for their own services or on
behalf of facilities, such fees are now
prohibited. For example, in Arizona,
‘‘[a]ll adult visitors applying for inperson/phone, and video visits must
pay a one time, non-refundable, $25.00
background check fee.’’ To process this
Visitation Application, some providers
charge additional ancillary service fees.
To ensure that providers have an
opportunity to recover their costs of
providing ancillary services, we include
providers’ reported ancillary service
costs from the 2023 Mandatory Data
Collection in the used and useful IPCS
costs that we use to set the rate caps we
adopt in the Report and Order.
415. Recognizing that Ancillary
Services Are Inherently Part of IPCS.
These actions reflect four independently
sufficient findings. These findings apply
equally to audio and video IPCS
because, as certain commenters explain,
the utility and costs of providing
ancillary services do not vary between
types of services. First, we find that all
ancillary services associated with IPCS,
including the five types of ancillary
services for which our inmate calling
services rules presently permit separate
charges, are inherent in the provision of
IPCS. In 2022, the Commission sought
comment on whether ‘‘some or all’’ of
the permissible ancillary services are
‘‘an inherent part of providing inmate
calling services,’’ such that the
Commission should continue to
‘‘include those costs in [the] per-minute
rate cap calculations and eliminate
some or all charges for ancillary
services.’’ To a large extent, the
permissible ancillary services reflect
routine internal business functions,
such as internal computer processing
and other back office, in-house
functions inherent in providing a
consumer-facing service. For example,
automated payment fees are, by
definition, fees for IPCS providers’
internal ‘‘credit card payment, debit
card payment, and bill processing’’ that
are basic back office functions that are
a routine part of providing a
communications service. Given the
historical backdrop of problems that
have arisen from separately-imposed
ancillary service charges in this context,
we find that providers should not be
allowed to treat payment for IPCS as a
service—separate and apart from IPCS
service itself—for which a separate
charge is assessed.
416. The other permissible ancillary
services—third-party financial
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
transaction fees, live agent fees, paper
bill/statement fees, and single-call and
related services fees—relate primarily to
how consumers are billed for and pay
for IPCS, and thus also are inherently
part of IPCS. Although these ancillary
services may have qualified as a
‘‘convenience’’ in 2015 when the
Commission first identified them in its
rules, the record indicates that they are
now the predominant means by which
consumers gain access to IPCS. While
alternative methods of funding an
account remain available (e.g., by check
or money order), automated payment or
money transmitter services are ‘‘an
intrinsic part’’ of accessing and using
IPCS, as is the case with most other
services in the 21st-century economy.
Indeed, one provider has pointed to the
decreased usage of collect calls, and its
alternative payment mechanisms, in
support of its proposal that the
Commission eliminate the fee for paper
statements. In short, ‘‘incarcerated
people and their families must either
incur [these charges] when making a
call or forego contact with their loved
ones.’’
417. We recognize, of course, that an
IPCS user may contact a live agent,
request a paper bill, or otherwise
interact with an IPCS provider regarding
matters other than routine billing and
collection. For instance, an IPCS
account holder may wish to speak with
a live agent to complain about the
service quality on video
communications, to learn about the
provider’s alternate pricing plans, or to
obtain a refund of money from an
inactive account. We find that these
other non-billing and collection
interactions also are inherent in the
provision of IPCS, in much the same
way that similar interactions are
inherent in products and services
provided outside the IPCS context. As
such, we conclude that the costs of
these interactions should be recovered
through IPCS rates, rather than ancillary
service charges that have been an
ongoing source of harm in the IPCS
context.
418. Eliminating Incentives for
Abuses. Second, we find that continuing
to allow providers to impose separate
ancillary service charges would create
an incentive for providers to continue to
engage in practices that unreasonably
burden consumers and effectively raise
the cost of IPCS. Although the
Commission has previously restricted
the type and amount of ancillary service
charges, providers are still ‘‘motivated
to exploit every available opportunity to
continue deriving unreasonable profits
from such fees.’’ A rate structure that
eliminates all separate ancillary service
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
charges while still allowing providers to
recover the costs of these functions will
eliminate the incentive and ability for
providers to charge multiple fees for the
same transaction, as a way of exacting
revenue from consumers that far
exceeds their actual costs of completing
the transaction, a problem that is welldocumented in the record. The record
reflects substantial debate or confusion
as to whether—and if so, under what
circumstances—multiple fees can be
charged for a single transaction, and
more generally, what activity the
payment-related fees were intended to
encompass. Because we eliminate all
ancillary service charges associated with
IPCS, we find it unnecessary to resolve
this dispute in this rulemaking. By
including providers’ reported costs of
all ancillary services into our rate caps
and eliminating providers’ ability to
charge for them separately, we also
remove the incentive for providers to
‘‘double dip’’ in this manner, mooting
related concerns in regard to our
existing rules and eliminating consumer
confusion arising from these practices.
419. We similarly eliminate the ability
of providers to engage in other rentseeking activity described in the record,
including concerns that providers may
‘‘steer’’ consumers to a more expensive
single-call option for an incarcerated
person’s initial call after incarceration
in an effort to artificially inflate
revenues through single-call fees.
Commenters describe circumstances
where providers charged multiple
single-call fees when calls were
disconnected and reconnected, or where
a provider ‘‘charge[d] a billing statement
fee as a matter of course without
offering an option of providing a free
electronic copy,’’ and several other rentseeking practices. These practices
undermine the intent of our rules and
merely inflate providers’ revenues well
beyond costs at the expense of
consumers while providing no
additional consumer value.
420. Recognizing the Limitations of
Providers’ Ancillary Services Cost Data.
Third, we find that the limitations
inherent in providers’ reported ancillary
service charge data preclude our setting
reasonable, cost-based caps on
individual ancillary service charges. In
the 2021 ICS Order, the Commission
found that the data before it provided
‘‘no reliable way to exclude ancillary
service costs’’ from the calculations for
the provider-related rate cap
component, resulting in interim rate
caps that included the costs that
consumers were also paying through
ancillary service fees. The Commission
was unable to ‘‘isolate with any degree
of accuracy’’ the costs of providing
PO 00000
Frm 00079
Fmt 4701
Sfmt 4700
77321
ancillary services because the
instructions for the Second Mandatory
Data Collection required providers to
report certain ancillary service revenues
separately, but did not require providers
to report their ancillary service costs
separately from other inmate calling
services costs. Further, those
instructions did not require providers to
separately report costs relating to any
specific ancillary service, and no
commenter suggested a way of
identifying the providers’ ancillary
service costs. To correct for this
problem, in the 2023 Mandatory Data
Collection, providers were required to
follow detailed instructions in
allocating their costs to, and among,
their permissible ancillary services. In
contrast to the Second Mandatory Data
Collection, the instructions for the 2023
Mandatory Data Collection required
providers to report their costs of each
ancillary service separately. But, as
made clear in a technical appendix,
providers failed to reliably or
consistently allocate their costs among
the various ancillary services. This
makes it impossible for us to assess
reliable costs for each individual
ancillary service. Incorporating all of
these reported costs into our rate cap
calculations avoids the risk of setting
individual caps for each ancillary
service charge that fail to reflect
providers’ actual costs, while still
ensuring the providers are able to
recover their costs through our rates. By
incorporating providers’ reported
ancillary service charge costs into our
rate cap calculations, we ensure they
have an opportunity to recover, but not
double recover, their actual costs of
providing ancillary services.
Additionally, by including providers’
costs of providing ancillary services in
our rate caps, we effectively exclude
from our rate cap calculations the
amount by which providers’ revenues
from ancillary service charges
unreasonably exceeded their costs.
421. Additional Benefits. Fourth, we
find that incorporating providers’
ancillary service costs into our rate cap
calculations will benefit both consumers
and providers. As an initial matter, that
approach will result in a rate structure
that will be easier for consumers to
understand and for providers to
administer, while still allowing
providers to recover any used and
useful costs they incur in providing
ancillary services. It will simplify
providers’ record keeping and billing
processes, easing the administrative
burdens on providers and reducing the
burdens on consumers as they seek to
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77322
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
understand any charges to their IPCS
accounts.
422. We likewise find that
incorporating ancillary service costs
into our rate cap calculations will align
rates and charges more fairly with actual
user activity. Commenters point out the
seeming unreasonableness and
disproportionality of imposing a $3.00
fee for automated single call and related
services for a call that may be of short
duration, or passing through similar fees
for smaller deposits, causing consumers
to ‘‘lose a significant amount’’ of their
account deposits through such fees.
Incorporating ancillary service costs
into our rate caps spreads those costs
across all calls and communications,
ensuring that the cost of any particular
communication for any IPCS consumer
is more proportionate to its duration.
423. Even beyond those direct effects
on IPCS rates and charges, we also
eliminate certain incentives for
consumer behavior that our current fee
structure would perpetuate, such as
avoiding a live agent or transferring
funds to relatives less frequently in an
effort to avoid such charges. Our actions
today reduce these barriers to
communication, resulting in a
compensation plan ensuring just and
reasonable rates and charges—and fair
compensation for providers—in a way
that best benefits the general public. Our
actions also better align with similar
services in the non-carceral
communications context. As one
commenter explains, ‘‘[m]ost telephone
corporations and other utilities provide
customer services for free, including
services such as speaking with a live
agent to set up an account, adding
money to an account, or assisting with
making a call.’’ Similarly, by
incorporating the reported costs of
paper bills into our rate cap
calculations, we align IPCS billing
practices more closely with
telecommunications billing practices
outside of the carceral context, where
separate charges typically are not
assessed for paper bills.
424. Finally, we find that
incorporating ancillary service costs
into our rate cap calculations aligns our
rate and fee structure more effectively
with broader patterns in the IPCS
industry while recognizing the
diminishing usage of certain ancillary
services. As the Commission has
previously observed, several states have
already banned ancillary service
charges, either piecemeal or outright.
For example, several providers assert
they rarely charge a paper bill fee as few
consumers require paper bills, even
proposing that this fee be eliminated. At
least one provider no longer charges a
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
live agent fee, having switched to an
automated system during the pandemic.
Meanwhile, some providers have shifted
from offering single-call services
through third parties (as defined in our
rules) to instead provide these services
themselves. Other commenters propose
eliminating the single-call fee entirely.
The record further suggests that the
single-call service, which ostensibly
offers the convenience of completing
initial contact without setting up an
account, may in practice offer little
benefit to consumers, as the called
parties still have to enter their payment
card information to accept the call. Our
actions are consistent with our recent
initiative requiring cable and direct
broadcasting satellite operators to offer
‘‘all-in’’ prices to consumers so that
consumers have a transparent and
accurate reflection of the total cost of
services, inclusive of all additional fees.
425. Some commenters object to the
approach of incorporating ancillary
service costs into our rate cap
calculations. Those commenters argue
that this methodology ‘‘does not reflect
the manner in which costs are caused by
users of the service,’’ and ‘‘would
impose costs for payment processing on
all consumers, rather than just those
consumers directly responsible for the
cost.’’ We are unpersuaded. We find that
most of these functions have become
‘‘an intrinsic part of providing’’ IPCS
because they provide IPCS consumers
the means to obtain IPCS, such that
consumers typically ‘‘must either incur
[these charges] when making a call or
forego contact with their loved ones.’’
For the same reason, we are not
persuaded by Securus’s implicit
argument that the current ancillary fees
are offered ‘‘as a convenience to
incarcerated persons or their friends and
family and are not intrinsic to the
provision of ICS.’’ Certain ancillary
service charges, for example those for
automated payment services, are costs
that are either universally or near
universally incurred by consumers. But
it is not necessary that these services be
used by ‘‘all consumers’’; the fact that
these services can operate as a
threshold, coupled with the factors
identified above that support ancillary
service cost recovery through perminute IPCS rate caps, will ensure that
our approach provides for just and
reasonable rates for consumers and
providers, while also providing
appropriate cost recovery for providers.
In the 2015 ICS Order, the Commission
found that single-call services were not
‘‘reasonably and directly related to the
provision of ICS’’ because they ‘‘inflate
the effective price end users pay for ICS
PO 00000
Frm 00080
Fmt 4701
Sfmt 4700
and result in excessive compensation to
providers.’’ We find that this pattern has
been ameliorated, in part, by the
changes to single-call fees adopted in
the 2021 ICS Order and 2022 ICS Order;
we also recognize that providers incur
some amount of legitimate costs for
providing this service, which for at least
some consumers may offer a crucial
means of completing an IPCS
communication. At the same time, we
find that the continuing abuse of this fee
described in the comment record,
supports elimination of the single-call
fee as an independent charge.
426. Further, commenters opposing
the elimination of separate ancillary
service charges ignore the other factors
that make it the best means of ensuring
just and reasonable IPCS rates and
charges. As discussed above, each of the
other factors supporting our approach—
the need to eliminate incentives for
providers to assess unreasonable
ancillary service charges, the
impossibility of setting reasonable
ancillary service charge caps given the
limitations on the data on ancillary
service costs providers reported in
response to the 2023 Mandatory Data
Collection, and the additional public
interest benefits our approach will
produce—fully and independently
support our approach both individually,
and in any combination.
9. Alternate Pricing Plans
a. Introduction
427. The Commission has
traditionally required IPCS providers to
charge for interstate and international
audio IPCS on a per-minute basis
principally to safeguard consumers from
potentially unreasonable rates and
practices. The Commission’s rules have
long prohibited providers from using
‘‘flat-rate calling’’ that would require
consumers to pay a flat rate per call
regardless of the length of the call. By
comparison, in recent years many
telecommunications service plans in
non-carceral settings have transitioned
to flat-rate pricing for a specific quantity
of, or an unlimited number of, minutes.
At the same time, IPCS marketplace
developments have also led to
‘‘emerging pay models’’ that more
closely track the ‘‘modern marketplace.’’
In recognition of these developments
and the pro-consumer benefits of
allowing more flexible pricing
programs, today we permit IPCS
providers to offer incarcerated people
and their friends and family IPCS via
optional ‘‘alternate pricing plans,’’
subject to clearly defined safeguards to
ensure that IPCS consumers are
protected. The Commission previously
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
referred to these programs as ‘‘pilot
programs.’’ These optional programs
could, for example, consist of blocks of
audio calls or video communications, or
an unlimited quantity of either service,
at a set monthly or weekly price.
428. The record reflects that alternate
pricing plans can provide meaningful
benefits to IPCS consumers, including,
but not limited to, increased utilization
of IPCS, with all of its attendant benefits
for reducing recidivism, and greater
budgetary certainty for IPCS consumers.
Nevertheless, we are mindful that
alternate pricing plans may not be a
good fit for every consumer and
therefore include guardrails to protect
against potential ‘‘abuse and higher
prices.’’ We find that, on balance, the
potential advantages of these plans are
significant. We therefore permit IPCS
providers to offer alternate pricing plans
subject to rules and conditions to ensure
that consumers that elect these plans
have the information needed to make
informed choices and are protected from
unjust and unreasonable rates and
charges. As explained above, the Martha
Wright-Reed Act requires just and
reasonable rates and charges, and
provides us with limited authority to
regulate IPCS providers’ practices,
classifications, and regulations that
relate to IPCS rates and charges.
Alternate pricing plans may include the
full range of IPCS now subject to the
Commission’s authority, including
intrastate IPCS and advanced
communications services now included
in the statutory definition of ‘‘payphone
service’’ in carceral facilities.
b. Background
429. The Commission has previously
invited comment on how its regulation
of IPCS ‘‘should evolve in light of
marketplace developments to better
accommodate the needs of incarcerated
people,’’ including through the use of
‘‘alternative rate structures.’’ In the 2020
ICS Notice, the Commission sought
comment about ‘‘alternative rate
structures’’ and whether it should
change its rules ‘‘to recognize industry
innovations’’ including new pay
models. At that time, some commenters
voiced support for such changes. Later,
in 2021, the Commission asked whether
it should consider ‘‘alternative rate
structures, such as one under which an
incarcerated person would have a
specified—or unlimited—number of
monthly minutes of use for a
predetermined monthly charge.’’ Some
commenters expressed support for
‘‘alternative rate structures’’ while
acknowledging the need to ensure
incarcerated people and their loved
ones are protected from unjust and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
unreasonable rates and charges. At that
time, the Prison Policy Initiative
asserted that alternate pricing plans
were premature as a matter of law and
fact, and requested that the Commission
ensure that the alternate pricing plans
be ‘‘fair to consumers.’’
430. Shortly after seeking comment in
2021, Securus filed a Petition for Waiver
of the Commission’s rules so it and
‘‘other providers’’ could offer flat-rate
calling packages for interstate audio
IPCS. Securus had been offering
subscription plans for intrastate audio
service since December 2020. Under its
subscription plans, Securus charged a
flat rate for a fixed number of calls for
a period of, for example, one month. In
addition to the flat rate, Securus charged
a ‘‘site commission[ ] (if applicable),
plus $3.00 automated payment fee.’’
Also, the plans were ‘‘[d]esigned to be
used only to call specific numbers from
a specific facility.’’ Calls made to other
numbers that were not using Securus’s
subscription plan were charged at
Securus’s per-minute rates. The Bureau
sought comment on the Securus Waiver
Petition. While commenters did not
object to alternate pricing plans in
general, the responses were mixed, with
some urging the Commission to grant
the Securus Waiver Petition, and others
expressing concern and suggesting that
the Commission proceed slowly and
adopt consumer protection measures
applicable to such plans. Securus
terminated its subscription plans later
in 2021 due to its inability to determine
the jurisdictional nature of the calls
included in the plans.
431. In 2022, and again in 2023, the
Commission sought further comment on
alternate pricing plans, conditions that
may be placed on the plans, and
consumer disclosures to ensure that
providers accurately disclose the details
of any alternate pricing plans. The
record in response generally supports
the agency permitting these alternate
pricing plans but many commenters
focused on requirements and protective
measures related to these plans. ViaPath
asks the Commission to refrain from
adopting ‘‘excessive and unnecessary
conditions’’ applicable to the plans.
Securus requests flexibility in selecting
the form of the plans, and recognizes
that ‘‘reasonable conditions’’ will be
necessary. The Public Interest Parties
suggest that the Commission permit the
plans subject to a number of conditions
concerning, for example, rates and
consumer information, to ensure that
consumers are protected. Based on the
foregoing suggestions, Pay Tel observes
that the plans may have benefits ‘‘in
some settings for some customers.’’
Stephen Raher requests a robust system
PO 00000
Frm 00081
Fmt 4701
Sfmt 4700
77323
of consumer disclosures. Subsequent ex
parte filings provide additional detail
on Securus’s experience offering
alternate pricing plans and discuss
possible conditions on these plans.
c. Discussion
432. We find that the record supports
allowing IPCS providers to offer
alternatives to per-minute pricing for
IPCS subject to the rules and conditions
adopted in the Report and Order. We
therefore allow IPCS providers
flexibility to offer pricing structures
other than per-minute pricing as options
for consumers in addition to offering
standard per-minute pricing plans. In
reply comments to 2022, the Public
Interest Parties request the Commission
to defer consideration of alternate
pricing plans due to the enactment of
the Martha Wright-Reed Act in January
2023, and the circulation of the draft
2023 IPCS NPRM (which was released
Mar. 17, 2023). Parties have had more
than three years and several
opportunities to comment on alternate
pricing plans, including in response to
further questions about such plans
raised in connection with the
Commission’s implementation of the
Martha Wright-Reed Act in 2023. Given
the potential benefits discussed herein,
we see no reason to wait any longer to
allow such plans. The record indicates
both provider and consumer interest in
such plans, and we find that these plans
offer benefits that consumers want. For
example, Securus’s plans were
‘‘developed as a direct result of
consultations between Securus
leadership and justice-involved
families.’’ After Securus terminated its
subscription plans, consumers asked it
to reinstate the plans, and emphasized
their benefits. Former subscribers
explained that Securus’s subscription
plans helped them be able to talk to
loved ones, helped stabilize their mental
health, and enabled an incarcerated
person to help their children with their
homework. The Director of Facility
Operations at one carceral facility
describes Securus’s plan as ‘‘the most
economical option for communication
[between incarcerated people and] their
wives and children.’’ Securus remarks
that a ‘‘key benefit’’ to the individuals
enrolled in its subscription plans ‘‘was
being able to better budget for calls by
knowing in advance how much would
be spent on calls during a given period.’’
Demand for flat-rate monthly plans also
was expressed in the California PUC’s
hearings on Regulating
Telecommunications Services Used by
Incarcerated People. Consumers
mentioned the flat-rate monthly plans
for cell phone usage, and streaming
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77324
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
services like Disney and Netflix, and
asked whether flat-rate monthly plans
could be provided for telephone calls
with incarcerated people. To support its
argument that fixed-rate pricing helps
consumers budget for calls, Securus
points to Connecticut, where the
Department of Corrections (DOC) now
pays for calls, thereby making the calls
free to the consumers. Securus asserts
that it charges the DOC for Securus’s
services on a per-incarcerated-person
basis (rather than using per-minute
rates) to enable DOC to better budget for
Securus’s services.
433. Additionally, data provided by
Securus indicate that consumers
experienced longer and less costly calls
under its subscription plans. According
to Securus, the average cost per call was
$0.65 under its subscription plans (with
an average call length of 14.51 minutes)
compared to an average cost per call of
$1.62 using Securus’s per-minute rates
(with an average call length of 9.19
minutes). Securus explains that ‘‘[c]osts
decreased [an] average of 61% per call
and 74% on a per-minute basis.’’
ViaPath also predicts that alternate
pricing plans ‘‘will promote increased
calling while reducing costs.’’
434. Nevertheless, other commenters
urge caution regarding alternate pricing
plans. For example, Pay Tel expresses
concern that if a consumer does not use
all of the minutes in a plan, the cost
they pay for a plan would be greater
than they would have paid at the perminute rates offered by that provider.
The Accessibility Advocacy and
Research Organizations ask the
Commission to take a ‘‘cautious
approach designed to ensure [alternate
pricing plans] serve incarcerated people
with disabilities’ interests first, and not
those of ICS providers looking for ways
to circumvent their pricing obligations.’’
Worth Rises points out that ‘‘IPCS
providers have a record of exploiting
incarcerated people and their loved
ones.’’ Although Securus points out that
‘‘[s]ubscribers saved money at low
levels of utilization: [15 to 30%,]’’ the
data do not tell the complete story. The
Public Interest Parties point out that a
‘‘substantial number of participants’’
(i.e., from 10% to 34% of the
consumers) in Securus’s nine
subscription plans had low usage and as
a result, paid more using the
subscription plans than they would
have paid under per-minute rates. The
Public Interest Parties, and Securus’s
spreadsheet, reference the breakeven
point for Securus’s subscription plans.
The breakeven point refers to the
amount of usage required for a
consumer to realize a rate that equals
the provider’s per-minute rate.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Specifically, the ‘‘breakeven point’’ is
the usage amount: (a) below which a
consumer would pay more for the
subscription plan than they would have
paid under the provider’s per-minute
rates, and (b) at or above which the cost
of the subscription plan would be less
than or equal to what the consumer
would pay under the provider’s perminute rates. For example, Securus
shows that 76% of its subscribers were
above the breakeven point at one
facility. In other words, 76% of the
subscribers had usage high enough to
justify the cost of the subscription plan
whereas the remaining 24% of
subscribers effectively paid more for the
subscription plan than they would have
paid if they had paid for the service at
Securus’s per-minute rates.
435. Given the apparent demand from
consumers and the potential savings
and increased communications that can
result from alternate pricing plans, we
will permit IPCS providers to offer such
plans. However, to help make sure that
consumers who enroll in the plans
benefit from them and that IPCS
providers do not use such plans to
otherwise evade the Commission’s IPCS
rules, we require that these plans
comply with the general rules
applicable to all IPCS, and adopt
specific consumer protection and
disclosure rules for these plans. We
expect the rules we adopt today will
provide sufficient consumer protections,
and in any event, the alternate pricing
plans are optional for both providers
and consumers.
436. We acknowledge that our
decision today represents an evolution
in the Commission’s thinking
concerning permitted rate structures.
We emphasize that IPCS alternate
pricing plans are optional to consumers,
and IPCS providers that offer such plans
are still required to offer a per-minute
pricing option to the consumers they
serve. This ensures that consumers will
always have the option of selecting perminute pricing if traditional per-minute
pricing offers greater value. In facilities
where alternate pricing plans are
offered, consumers will now have the
ability to select the pricing models that
best meet their needs and their budgets,
similar to the flexibility afforded to
consumers outside the carceral setting.
(i) General Parameters of Alternate
Pricing Plans
437. We allow IPCS providers the
option to offer alternate pricing plans.
We first define an ‘‘alternate pricing
plan’’ as the offering of IPCS to
consumers using a pricing structure
other than per-minute pricing. An IPCS
provider may determine whether to
PO 00000
Frm 00082
Fmt 4701
Sfmt 4700
offer such a plan, which services to
include, which format (i.e., the rates
(subject to the applicable rate caps) and
the number of minutes, calls or
communications for example, included
(or an unlimited number of minutes,
calls or communications)), and where to
offer the plan, as discussed below. We
require IPCS providers that offer
alternate pricing plans to comply with
the rules specific to alternate pricing
plans, as well as other rules applicable
to all IPCS, to help ensure just and
reasonable rates and charges. For
example, the prohibitions and
limitations on per-call, per-connection,
and per-communication charges, site
commissions, ancillary service charges,
and taxes and fees as provided for in our
rule revisions, also apply to alternate
pricing plans.
438. Optional to Consumers and to
IPCS Providers. As a threshold matter, a
consumer may enroll in an alternate
pricing plan at their discretion. IPCS
providers must not require a consumer
to enroll in an alternate pricing plan. In
2021 and 2022, the Commission asked
whether providers should be permitted
to offer optional pricing structures as
long as consumers would still have the
ability to purchase service on a perminute basis. In response, the Public
Interest Parties and ViaPath agree that
participation in an alternate pricing
plan should be voluntary for the
consumer. No commenter suggests that
enrollment in a plan should be
mandatory for a consumer.
439. Similarly, we do not require IPCS
providers to offer alternate pricing
plans. An IPCS provider’s decision to
offer an alternate pricing plan is
voluntary. Consistent with the record
and to ensure the optional nature of
alternate pricing plans particularly for
consumers, we require providers
offering alternate pricing plans to also
continue offering per-minute pricing.
We adopt revisions to section 64.6010(a)
of our rules to incorporate this
requirement. Consumers therefore will
still have the option of paying for IPCS
on a per-minute basis. As Worth Rises
points out, ‘‘[p]er minute pricing
structures . . . protect ratepayers who
may only make a few calls and do not
want to be locked into paying for
extended time periods.’’ No commenter
requested that the Commission mandate
the offering of alternate pricing plans, or
eliminate the per-minute option. Worth
Rises asks the Commission to obtain
more data before permitting providers to
offer alternate pricing plans, but our
requirements that alternate pricing
plans to be optional for consumers, and
that the plans comply with the other
rules and conditions we adopt here
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
generally for IPCS, should resolve
Worth Rises’s concerns.
440. Format. An IPCS provider may
employ any format for its alternate
pricing plans that complies with the
Commission’s generally applicable IPCS
rules and the safeguards we adopt in the
Report and Order, which, together, are
designed to protect consumers from
unjust and unreasonable rates and
charges, consistent with the Martha
Wright-Reed Act. IPCS providers will
have the flexibility to determine the
format of their alternate pricing plans
and may offer plans based on pricing by
minutes of use, calls or communications
made, or any other format. In 2022 and
2021, the Commission asked about
plans that would offer a specific, or
unlimited, number of minutes of use for
audio services at a monthly charge, and
the merits of different pricing structures
and their impact on consumers and
providers. Our decision to permit IPCS
providers to offer alternate pricing plans
based on a fixed or unlimited number of
minutes, calls or communications seems
to be inconsistent with the
Commission’s prior implication, in the
2022 ICS Order, that per-minute rates
are preferable to per-call rates. But in
the 2022 ICS Order, the Commission
cited to a discussion in the 2021 ICS
Order concerning cost allocators, not
rate setting. Thus, because our decision
here is about rate setting, not cost
allocation, that passage in the 2022 ICS
Order does not apply. Some
commenters oppose plans based on a
specified number of calls due to
concerns about dropped calls, which we
address below. One commenter argues
that the Commission’s prohibition on
flat-rate calling and per-call charges
prohibits alternate pricing plans. As
discussed below, we remove the rule
prohibiting flat-rate calling, making this
concern moot. In addition, the
prohibition on per-call charges does not
prohibit the provision of alternate
pricing plans based on a specific
number, or unlimited number of, calls
or communications; the prohibition on
per-call charges just prohibits charges
that are assessed in addition to the base
rates for calls. As discussed above, we
retain and amend the prohibition on
per-call charges. Thus, the commenter’s
concern about per-call charges is
misplaced. Because we now have
authority to regulate rates for certain
advanced communications services,
including video services, alternate
pricing plans may include advanced
communications services, which
likewise may be offered for a fixed
number of or an unlimited number of
minutes or communications, for a
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
service period of a week or a month,
among other formats.
441. When determining the format of
an alternate pricing plan, IPCS
providers must consider the type and
characteristics of the facilities they
serve, including: (a) any limits on the
number of and length of calls or
communications imposed by the
facility; (b) the availability of
correctional staff to manage the use of
the service; and (c) equipment
availability for the calls or
communications. The amount of
communications equipment per facility
varies but, as an example, the Public
Interest Parties suggest that in 2023, the
California Department of Corrections
and Rehabilitation Facilities had an
average of 1 telephone for every 22
incarcerated people. Additionally, in
the Genessee County Jail, ‘‘[e]ach jail
pod has only two video kiosks for
roughly 60 to 70 people, and it is
common for only one of the kiosks to be
working at any given time.’’ A
provider’s consideration of these factors
will help ensure that consumers are
reasonably able to make enough calls to
reach the breakeven point for the
specific plan as discussed below. We
want to avoid IPCS providers, offering
alternate pricing plans of, for example,
200 calls per month when because of
equipment limitations or call length and
frequency limitations the incarcerated
individual could not possibly make 200
calls a month at their facility.
442. Service Period. In 2022, the
Commission asked parties to comment
on the appropriate service period for
alternate pricing plans. The Public
Interest Parties and Securus suggest that
‘‘consumers should not be required to
sign up for long term commitments.’’
PPI notes that in prisons, ‘‘residents
have a longer and more predictable
length of stay (as compared to jails),
allowing them to more effectively
budget for recurring expenses like
phone calls,’’ whereas in jails,
‘‘populations are more transient and
financial planning is more difficult.’’
NCIC suggests that bulk packages for
video could be offered as an option at
longer-term facilities, but that ‘‘perminute billing would be the most costeffective solution for short-term and
county jails that may house incarcerated
persons for an evening or weekend.’’
Although these statements appear to
assume that the consumer is the
incarcerated person, the concern about
the length of stay likely would similarly
apply to the friends and family of the
incarcerated person, if they are the
consumers. We agree and therefore limit
the service period IPCS providers may
offer an alternate pricing plan to no
PO 00000
Frm 00083
Fmt 4701
Sfmt 4700
77325
longer than one month. When Securus
offered its subscription plans, the
services were offered for no more than
one month at a time before renewal was
required. One month is the length of a
standard billing cycle used by IPCS
providers in carceral facilities and
telecommunications companies in noncarceral settings. Limiting alternate
pricing plans to service periods of at
most one month limits consumers’
potential financial liability and permits
flexibility for any changed
circumstances. At the end of a service
period, a consumer who is participating
in the alternate pricing plan will need
to renew their enrollment if they want
to continue participating in the plan
(unless the consumer previously has
opted in to automatic renewals, if
offered by the provider).
443. Services Included. An alternate
pricing plan may consist of: (a) a single
service that is defined as IPCS (e.g., an
audio or video communications service)
or (b) any bundle of services for which
each service is defined as IPCS. Our use
of the word ‘‘bundle’’ in the context of
alternate pricing plans refers only to a
combination of services; it does not
imply a discount. We also note that
‘‘bundling’’ is mentioned in the record
in the context of services offered by a
provider to a contracting authority. By
comparison, ‘‘bundling’’ in alternate
pricing plans concerns services offered
by a provider to consumers.
Most comments in the record focus on
the provision of interstate audio IPCS,
because most of the comments were
filed before the enactment of the Martha
Wright-Reed Act, which expanded the
Commission’s regulatory authority to
include all audio and video
communications services in carceral
facilities. In the absence of regulation,
we recognize that some providers have
priced video services at flat rates, and
others have priced video services by the
minute. In 2023, the Commission asked
whether it should ‘‘allow voice and
video services to be offered as bundles.’’
While not advocating for alternate
pricing plans that would consist of
combinations of services with prices
based on broadband usage, Worth Rises
previously suggested that the
Commission consider such approaches
and determine if they would protect
consumers. In response, Securus urges
the Commission to ‘‘make clear’’ that
providers ‘‘may bundle voice, video and
other services’’ in alternate pricing
plans, and that the Commission could
‘‘exercise oversight’’ through reporting
requirements. Additionally, the
California Public Utilities Commission
states that bundles should not be
allowed ‘‘unless the provider provides
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77326
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
transparency on the cost or what the
rate entails.’’ Our rate, reporting and
other alternate pricing plan
requirements should resolve these
concerns.
444. We recognize that services
offered in combination under an
alternate pricing plan may not be
subject to the same rate caps.
Nevertheless, services offered under an
alternate pricing plan remain subject to
the general IPCS rules, including the
applicable rate caps for both audio and
video services and the prohibition for
levying separate ancillary service
charges. To the extent a consumer
purchasing services under an alternate
pricing plan believes that the charge
assessed for the bundled services
resulted in the effective rate exceeding
the applicable rate caps established in
the Report and Order, the consumer
would first need to show that their
usage of each service in the bundle
meets or exceeds the usages required to
meet the specified breakeven point(s),
and then the IPCS provider would bear
the burden of demonstrating that the
rate charged to that consumer under its
alternate pricing plan is less than or
equal to the applicable IPCS per-minute
rate cap. The breakeven point refers to
the amount of usage required for a
consumer to realize a rate that equals
the provider’s applicable per-minute
rate at the facility. Specifically, the
‘‘breakeven point’’ is the usage amount:
(a) below which a consumer would pay
more for the subscription plan than they
would have paid under the provider’s
per-minute rates, and (b) at or above
which the cost of the subscription plan
would be less than or equal to what the
consumer would pay under the
provider’s per-minute rates.
445. We do not permit alternate
pricing plans that combine IPCS with
non-regulated services, as requested by
some IPCS providers. Several providers
suggest that the Commission should
permit bundling of non-IPCS with IPCS.
NCIC explains that its accounting
system is set up to support just
subscription plans or just per-minute
plans. Thus, if subscription plans
include audio but not messaging, then a
consumer would need to have two
accounts with NCIC if they want both
services—and NCIC would need to
modify its accounting platform to
support the two accounts. NCIC is the
only commenter that expresses concern
about the cost of establishing
subscription plans, and NCIC does not
quantify that cost. However, NCIC does
point out that other IPCS providers have
separate accounts for separate services,
and charge their customers varying fees
for each of those accounts. NCIC is
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
concerned that the FCC would
‘‘mandate a subscription plan.’’ Because
we are making subscription plans
optional to the provider, NCIC can
choose to not offer such plans. As the
Public Interest Parties observe, alternate
pricing plans should not include nonIPCS ‘‘which lack visibility and
transparency in their pricing.’’ A key
premise in our decision to allow
alternate pricing plans is the ability of
IPCS users to make informed decisions
about whether to choose such optional
plans. Where the plans are limited to
IPCS, users can make comparisons to
the rate-regulated per-minute plans
capped by Commission rules. By
contrast, if non-regulated services are
included in alternate pricing plans, we
are not confident that IPCS users
consistently will have the same type of
visibility and transparency in the
pricing for those non-regulated services
sufficient to make an informed decision
whether to elect an alternate pricing
plan.
446. Facilities. Alternate pricing plans
may be offered at any carceral facilities
served by the IPCS provider, such as
jails and prisons, where the relevant
correctional authorities permit. Securus
offered its subscription plans in eight
jails and one prison. One of those
facilities was a short-term detention
facility where Securus offered a plan of
just 25 calls per week, but that facility
had low utilization. Securus
consequently posits that ‘‘[i]t may be
that subscription plans are not optimal
for short term facilities.’’ By not
specifying the types of facilities in
which IPCS providers may offer
alternate pricing plans, we allow
providers the flexibility to determine
where these plans would be most
beneficial.
(ii) Rules and Conditions Specific to
Alternate Pricing Plans
447. Alternate pricing plans must
comply with the rules generally
applicable to IPCS, as well as specific
rules and conditions designed to ensure
that consumers that choose these
pricing plans are protected. Requiring
compliance with these comprehensive
rules will serve to protect consumers
and ensure just and reasonable rates and
charges as required by the
Communications Act and the Martha
Wright-Reed Act.
a. Using a Consumer’s Comparable PerMinute Rate
448. In 2021, the Commission asked
about the appropriate rate of IPCS
offered via an alternate pricing plan. In
2022, the Commission asked how to
protect consumers from ‘‘unreasonably
PO 00000
Frm 00084
Fmt 4701
Sfmt 4700
high interstate and international rates in
connection with pilot programs.’’
Today, we require that any IPCS
alternate pricing plan be offered at a rate
that has a breakeven point equal to or
less than the applicable rate cap. In
2022, the Commission also asked
whether it should require providers to
offer consumers a discount compared to
what they would pay for the same usage
under the rate caps. Securus objects to
being required to offer a discount
because ‘‘there [would be] little or no
incentive to price these plans at a
substantial price discount.’’ We do not
require that alternate pricing plans be
offered at a discount from the
Commission’s per-minute rate caps.
Providers can determine the details of
their alternate pricing plans, subject to
our rules and what the market will bear.
The rates of alternate pricing plans that
satisfy this requirement will be
presumed lawful. We therefore ensure
that providers cannot use alternate
pricing plans to circumvent our rate
caps, as commenters have cautioned.
449. For purposes of demonstrating
compliance with our rules in the event
of a consumer complaint or
investigation, an alternate pricing plan,
whether offering bundled IPCS or a
stand-alone service, must have a
breakeven point that, when calculated
on a per-minute basis, is less than or
equal to the applicable rate caps. The
IPCS provider bears the burden of
demonstrating compliance with this
condition if its alternate pricing plan is
the subject of a complaint or an
investigation by the Commission.
Commenters agree that the providers
should bear the burden of
demonstrating their compliance with
the Commission’s rate caps and
ancillary services caps, because ‘‘IPCS
providers . . . are in the best position
to provide this information about usage
to the Commission.’’ A consumer
complaint about the provider’s alternate
pricing plan rates will not be
entertained under the alternate pricing
plan rule in § 64.6140 unless the
consumer’s usage meets or exceeds the
breakeven point(s) for the alternate
pricing plan. This limitation does not
restrict non-rate-related complaints
about providers’ alternate pricing plans,
for example about dropped calls or
billing issues, while it does strike a
balance by limiting the number of rate
complaints that can be brought to the
Commission to those brought by
consumers whose usage met the
breakeven point.
450. In 2022, the Commission also
sought comment on whether a
consumer’s actual usage should be taken
into account when determining whether
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
an alternate pricing plan is consistent
with the rate caps. One commenter
suggests that a plan’s effective rate be
calculated based on the usage data for
a specific consumer. Other commenters
propose using alternative methods such
as a ‘‘reasonable utilization’’ of the
allotted minutes, ‘‘a reasonable
assumption of usage,’’ and an ‘‘average
level of usage.’’ Securus also suggests
that no plan ‘‘should be offered if its
effective per-minute rate at full
utilization is not below the applicable
per-minute cap.’’ Calculating a
comparable per-minute rate at full
utilization assumes that a ‘‘consumer
will use every call and minute
available,’’ an assumption that defies
the purpose of our requirement to
calculate the consumer’s effective rate.
None of these commenters explain how
these alternative methods would be
implemented in practice. We find that
comparing the amount of usage to meet
the breakeven point to the consumer’s
actual usage of the alternate pricing plan
will result in a more meaningful and
accurate assessment than using the
alternate methods proposed by
commenters.
451. Our rule requiring comparison of
a consumer’s actual usage to the
alternate pricing plan’s breakeven point
makes the determination of whether a
plan results in just and reasonable rates
for a specific consumer straightforward.
In the event of a challenge, the IPCS
provider would need to use only the
number of minutes used by the
consumer challenging the lawfulness of
the alternate pricing plan, without
needing to analyze other consumers’
usage to determine an ‘‘average’’ or
‘‘reasonable’’ amount of usage. Securus
cautions that the Commission ‘‘be
mindful . . . of not imposing excessive
burdens on providers’’ as it considers
the calculation of a consumer’s effective
rate, but Securus does not explain what
it thinks the ‘‘burden’’ may be. We find
that requiring that a consumer’s actual
usage be used to determine the
comparable per-minute rate for that
consumer is less of a burden than
Securus’s suggestions that providers use
a ‘‘reasonable’’ or ‘‘average’’ amount of
usage.
(b) Complaints of Dropped Calls or
Communications
452. When using an alternate pricing
plan based on a specific number of calls
or communications, an IPCS consumer
may be charged for more than one call
or communication if an original call is
dropped and the consumer is forced to
reinitiate the call or communication to
finish a conversation. We, therefore,
address the issue of refunds or credits
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
for such calls or communications when
consumers are effectively charged for
more than one call when a call is
dropped. In the case of plans that charge
on a per-call or per-communication
basis, we expect refunds or credits to be
provided in particular circumstances for
dropped calls, and also require specific
consumer disclosures to ensure that
consumers are aware of the ability to
request those refunds or credits.
453. Complaints of dropped calls, and
the attendant lost funds associated with
those calls, have been a constant refrain
since the beginning of the Commission’s
regulatory efforts to reform
communications services for
incarcerated persons. Then, in the 2015
ICS Order, the Commission prohibited
per-call (and per-connection) charges, in
part, due to the ‘‘ ‘assessment of
multiple per-call charges for what was,
in effect, a single conversation’ ’’ that
was interrupted when the call was
dropped. Unfortunately, dropped calls
continue to be a problem and are not
limited to audio IPCS. In 2021, the
Commission asked about preventing
providers from assessing duplicative
ancillary service charges when a call is
dropped. In 2022, the Commission
sought comment on adopting a
requirement to provide credits or other
remedies for dropped calls in the
context of alternate pricing plans. At the
October 27, 2023, and February 1, 2024,
IPCS Listening Sessions, IPCS
consumers also discussed the issue and
the difficulty of having calls dropped.
454. There are several possible
reasons for an audio call or a video
communication to drop. On the one
hand, there could be a technical reason
such as faulty equipment in the carceral
facility, a problem in the IPCS
provider’s network, in the transmission
network between the IPCS provider and
the called party, or in the called party’s
network, in which instances we expect
providers to take steps to provide
appropriate refunds or credits. On the
other hand, calls or communications
can be intentionally disconnected for
non-technical reasons related to
security, such as stopping attempts to
initiate a three-way call, for which
refunds or credits would not be
appropriate. For example, when it
offered its subscription plan, Securus
made refunds available upon request
and acknowledged that refunds may be
available ‘‘for verified performance
problems such as poor quality or
outages caused by Securus systems.’’
Upon receipt of a dropped call
complaint, we similarly expect IPCS
providers to investigate these claims in
good faith and resolve them swiftly so
as not to delay giving a refund or credit
PO 00000
Frm 00085
Fmt 4701
Sfmt 4700
77327
to the IPCS consumer when warranted.
The record indicates that Securus
monitored the incidences of dropped
calls in its subscription plans, thereby
suggesting that this task will not be
overly burdensome for IPCS providers.
Regardless, we will vigilantly monitor
complaints about inappropriately
dropped communications, and, if
necessary, will adopt specific rules
requiring refunds or credits in the
instance of dropped calls or
communications. We seek comment on
call or communication service quality
and the issue of dropped calls due to
service quality in the accompanying
document.
455. We next require IPCS providers
to clearly describe their policies
regarding dropped calls or
communications in plain language in
their consumer disclosures, including
explaining the types of dropped calls
and communications for which a
consumer can seek a refund or credit.
The provider also must explain how the
refund or credit for a dropped call or
communication will be calculated. For
example, if an alternate pricing plan is
based on the number of calls or
communications, then the IPCS
provider could give a credit of at least
one call or communication, if there is
enough time left in the service period
for the consumer to use that credit;
otherwise, a pro-rated refund may be
appropriate. If the alternate pricing plan
consists of a fixed number of minutes,
we suggest that the IPCS provider give
the consumer a refund for the minutes
used by the call or communication that
was dropped. Finally, if the alternate
pricing plan consists of unlimited calls
or communications, or unlimited
minutes, then no credit or refund would
be needed. In its consumer disclosures,
the IPCS provider must also clearly
explain the method the consumer must
use to make a complaint and request a
refund or credit for a dropped call or
communication, and that method must
be easy for the consumer to complete.
ViaPath suggests that complaints could
be filed at the Commission. However,
clearly informing consumers of a
provider’s policies regarding dropped
calls or communications and providing
an easy-to-use method for requesting a
refund or credit will be a good first step
toward resolving issues with dropped
calls and communications.
(c) Automatic Renewals
456. To protect consumers from being
billed for additional service periods
without their consent, we permit IPCS
providers to offer automatic renewals of
any alternate pricing plan but only on
an opt-in basis, and subject to other
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77328
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
requirements discussed below. In 2022,
the Commission sought comment on
whether consumers should be able to
opt out of automatic renewals for
alternate pricing plans, citing concerns
that without such protections, alternate
pricing plans may default to renewals
consumers do not intend to purchase or
no longer need. In response, some
commenters expressed similar concerns
and even suggested prohibiting
automatic renewals. Alternatively,
Securus asserts that ‘‘the consumer
should have a readily accessible means
to decline or cancel any renewal
option.’’ During Securus’s subscription
plans, when a consumer signed up
using its website, Securus gave the
choice between manual renewal and
automatic renewal. PPI notes that
Securus apparently did not give
advance notice when a renewal
occurred for its subscription plan;
Securus notified customers only ‘‘after
their renewal payments have been
processed.’’ PPI also points out that
although Securus stated that customers
could receive a refund within 14 days
of an unwanted and unused automatic
renewal, Securus’s contracts did not
include these terms.
457. We adopt rules to ensure that
consumers are informed about their
renewal options. These rules are
intended to give consumers the option
to select automatic renewal, and also an
easy method and sufficient opportunity
for consumers to cancel the service
before a plan renews. We are guided by
the record, and many other situations
where the Commission has required
service providers to educate their
consumers and allow them to opt into
or out of a service. These rules apply to
all IPCS offered through an alternate
pricing plan.
458. We also require that IPCS
providers offering automatic renewals
for alternate pricing plans explain, in
plain language, the terms and
conditions of the automatic renewal
both at the time that it initially offers
the automatic renewal option to a
consumer, and before any automatic
renewal is about to occur by whatever
method the IPCS provider has
established for other consumer
notifications. The notices must explain
that if a consumer who requested
automatic renewals does not later want
the alternate pricing plan to be renewed,
the consumer may cancel their
participation within a reasonable grace
period identified by the provider at the
time service is initiated.
459. The IPCS provider must give
notice to the consumer of an upcoming
renewal with sufficient time before the
renewal date to ensure the consumer
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
can cancel their enrollment in the
alternate pricing plan prior to its
renewal. The Prison Policy Initiative
suggests that a notification two to three
‘‘business days prior to renewal would
help customers avoid potential overdraft
fees and remind them to cancel their
subscription if they have been meaning
to do so but forgot.’’ No other
commenter mentions the notices to be
provided before automatic renewals. We
agree that this requirement will ensure
that consumers have sufficient notice.
Therefore, we require that providers
give notice directly to consumers no
later than three business days prior to
the renewal date, and, to ensure receipt
of the notice, we require providers use,
at a minimum, the method of
communication that consumers agreed
to at the time they enrolled in the
alternate pricing plan. For example,
Securus used email to remind
consumers when they were reaching the
call limit of its subscription plans. PPI
commends Securus for providing an
online option for cancelling enrollment
(although they suggest that the related
terms and conditions were confusing).
(d) Cancellation by the Consumer
460. A consumer must be able to
cancel their enrollment in an alternate
pricing plan at any time and revert to
per-minute pricing. Refunds or credits
must be made available to consumers in
the circumstances detailed below.
Providers should process the
cancellation by the next business day
after the cancellation request. In its
consumer disclosures, the provider
must clearly explain the process for
requesting plan cancellation, which
must include the ability to use the
method the consumer used to enroll in
the plan. Securus provided an online
cancellation option but, according to
PPI, did not tell consumers that
procedure was available. The
disclosures also must include an
explanation of the option to request a
specific termination date if different
from the date that the provider
processes the cancellation. For example,
the consumer may want to request a
cancellation because an incarcerated
person is going to be transferred, and
the consumer would want the plan to
terminate after the date of transfer. The
consumer disclosures also must include
an explanation of the amount of the
refund that will be provided in
situations where the IPCS provider does
give refunds under the circumstances
surrounding cancellation. The provider
must clearly explain that once the
alternate pricing plan terminates, and
where applicable, the provider will bill
for its service(s) at the provider’s per-
PO 00000
Frm 00086
Fmt 4701
Sfmt 4700
minute rates for the service(s) by the
first day after the termination date. For
example, if the plan is cancelled due to
the incarcerated person being released,
then the ability for the incarcerated
person to call their friends and family
would no longer be needed. By
comparison, if the cancellation is not
due to one of the special circumstances,
then the incarcerated person may still
need to use the service of the provider
and would pay for that service using the
provider’s per-minute rates. We do not
require providers to roll over unused
minutes, calls or communications.
461. When Cancellation Is Allowed.
IPCS providers must allow consumers to
cancel their participation in an alternate
pricing plan at any time during the
service period and revert to per-minute
pricing. This requirement applies
regardless of whether the consumer has
elected to permit the provider to
automatically renew their participation
in the plan. In 2022, the Commission
sought comment on whether consumers
should be permitted to cancel their
enrollment in an alternate pricing plan
before the end of their enrollment
period. NCIC noted that people who are
incarcerated for only a short period of
time or are moved to another facility
may not be able to ‘‘receive the full
benefit of the subscription plan.’’ The
Public Interest Parties assert that
‘‘[c]onsumers should . . . not be bound
by any long-term commitments and
should be free to switch to a per-minute
structure upon request.’’ The record also
indicates that a consumer may want to
cancel their enrollment if they have not
used the service since the beginning of
the service period or if their
incarceration status has changed. There
may also be ‘‘special circumstances’’
such as release or transfer under which
a consumer may need to cancel their
participation in an alternate pricing
plan. Securus repeatedly states that
consumers should be permitted to
cancel at any time, and refers to easy
cancellations as the ‘‘ultimate consumer
protection.’’ We agree. Regardless of
when a consumer wants to cancel their
enrollment, the IPCS provider’s
procedures for cancelling the service
must be easy to follow and use the same
method to effectuate cancellation that
the consumer used to enroll in the plan.
As Securus points out, the method for
cancelling service should be ‘‘readily
accessible.’’
462. Refunds Upon Cancellation. In
the 2022 ICS Further Notice, the
Commission asked whether IPCS
providers should be required to offer
refunds when consumers cancel an
alternate pricing plan before the end of
the ‘‘subscription period.’’ Securus
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
explains that under its subscription
plan, ‘‘refunds [were] available upon
request,’’ and suggests that refund
options should be limited to special
circumstances such as the transfer or
release of the incarcerated person.
Securus argues that requiring providers
to otherwise give refunds to consumers
who cancel during a service period
‘‘would deprive providers of the benefit
of the bargain—low rates in exchange
for a predictable revenue stream.’’ We
agree. Therefore, although consumers
may cancel their enrollment in an
alternate pricing plan at any time, IPCS
providers are not required to refund the
balance of the subscription amount
except in the case of special
circumstances. The special
circumstances recognized by the IPCS
provider shall include situations where
the incarcerated person: (a) is released;
(b) is transferred to another facility; or
(c) is not permitted to make calls or
communications for a substantial
portion (for example 50% or more) of
the subscription period of the alternate
pricing plan. Under such circumstances,
the consumer would not be able to make
use of the alternate pricing plan, and
thus not be able to receive the benefit
of the services they paid for. The IPCS
provider may also establish other
special circumstances for which it will
provide a refund when a consumer
requests cancellation.
463. Any refund provided due to
special circumstances shall be no less
than the pro-rated amount that
corresponds to the unused portion of
the service period remaining under the
alternate pricing plan. For example, if a
consumer is enrolled in an alternate
pricing plan and has used 200 minutes
of an allotted 600 minutes when the
consumer cancels due to special
circumstances, the consumer would
have 400 minutes (= 600 minutes¥200
minutes) unused at the time of
cancellation. The provider would give a
refund of at least 2⁄3 (= 400 minutes/600
minutes) of the amount the consumer
paid for the plan. These limited refund
requirements strike the appropriate
balance between protecting consumers
in the case of changed circumstances
while still making the plans attractive
for IPCS providers. Although we do not
require an IPCS provider to give a
refund for the unused portion of the
alternate pricing plan when a
cancellation occurs in situations other
than the special circumstances detailed
here, an IPCS provider may offer a
refund at the provider’s option in other
situations.
464. No Required Rollovers. We do
not require providers to roll over
unused minutes, calls, or
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
communications from one service
period under an alternate pricing plan
to another service period. One
commenter observes that Securus’s
subscription plan did not allow for the
rollover of unused minutes, thereby
increasing the consumer’s effective rate.
Securus opposes a requirement for
consumers to be able to roll over unused
minutes because rollovers would
convert alternate pricing plans into
‘‘repackaged per-minute rate plans and
prevent consumers from enjoying lower
prices.’’ Indeed, in Securus’s
subscription plan, Securus did not roll
over unused calls. We agree that a
rollover requirement may undermine
IPCS providers’ incentives to offer
alternate pricing plans, and therefore
refrain from requiring providers to roll
over unused minutes, calls, or
communications.
d. Other Issues
(i) Flat-Rate Calling
465. Because we permit IPCS
providers to offer alternate pricing plans
at flat rates (e.g., $Y per month or $Y per
week), we remove § 64.6090 of the
Commission’s rules which prohibits the
offering of IPCS via flat rates. That
prohibition on ‘‘flat-rate calling’’ was
adopted by the Commission in the 2015
ICS Order when some providers
required consumers to pay for a 15minute call even if the call ended prior
to the expiration of the 15 minutes. The
Commission concluded that flat-rate
prices for such short calls were
‘‘disproportionately high’’ and therefore
prohibited flat-rate calling. Today, IPCS
providers offer their IPCS at per-minute
pricing, and we permit them to offer
flat-rated alternate pricing plans as an
option to the per-minute pricing.
Consequently, we no longer need to
prohibit flat-rate calling to protect
consumers. One commenter opposes
flat-rate charges for IPCS video calling,
providing examples where the flat-rate
charges are the only way to pay for
video calling. Because today we adopt
per-minute rate caps for IPCS video
calling and permit flat-rate charges for
video calling only within the context of
an optional alternate pricing plan, these
concerns are mitigated. If a provider
offers a flat rate option for IPCS, they
would be offering an alternate pricing
plan, and would be subject to our
general IPCS rules as well as the
alternate pricing plan rules which will
serve to protect consumers.
(ii) Disability Access via Alternate
Pricing Plans
466. IPCS providers that offer
alternate pricing plans must ensure that
PO 00000
Frm 00087
Fmt 4701
Sfmt 4700
77329
they comply with our rules concerning
TRS and related communication
services. In 2022 and 2023, the
Commission sought comment regarding
the features or attributes that should be
included in alternate pricing plans, and
what conditions it would need to
impose to ensure just and reasonable
rates for audio and video
communications services relevant here.
In 2023, the Commission also sought
comment on the extent to which the
Martha Wright-Reed Act expands its
ability to ensure that any audio and
video communications services used by
incarcerated people are accessible to
and usable by people with disabilities.
The Accessibility Advocacy and
Research Organizations urge the
Commission to ‘‘be proactive and
aggressive in preventing’’ providers
from using alternate pricing plans to
circumvent ‘‘the prohibition on charges
for certain TRS calls’’ as well as
providers’ ‘‘pricing obligations.’’
467. In the 2022 ICS Order, the
Commission amended § 64.6040 of its
rules to improve access to TRS and
related communications services, and
clarified and expanded the restrictions
on charges for TRS calls. In the Report
and Order, we amend § 14.10 to reflect
the Martha Wright-Reed Act’s expansion
of the Communications Act’s definition
of advanced communications service,
making clear the obligations of IPCS
providers to ensure their video and
voice communications services are
accessible to and usable by incarcerated
people with disabilities, and we amend
§ 64.611 to facilitate the provision of IP
CTS to incarcerated people with
disabilities. Here, we amend § 64.6040
to clarify how calls or communications
using TRS and related communications
services shall be treated under an
alternate pricing plan.
468. An IPCS provider that offers an
alternate pricing plan must treat the
calls or communications made to use
TRS and related communications
services in accordance with new
§ 64.6040(e). The requirements in new
§ 64.6040(e) mirror the restrictions on
charges for IPCS in § 64.6040(d). If an
alternate pricing plan offers an
unlimited number of minutes or calls,
then eligible TRS users must be allowed
unlimited TRS, text-telephone-to-texttelephone (TTY-to-TTY), and point-topoint American Sign Language (ASL)
video calls under the same plan. If an
alternate pricing plan limits the number
of calls or minutes that are allowed
during a billing period, then: (1) Video
Relay Service (VRS), internet Protocol
Relay Service (IP Relay), and Speech-toSpeech Relay Service (STS) calls or
minutes shall not be counted for
E:\FR\FM\20SER2.SGM
20SER2
77330
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
purposes of such limits; (2) each
internet Protocol Captioned Telephone
Service (IP CTS) and Captioned
Telephone Service (CTS) call or minute
shall be counted as equal to a non-TRS
audio call or minute; and (3) TTY-toTTY calls (which under a per-minute
rate plan must not be charged at more
than 25% of the per-minute rate) shall
be counted as single calls (under a plan
that limits the number of calls) or
counted at one fourth the number of
minutes used (if the plan limits the
number of minutes). Also, each point-topoint video call shall be counted as
equal to an audio call. Regardless of the
format of an alternate pricing plan, there
shall be no charge or fee for any
equipment used to access TRS and
related communication services, and no
charge or fee for the internet or data
portion of an IP CTS or CTS call, or for
any additional internet or other
connections needed for services covered
by § 64.6040. For example, with CTS
and IP CTS, a second telephone line or
an internet connection—separate from
the voice connection—is often used to
connect the user’s device with the IP
CTS provider to enable the provision of
captions. If an alternate pricing plan
offers a fixed number of minutes for
voice service, for example, then in
applying such a limit to a CTS or IP CTS
user, only the minutes handled by the
voice service line may be counted.
These rules will prevent IPCS providers
that offer alternate pricing plans, from
circumventing the requirements
adopted in the 2022 ICS Order. The
rules also will satisfy requests in the
record, and our statutory duties to
ensure that communications services are
accessible to and usable by persons with
disabilities.
(iii) Consistency With the Martha
Wright-Reed Act
469. We find that allowing alternate
pricing plans subject to the
requirements and rules we adopt today
is consistent with the Martha WrightReed Act. In 2023, the Commission
asked whether the Martha Wright-Reed
Act precludes the Commission from
permitting alternate pricing plans for
audio or video communications. Only
one commenter addressed this issue,
asserting that nothing in the Martha
Wright-Reed Act ‘‘bars use of different
pricing structures.’’ Previously, in
response to 2021, the Prison Policy
Initiative argued that the effective rates
of alternate pricing plans and the
consumer disclosures provided at that
time could violate the Commission’s
statutory duties under sections 201(b)
and 276(b)(1)(A).Act. We find, however,
the conditions we impose today on the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
offering of alternate pricing plans
sufficiently address the fundamental
concerns raised in the record. Because
we limit the rates that may be charged
for IPCS when offered through alternate
pricing plans to the just and reasonable
rate caps we adopt today on a perminute basis—rate caps that ensure fair
compensation to providers—alternate
pricing plan rates and charges will also
be just and reasonable and provide fair
compensation consistent with the
Martha Wright-Reed Act. While we find
that the per-minute rate caps we adopt
today will ensure that IPCS providers
are ‘‘fairly compensated,’’ in accordance
with section 276(b)(1)(A) of the
Communications Act, an IPCS provider
that chooses to offer an alternate pricing
plan will bear the responsibility for
ensuring that the plan will adequately
compensate it for its services on a
companywide basis.
(iv) Start Date and End Date
470. Consistent with the voluntary
nature of any IPCS alternate pricing
plan, an IPCS provider that elects to
offer an alternate pricing plan may
choose when to offer the plan once the
rules permitting such plans are
effective. The Commission previously
asked about possibly allowing alternate
pricing plans on a temporary or pilot
program basis only. We decline to limit
providers’ ability to offer these plans
given that no IPCS user must choose
such a plan, and given the other
protections we adopt. Worth Rises
suggests that the Commission permit a
pilot program pursuant to a waiver for
no longer than three months so that the
Commission may collect data to ensure
compliance with the rate caps before
permitting the plan to continue.
Conversely, Securus asserts that the
Commission should not limit the length
of time the plan can be offered and
argues that ‘‘[a]rtificially ending
programs that may be providing
substantial benefits would harm the
very consumers the Commission wishes
to protect.’’ We also do not limit the
time frame during which an alternate
pricing plan may be offered due, in part,
to the potential consumer benefits of
these plans and to our adoption of rules
and conditions that will ensure such
benefits. However, we caution providers
that if we see evidence of
gamesmanship or that providers are
otherwise taking advantage of
consumers through these alternate
pricing plans, we will not hesitate to
revisit allowing IPCS providers to offer
such plans.
471. Just as we permit providers to
determine when to offer an alternate
pricing plan without prior approval
PO 00000
Frm 00088
Fmt 4701
Sfmt 4700
from or notification to the Commission,
we similarly permit providers to
terminate a plan at their discretion,
provided that sufficient notice is given
to their consumers. We permit providers
to determine what is reasonable notice
of termination, and require notification
to consumers in accordance with
applicable consumer disclosure rules.
For example, given that alternate pricing
plans are limited to one month service
periods, IPCS provider notification to
affected consumers two weeks prior to
it no longer offering a monthly plan
exemplifies reasonable notice.
10. International Rate Caps
472. In the 2021 ICS Order, the
Commission first adopted interim rate
caps on international audio IPCS
communications comprised of the
applicable interstate rate cap component
for that facility plus an international
termination component. The record and
the data before us demonstrate that
providers continue to incur termination
charges for completing international
audio communications. We therefore
decline to disturb the rules for
international calls on the record before
us, and maintain our existing
international rate cap structure for audio
IPCS.
473. In 2021, the Commission sought
comment on whether and how it should
further reform international rates, a
request echoed in subsequent requests
for comment. In response, certain
commenters raised concerns with the
formula for calculating international
rates set forth in our rules, arguing that
tracking multiple ‘‘floating rates’’ raises
surveillance costs for providers and
reduces predictability for consumers.
We are unpersuaded. As an initial
matter, we decline to establish a
uniform safe harbor under which the
termination component that would
apply to all of a provider’s international
audio calls (or alternatively to all of the
provider’s international audio calls
under a particular contract) would equal
the average of the provider’s
international termination charges for the
previous calendar year (or alternatively
the average of such charges under the
particular contract), as one commenter
suggests. Because international
termination charges vary significantly
depending on the calls’ destinations,
any such approach would result in IPCS
consumers being charged unreasonably
high rates for calls to international
destinations having relatively low
termination charges. It is also hard to
understand how predictability could
decline when the international
termination fees themselves change
frequently, and the commenters have
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
not substantiated their claims of
compliance difficulties with cost data.
No commenter raises other concerns
with the current international rate cap
formula. At the same time, providers’
submitted data are remarkably devoid of
any data on the cost of providing
international IPCS, with only one
provider reporting such costs. We
therefore find that both the data and the
record are, at present, insufficient to
support revisions to our rules, or to
develop alternative approaches to
international rate caps.
474. We recognize that differences
between audio IPCS and video IPCS
may limit the applicability of these rules
to video IPCS. Unlike audio IPCS, we
have no record evidence that video
communications services incur
international termination charges. In
fact, the data from the 2023 Mandatory
Data Collection do not indicate that
providers routinely or ordinarily incur
termination charges for completing
international video communications. In
the absence of any record supporting the
need for international video
communications rate caps, we decline
to adopt an international termination
component for video IPCS at this time.
In the absence of such a separate
component for video IPCS, international
video communications will be subject to
the interstate video cap in effect for the
relevant facility.
E. Waivers
475. We adopt with modifications the
waiver process previously adopted by
the Commission in the 2021 ICS Order.
The modifications reflect our full
jurisdiction under the Martha WrightReed Act to include intrastate services
and various advanced communications
services, including video services and
providers that offer them, in addition to
the interstate and international services
that previously were the focus of our
IPCS rules. The modifications also
reflect the Act’s direction that the
Commission may use a provider’s
average costs in determining just and
reasonable IPCS rates. The waiver
process we adopt will ensure that
providers that may face unusually high
costs to serve a particular facility or set
of facilities covered by a contract will
have the opportunity to demonstrate
that those costs are, indeed, used and
useful costs in their provision of IPCS
and are therefore recoverable. As
discussed above, we interpret and apply
section 276(b)(1)(A) in a manner that
harmonizes the ‘‘just and reasonable’’
and ‘‘fairly compensated’’ criteria.
Consequently, the used and useful
analysis we employ will involve that
harmonization of the ‘‘just and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
reasonable’’ and ‘‘fairly compensated’’
standards.
476. The Commission’s previous
waiver process permitted an inmate
calling service provider to file a petition
for a waiver of our interim inmate
calling services rate caps if the provider
makes certain showings that it cannot
recover its allowable costs under the
Commission’s interim inmate calling
services rate caps. The portions of the
2015 ICS Order regarding the waiver
process were unaltered by the GTL v.
FCC court’s 2017 vacatur. We modify
that process to take into account the
Commission’s full authority under the
Martha Wright-Reed Act to include
intrastate services and advanced
communications services. In addition,
the Commission will evaluate waiver
petitions in light of the Act’s
elimination of the section 276
requirements that providers be
compensated on a ‘‘per-call’’ basis, and
compensated for ‘‘each and every call,’’
and in light of the addition of the
requirement that the Commission
ensure IPCS rates are just and
reasonable while ensuring that
providers are fairly compensated.
477. To be granted a waiver under the
rules adopted in 2021, providers are
required to show that they faced
‘‘unusually high costs in providing
interstate or international inmate calling
services at a particular facility or under
a particular contract that are otherwise
not recoverable through the per-minute
charges for those services and through
ancillary service fees associated with
those services.’’ When adopted, the
Commission noted that various
providers argued that reductions in
inmate calling services rates would
threaten their financial viability,
imperiling their ability to provide
service, and risk degrading or lowering
their quality of service. It determined
that those claims were best addressed
on a case-by-case basis through a waiver
process that focused on the costs the
provider incurred in providing
interstate and international inmate
calling services, and any associated
ancillary services, at an individual
facility or under a specific contract.
478. In 2023, the Commission sought
comment on ‘‘any other matters that
may be relevant to our implementation
of the Martha Wright-Reed Act to adopt
just and reasonable rates and charges for
incarcerated people’s audio and video
communications services.’’ In the
context of analyzing providers’ site
commission payments, it also asked for
comment on the showing it should
require to evaluate waivers seeking to
recover the portion of those payments
that compensate facilities for their used
PO 00000
Frm 00089
Fmt 4701
Sfmt 4700
77331
and useful costs of providing IPCS.
Based on the record, we retain our
current waiver process framework with
modifications to reflect the provisions of
the Martha Wright-Reed Act, including
our new authority thereunder. We
decline at this time to extend our waiver
process to include pilot programs or to
impose requirements on state ratesetting processes. State rate-setting
processes (in contrast to site
commission payment requirements) are
not governed by our current IPCS rules,
to the extent they do not result in state
rates or charges exceeding our rate caps,
and thus cannot be addressed by waiver
in any case. And we decline to depart
from our rules governing alternate
pricing plans via waiver because we
believe those rules already provide for
appropriate flexibility, and adhering to
that regulatory framework provides
certainty regarding the parameters for
any such experimentation that will
occur, thereby facilitating appropriate
Commission oversight and managing
what IPCS users will be expected to
understand about such plans, and the
protections they will have under them.
479. The IPCS rate cap methodology
we adopt herein comprehensively
accounts for providers’ reported costs of
providing IPCS as contemplated by the
Act, and we therefore anticipate that
instances where providers cannot
recover their cost of service should be
exceptional. To the extent such
instances occur, however, we adopt a
process that allows providers to seek
waivers of our rate caps to ensure
recovery of the used and useful costs of
providing IPCS. We also expand the
scope of our previous waiver process to
allow providers to seek waivers related
to the provision of advanced
communications services, including
video, as well as with respect to our
overall IPCS rate caps which will now
apply to international, interstate and
intrastate services. Additionally, we
remove any reference to ancillary
services in our waiver rules because, as
explained above, separately-identified
ancillary service fees have been
prohibited, and the costs of providing
ancillary services have instead been
included in the overall rate caps. As was
the case with our previous IPCS waiver
process, providers may seek a waiver
either on a facility basis or contract
basis. We disagree with Securus that we
should allow company-wide waivers
given that company-wide waivers
would likely be too complex and timeconsuming to provide adequate and
timely relief for providers.
480. Consistent with the
Commission’s previous waiver process
and with its waiver processes generally,
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77332
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
petitioners will continue to bear the
burden of proof to show that good cause
exists to support waiver requests, but all
waiver requests must now include a
showing that the request will not result
in unjust and unreasonable IPCS rates
and charges. An IPCS provider filing a
petition for waiver must clearly
demonstrate that good cause exists for
waiving our rate caps or other rules at
a given facility or group of facilities, or
under a particular contract, and that
strict compliance with these caps would
be inconsistent with the public interest.
For any waiver request based on a
particular facility or group of facilities,
the provider must show that the costs of
the entirety of its contract are not
recoverable under the applicable rate
caps, not merely the costs at an
individual facility or group of facilities
that are part of an otherwise profitable
contract. As the Commission explained
in the 2021 ICS Order, conclusory
assertions that the reductions in rates
will harm the provider or make it
difficult for the provider to expand its
service offerings will not be sufficient to
obtain a waiver. Providers requesting a
waiver of our IPCS rules will continue
to be required to provide a detailed
explanation of their claims, including
all relevant financial and operational
data as referenced in our rules. In order
to evaluate waivers, we also require a
provider to submit its total company
IPCS costs and revenues and other
financial data and information,
including justification for deviating
from ‘‘the average costs of service of a
communications service provider’’ to
assess the merits of a petition. Failure to
provide such information will prevent
us from making a determination
regarding the waiver request and will be
grounds for dismissal without prejudice.
Furthermore, the petitioner must
provide any additional information
requested by Commission staff to
evaluate the waiver request during the
course of its review.
481. We caution petitioners that we
will continue to evaluate waiver
petitions thoroughly and waivers will
not be routinely granted. The
Commission previously delegated
authority to the Bureau to review and
rule on petitions for waivers, and we
reaffirm that delegation of authority
today. Waiver petitions will be placed
on public requests for comment, and
interested parties will be provided an
opportunity for comment.
F. Communications Services for
Incarcerated People With Disabilities
482. We amend our rules to improve
communications services for
incarcerated people with disabilities.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
First, in response to comments on 2023,
we amend our Part 14 rules as
appropriate to reflect the Martha
Wright-Reed Act’s expansion of the
Communications Act’s definition of
‘‘advanced communication service.’’
Next, in response to comments on 2022,
we amend our Part 64 TRS rules to
allow a form of enterprise registration
for the use of internet Protocol
Captioned Telephone Service (IP CTS)
in carceral facilities. We also amend the
Part 64 IPCS rules to require that IPCS
providers provide billing and other
information regarding their services in
accessible formats. We clarify that
internet-based IPCS providers may
provide access to traditional (TTYbased) TRS via real-time text. We defer
action on setting a timeline to expand
the scope of our IPCS rules on access to
TRS and related services, pending the
collection of further information on
implementation of the current rules.
1. Part 14 Changes
483. Advanced Communications
Services Definition. We adopt the
Commission’s proposal, in 2023, to
amend the definition of ‘‘advanced
communications services’’ in our Part
14 rules to incorporate the amended
statutory definition. Prior to the Martha
Wright-Reed Act, the Communications
Act (and Part 14 of our rules) defined
‘‘advanced communications services’’ to
be: (1) interconnected VoIP service; (2)
non-interconnected VoIP service; (3)
electronic messaging service; and (4)
interoperable video conferencing
service. In light of the lengthy pendency
of unsettled questions regarding the
application of Part 14 to video
conferencing, the Commission extended
until September 3, 2024, the deadline
for providers of such services to comply
with the Part 14 accessibility rules for
advanced communications services. The
Martha Wright-Reed Act amended this
definition to add a fifth category: ‘‘any
audio or video communications services
used by inmates for the purposes of
communicating with individuals
outside the correctional institution
where the inmate is held, regardless of
technology used.’’ We now amend the
definition of ‘‘advanced
communications services’’ in our Part
14 rules to include that category as well,
aligning the definition in our rules with
the amended statutory definition. One
commenter agrees that the Commission
should simply incorporate section 3’s
definition of ACS, as amended by the
Martha Wright-Reed Act, into Part 14.
No other commenters directly address
the issue.
484. Statutory Accessibility
Requirements. Pursuant to section 716
PO 00000
Frm 00090
Fmt 4701
Sfmt 4700
of the Communications Act, providers
of advanced communications services
and manufacturers of equipment used
for such services (including end user
equipment, network equipment, and
software) must ensure that such
services, equipment, and software are
accessible to and usable by individuals
with disabilities, unless doing so is ‘‘not
achievable.’’ The term ‘‘achievable’’
means with reasonable effort or
expense, as determined by the
Commission. Section 716 of the
Communications Act specifies that, in
determining whether the requirements
of a provision are achievable, the
Commission shall consider the
following factors: (1) the nature and cost
of the steps needed to meet the
requirements of this section with
respect to the specific equipment or
service in question; (2) the technical and
economic impact on the operation of the
manufacturer or provider and on the
operation of the specific equipment or
service in question, including on the
development and deployment of new
communications technologies; (3) the
type of operations of the manufacturer
or provider; and (4) the extent to which
the service provider or manufacturer in
question offers accessible services or
equipment containing varying degrees
of functionality and features, and
offered at differing price points.
Whenever those requirements are not
achievable a manufacturer or provider
must ensure that its equipment or
service is compatible with existing
peripheral devices or specialized
customer premises equipment
commonly used by individuals with
disabilities to achieve access, unless
such compatibility is not achievable.
Providers of advanced communications
services are also prohibited from
installing network features, functions, or
capabilities that impede accessibility or
usability. The Commission has
implemented section 716 by adopting
performance objectives to ensure the
accessibility, usability, and
compatibility of advanced
communications services and the
associated equipment, recordkeeping
requirements, and the consumer dispute
assistance and informal and formal
complaint processes. ‘‘Manufacturers
and service providers must consider
[these performance objectives] at the
design stage as early as possible and
must implement such performance
objectives, to the extent that they are
achievable.’’ In addition,
‘‘[m]anufacturers and service providers
must identify barriers to accessibility
and usability as part of such
evaluation.’’ Covered service providers
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
and equipment manufacturers also must
file certificates of compliance with
applicable recordkeeping requirements,
including contact information for
persons authorized to resolve
complaints regarding alleged violations
of accessibility requirements.
485. Effect of the Martha Wright-Reed
Act on the Scope of Rules. In 2023, the
Commission sought comment on the
extent to which the Martha Wright-Reed
Act expands its ability to ensure that
any audio and video communications
services used by incarcerated people are
accessible to and usable by people with
disabilities. As a number of commenters
recognize, prior to enactment of that
legislation, voice services offered by
IPCS providers were already subject to
the requirements of section 716 or the
related requirements of section 255 of
the Communications Act. Section 255
imposes similar accessibility obligations
on providers of telecommunications
services and manufacturers of
telecommunications equipment, and the
Commission’s regulations implementing
section 255, 47 CFR part 6, also apply
to providers of interconnected VoIP
service. Accessibility of voicemail
equipment and services are addressed in
47 CFR part 7. Overlap between sections
255 and 716 is avoided because section
716 provides that it does not apply to
‘‘any equipment or services, including
interconnected VoIP service, that [were]
subject to the requirements of section
255’’ of the Communications Act prior
to the enactment of section 716.
Accessibility of voicemail equipment
and services are addressed in 47 CFR
part 7. Overlap between sections 255
and 716 is avoided because section 716
provides that it does not apply to ‘‘any
equipment or services, including
interconnected VoIP service, that [were]
subject to the requirements of section
255’’ of the Communications Act prior
to the enactment of section 716. Such
services and equipment ‘‘shall remain
subject to the requirements of section
255’’ of the Communications Act.
However, the recordkeeping, certificate
of compliance, consumer dispute
assistance, and enforcement
requirements of Part 14 apply to
manufacturers and service providers
covered by section 255 as well as those
covered by section 716. Similarly,
electronic messaging services and
interoperable video conferencing
services offered by IPCS providers were
also subject to section 716 and the Part
14 rules. The record does not indicate
to what extent, if at all, there are other
audio and video communication
services offered by IPCS providers that
were not previously included in the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
definitions of ‘‘telecommunications
service’’ or ‘‘advanced communications
services,’’ and that, accordingly, are
newly subject to accessibility
requirements under section 716 of the
Communications Act and Part 14 of our
rules. However, to the extent that any
IPCS provider may have been uncertain
whether accessibility requirements
apply to a particular voice or video
communication service that it provides
for the use of incarcerated persons in
communicating with non-incarcerated
persons, the Martha Wright-Reed Act
makes clear that the accessibility
requirements of the Commission’s rules
apply to such services.
486. Part 14 Performance Objectives.
The 2023 IPCS NPRM also sought
comment on whether the Commission
should add or modify any performance
objectives or recordkeeping
requirements for application in the
correctional facility context. At this
time, we do not see a need to create new
or different performance objectives for
IPCS providers. As noted above,
communications services offered by
IPCS providers were already covered by
section 255 or 716 of the
Communications Act, and the record
does not indicate that any audio and
video communications services used by
incarcerated people were not previously
included in the statutory definitions of
telecommunications services and
advanced communications services.
Further, while the communication
challenges experienced by incarcerated
people with disabilities may be more
acute, the record does not indicate that
they are different in kind from those of
non-incarcerated people with
disabilities. For example, to be
accessible to a blind person, whether
incarcerated or not, an advanced
communications service should
‘‘[p]rovide at least one mode that does
not require user vision.’’
487. We decline, at this time, to
impose a limitation on the use of
automatic speech recognition (ASR)
technology alone in the provision of IP
CTS in carceral facilities. The
Commission previously found the use of
ASR-only captioning in the provision of
IP CTS to be comparable in accuracy to
CA-assisted IP CTS. While we continue
to encourage providers to make CAassisted IP CTS available, there is not a
sufficient record in this proceeding to
suggest that provision of ASR-only IP
CTS would discriminate against for
example, people who speak dialects,
have accented speech, or speech
impediments, nor a record to suggest
that CA-assisted IP CTS would cure or
otherwise prevent such discrimination.
The Commission will continue to
PO 00000
Frm 00091
Fmt 4701
Sfmt 4700
77333
collect data and information annually
from IPCS providers and it has open
dockets concerning advanced
communications services and IP CTS
where a record on the raised concerns
may be developed to be addressed. In
the interim, we proceed with ensuring
the Commission’s current accessibility
rules are appropriately applied in the
correctional facilities context.
488. We are also not persuaded that
it is necessary to modify Part 14
performance objectives to address ‘‘the
unique challenges of offering internetbased IPCS and consistent with the
Commission’s existing IPCS
accessibility rules,’’ as recommended by
Ameelio, a provider of internet-based
IPCS. To the extent that security issues
or other factors may affect the
achievability of specific performance
objectives, such concerns can be
addressed consistently with the current
Part 14 rules, as Part 14 obligations are
expressly subject to the proviso ‘‘unless
the requirements of this [subsection/
paragraph] are not achievable.’’ We also
note that some of the concerns raised by
Ameelio appear to be based on a
misunderstanding of the Commission’s
video conferencing proposals. For
example, the Commission has proposed
to modify the TRS ‘‘privacy screen’’ rule
(redesignated 47 CFR 64.604(d)(5)) to
allow VRS providers to be compensated
for providing VRS in a video conference
in which some participants turn off
their video cameras. However, nothing
in the Commission’s proposal suggests
that the proposed rule would affect the
ability of a video conferencing service
provider or host to require participants
to leave their cameras on, for security or
other reasons.
2. Enterprise Registration for IP CTS and
IP Relay
489. Background. To prevent waste,
fraud, and abuse and allow the
collection of data on TRS usage, our
rules generally condition TRS Fund
support for VRS, IP CTS, and IP Relay
on eligible users of these services being
registered with a service provider.
Certain personal data, as well as a selfcertification of eligibility to use TRS,
must be collected from each TRS user
and—for VRS and IP CTS users—
entered in the TRS User Registration
Database (User Database), a central
registry maintained by a Commissiondesignated administrator. The User
Database has not yet been activated for
IP CTS. Pending its activation, however,
registration data and a self-certification
of eligibility must be collected and
maintained by the IP CTS provider. For
VRS, however, the rules provide an
alternative to individual registration for
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77334
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
videophones maintained by businesses,
organizations, government agencies, or
other entities and made available to
their employees or clients as ‘‘enterprise
videophones.’’ This ‘‘enterprise
registration’’ alternative is not currently
authorized for IP CTS or IP Relay. The
Commission has previously granted a
waiver of the TRS registration rule to
allow TRS providers to provide IP CTS
and IP Relay to federal government
employees and on-premises contractors
through a registration process similar to
the VRS enterprise registration process.
490. In the 2022 ICS Order, the
Commission modified its registration
rules for incarcerated people eligible to
use TRS, simplifying the registration
data that must be collected in that
context to account for differences in the
availability and source of registration
information. IPCS providers are
required to assist TRS providers in
collecting registration information and
documentation from incarcerated users
and correctional authorities. The
Commission also authorized a modified
form of enterprise registration for VRS
use in correctional facilities. In lieu of
registering each videophone, the
amended enterprise rule allows a VRS
provider to assign a pool of telephone
numbers to a correctional authority. The
numbers may be used interchangeably
with any videophone or other user
device made available for the use of
VRS within the correctional facility. In
2022, the Commission sought comment
on whether to adopt a comparable form
of enterprise registration for IP CTS in
the incarceration context. All
commenters addressing the issue
support such a rule change. In addition,
Securus urges that enterprise
registration also be allowed for IP Relay
in the carceral context, noting that ‘‘the
same logistical issues at the correction
facility for individual registration of IP
CTS’’ extend to IP Relay.
491. To further expedite access to TRS
by incarcerated people, we amend our
rules to allow enterprise registration for
IP CTS and IP Relay in the incarceration
context. The record indicates that the
individual registration process can pose
significant challenges for incarcerated
people attempting to use IP CTS or IP
Relay. When a person is initially
confined and seeks to notify a family
member or attorney of their situation,
the need for individual registration may
delay access to IP CTS or IP Relay for
hours or days, with potentially serious
consequences for the newly incarcerated
person. For example, some of the
required registration information and
documentation may not be readily
available at the time of initial
incarceration, and assistance in
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
collecting or preparing such information
and documentation may not always be
available from correctional authorities.
Further, incarcerated persons,
particularly those newly incarcerated,
are often transferred between facilities.
If a transferee must re-register (e.g.,
because the new facility is operated by
a different correctional authority or a
different TRS provider is providing a
particular relay service), or if there is a
delay in confirming an existing
registration (e.g., because the TRS
provider is not promptly informed of
the transfer) access to TRS could be
interrupted or even terminated.
Additional registration issues may arise
in juvenile detention facilities, where a
parent or guardian would need to
register on behalf of a minor who has
been incarcerated.
492. The record confirms that
allowing enterprise registration for IP
CTS and IP Relay in the carceral setting
would not significantly increase the risk
of TRS waste, fraud, or abuse. In the
2022 ICS Order, the Commission found
that the security measures routinely
applied to telephone service in
correctional facilities limit any risk of
waste, fraud, and abuse associated with
enterprise registration for VRS, and
those same security measures would
tend to limit such risks in the case of IP
CTS and IP Relay. Further, by allowing
the assessment of charges for IP CTS
that do not exceed those for an
equivalent voice telephone call, we have
limited the potential incentive of
incarcerated people who do not need
the service to seek to use it in lieu of
ordinary voice service. Conversely, the
limitation of IP CTS charges to those for
an equivalent voice call limits any
incentive for correctional authorities to
allow or promote the use of IP CTS by
incarcerated people with no need for the
service. In IP Relay, no charges are
permitted. However, with IP Relay,
unlike IP CTS, the communications
assistant mediates communication in
both directions. As a result, IP Relay
conversations tend to be substantially
slower than the equivalent voice
conversations, and there is accordingly
less incentive for incarcerated people to
request use of the service if they do not
need it for functionally equivalent
communication.
493. The enterprise registration rule
we adopt for IP CTS and IP Relay in the
carceral context parallels the VRS
enterprise registration rule, as modified
for the carceral context. To make it
easier to find the applicable
requirements, we combine the existing
requirements for carceral enterprise
registration for VRS with the new
requirements for such registration for IP
PO 00000
Frm 00092
Fmt 4701
Sfmt 4700
CTS and IP Relay in a single new
paragraph (l) of § 64.611. For enterprise
registration of a correctional facility or
correctional authority, a TRS provider
must transmit to the TRS User
Registration Database administrator the
following information: the TRS
provider’s name, the telephone numbers
or other unique identifiers assigned to
the correctional authority, the name and
address of the correctional facility or
correctional authority, the date of
initiation of service to the correctional
authority, and the name of the
individual responsible for the device(s)
used to access VRS, IP Relay, or IP CTS
at the correctional facility or facilities
involved. The existing rule for VRS
allows enterprise registration of a single
pool of telephone numbers for use by a
correctional authority in all of its
facilities. We allow the same flexibility
for IP CTS. Such numbers may be
assigned either by the IPCS provider or
the TRS provider. As with the existing
rule for VRS, the address may be the
main or administrative address of the
correctional authority. This individual
may be an employee of either the
correctional authority or the IPCS
provider. When a TRS provider ceases
providing relay service to a correctional
authority via enterprise registration, the
provider shall transmit the date of
termination of such service.
494. The TRS provider also must
obtain a signed certification from the
responsible individual attesting that he
or she understands the functions of the
devices used to access TRS and that the
cost of TRS is financed by the federally
regulated Interstate TRS Fund. The
certification also must state that the
correctional authority or IPCS provider
will make reasonable efforts to ensure
that for VRS and IP Relay only persons
with a hearing or speech disability are
permitted to access the service, and that
for IP CTS only persons with hearing
loss that necessitates the use of IP CTS
to communicate by telephone are
permitted to access IP CTS. A VRS or IP
CTS provider must also obtain the
responsible individual’s consent to
transmit this information to the TRS
User Registration Database. At this time,
the TRS rules do not require that IP
Relay registration data be entered in the
User Registration Database. Before
obtaining such consent, the TRS
provider must describe, using clear,
easily understood language, the specific
information being transmitted, that the
information is being transmitted to the
TRS User Registration Database to
ensure proper administration of the TRS
program, and that failure to provide
consent will require individual
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
registration and self-certification by
incarcerated persons. A TRS provider
shall maintain the confidentiality of any
registration and certification
information obtained by the TRS
provider, and shall not disclose such
registration and certification
information, or the content of such
registration and certification
information, except as required by law
or regulation.
3. Other Issues
495. Accessible Billing Formats. As
also proposed in 2022, we amend our
rules to require that any charges for
IPCS be disclosed in accessible formats
to incarcerated people with disabilities.
The record in this proceeding generally
supports this proposal. We do not agree
with ViaPath that amendment of the
Part 64 rules in this respect is
unnecessary. Although our Part 6, 7,
and 14 rules include requirements that
information and documentation
provided to customers regarding
covered services be accessible to
individuals with disabilities, those rules
are subject to an achievability
condition—which is not applicable to
our Part 64 IPCS rules. Given the special
importance of communication to
incarcerated people with disabilities
and the history of egregious telephone
charges imposed on incarcerated people
and their families, we decline to impose
an achievability condition on access to
billing information in the carceral
setting.
496. Charges for TRS-Related
Services. As discussed above, we amend
§ 64.6040 of our rules to clarify the
treatment of TRS and related services
under alternate pricing plans. We do not
otherwise alter the provisions of
§ 64.6040 regarding charges for TRS and
related services. In particular, we
decline Securus’s request for
modification of § 64.6040(d)(3), which
caps the permitted charges for point-topoint video service used by incarcerated
persons with disabilities who can use
ASL, limiting such charges to the
equivalent rate for an equivalent voice
call. Securus recommends that, ‘‘[n]ow
that the Commission has set rate caps
for video IPCS charges for video IPCS,’’
the benchmark for point-to-point ASL
video charges should be the charges for
equivalent non-ASL video calls. We
deny this request. Although ASL pointto-point video service is not relay
service per se, it serves the same
statutory purpose—‘‘to provide the
ability for an individual who is deaf,
hard of hearing, deaf-blind, or who has
a speech disability to engage in
communication by wire or radio in a
manner that is functionally equivalent
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
to the ability of a hearing individual
. . . to communicate using voice
communication services.’’ Therefore,
access to this service is mandated for
any facility covered by
§ 64.6040(b)(2)(ii), even if video
communication is not otherwise made
available at such facility. Accordingly,
in 2022, the Commission appropriately
benchmarked the charges for the use of
point-to-point video to communicate in
ASL at the charges for an equivalent
voice call. Permitting the assessment of
a higher video rate for such calls,
instead of the equivalent voice rate at
any correctional institution, would be
inconsistent with the underlying
statutory purpose—to make available
communication that is functionally
equivalent to voice communication.
497. Analog TRS. In response to reply
comments by Ameelio, an internetbased video IPCS provider, we clarify
the application to such providers of the
IPCS rules mandating the availability of
traditional (TTY-based) TRS and STS.
Noting that the internet does not
support analog services, Ameelio
‘‘proposes that the Commission update
its IPCS accessibility rules to
accommodate advanced
communications services that . . . do
not rely on the Public Switched
Telephone Network (PSTN), by
clarifying that app-based IPCS providers
may comply with the IPCS accessibility
rules by providing functional
equivalents to the traditional
accessibility services that rely on the
legacy telephone network.’’ As the
Commission explained in the 2022 ICS
Order, while TTY technology is
incompatible with the IP protocol, TTYbased TRS and STS continue to be
essential for ensuring that all segments
of the TRS-eligible population have
access to functionally equivalent
communications. In addition, U.S.
Department of Justice regulations
implementing Title II of the American
with Disabilities Act currently require
correctional authorities to furnish
auxiliary aids and services, which are
defined to include voice, text, and
video-based telecommunications
products and systems, including TTYs,
videophones, and captioned telephones
or equally effective telecommunications
devices. However, rules the Commission
adopted in 2016 allow mobile service
providers to comply with TTY-related
requirements by supporting real-time
text, an IP-based protocol, as an
alternative to TTY connection. We
amend our codified IPCS rules to make
clear that, similarly, IPCS providers may
provide access to traditional TRS via
real-time text, as an alternative to TTY
PO 00000
Frm 00093
Fmt 4701
Sfmt 4700
77335
transmissions, if real-time text
transmission is supported by the
available devices and reliable service
can be provided by this method.
Additionally, for IPCS providers to meet
their requirement to provide access to
traditional TTY-based TRS and STS,
they need only ensure that incarcerated
individuals eligible to use TRS can
access at least one certified provider of
each form of TRS. If an IPCS provider
does not interconnect with the PSTN, it
could rely on contracting or other
arrangements with a correctional facility
to ensure that TTY-based TRS and STS
are made available.
498. We also do not address at this
time the Commission’s proposal to
expand the scope of coverage of the TRS
Access Rule to include correctional
facilities in jurisdictions with an ADP of
fewer than 50 incarcerated people. We
recognize that the Communications Act
directs us to ensure that TRS are
available to all eligible persons in the
United States, to the extent possible,
and we reaffirm the Commission’s belief
that, to ensure the availability of TRS
and point-to-point ASL video
communication to the fullest extent
possible, the TRS-related access
obligations of incarcerated people’s
communications service providers
should be at least coextensive with
those of correctional authorities under
federal disability rights law—which are
not subject to any population size
limitation. However, given that the
current rule has been effective for less
than a year, we believe that our
determination of an appropriate
timeline for the expansion of TRS access
to those facilities not covered by the
current rule may benefit from
experience gained regarding the first
year of implementation. Therefore, we
will keep the record open for additional
input on this matter.
G. Reform of Consumer Protection Rules
499. In light of the expansion of our
authority under the Martha Wright-Reed
Act, we next revise our existing
consumer protection rules to improve
consumer disclosure requirements and
to protect the funds of IPCS accountholders to ensure IPCS consumers fully
benefit from the various reforms we
adopt in the Report and Order. The
Commission’s consumer disclosure
rules currently require providers to
disclose their rates, ancillary service
charges, and charges for terminating
international calls to account holders
and specify how certain charges should
be displayed on billing statements. The
existing inactive account rules bar
providers, on an interim basis, from
converting unused funds in inactive ICS
E:\FR\FM\20SER2.SGM
20SER2
77336
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
accounts to their own use and require
them to make reasonable efforts to
refund those funds. Based on the record,
we expand these consumer protection
rules to apply to the full scope of IPCS
now subject to our ratemaking authority.
500. We also address certain
limitations in our existing rules which
the record shows lack sufficient scope,
clarity, and specificity to enable IPCS
consumers—and the public—to make
fully informed decisions regarding the
rates, charges, and practices associated
with providers’ offerings. Some
commenters also contend that the
current rules are inadequate to ensure
that IPCS consumers receive the
information they need to verify charges
to their accounts. Similarly, the record
makes clear a need to revise and
strengthen the interim inactive account
rules to ensure that IPCS consumers are
able to receive timely refunds of unused
funds in IPCS accounts deemed to be
inactive. In light of this, we decline to
simply apply our existing consumer
protection rules to the expanded list of
services—video IPCS and other audio
and video advanced communications
services, including intrastate services—
over which we now have jurisdiction
under section 276. Instead, we revise
and strengthen those rules and apply
them to all IPCS as set forth below.
501. Section 276(b)(1)(A) of the
Communications Act, as amended by
the Martha Wright-Reed Act, requires
that we develop a compensation plan
ensuring just and reasonable rates and
charges for consumers and providers,
while providing fair compensation to
providers. As set forth above, we
interpret this requirement as giving us
authority over providers’ practices
associated with IPCS to the extent they
may affect our ability to ensure just and
reasonable audio and video IPCS rates
and charges and fair compensation for
all IPCS. We exercise that authority to
adopt rules requiring IPCS providers to
timely and effectively disclose the
information that IPCS consumers will
need to make informed decisions in
setting up and using their IPCS accounts
as well as rules to facilitate refunds of
funds remaining in accounts that have
been deemed inactive.
ddrumheller on DSK120RN23PROD with RULES2
1. Consumer Disclosure Rules
c. Disclosure of Rates, Charges, and
Practices
502. We revise and expand our
consumer disclosure rules so all IPCS
users and, where appropriate, the
general public will have sufficient
information to evaluate providers’ IPCS
rates, charges, terms and conditions.
Expanding these rules will offer
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
increased transparency and protection
for consumers beyond those afforded by
the Commission’s existing rules,
facilitating the monitoring and
enforcement of our rules to ensure just
and reasonable IPCS rates and charges.
We expand the scope of our rules to
include all IPCS providers subject to our
expanded jurisdiction under the Martha
Wright-Reed Act, including video IPCS
and other advanced communications
services. We also expand the scope of
our rules to apply to the different stages
of consumers’ interaction with IPCS
providers, from prior to the opening of
an IPCS account to the closing of an
inactive account. We conclude pursuant
to our authority under section
276(b)(1)(A) of the Communications
Act, as amended by the Martha WrightReed Act and, to the extent interstate or
international telecommunications
services are involved, pursuant to
section 201(b) of the Communications
Act, that the increased transparency we
require is necessary to ensure just and
reasonable IPCS rates and charges, and
fair compensation as the Martha WrightReed Act mandates.
503. Background. In the 2015 ICS
Order, the Commission first required
ICS providers to ‘‘clearly, accurately,
and conspicuously’’ disclose their
interstate, intrastate, and international
rates and ancillary service charges to
consumers ‘‘on their websites or in
another reasonable manner readily
available to consumers.’’ This rule is
now codified at 47 CFR 64.6110(a). The
Commission also stated that ICS
providers that are non-dominant
interexchange carriers must make their
current rates, terms, and conditions
available to the public via their
company websites. In the 2021 ICS
Order, the Commission required
providers to separately disclose any
charges for terminating international
calls, and to ‘‘clearly label’’ as ‘‘separate
line item[s] on [c]onsumer bills’’ any
amounts charged consumers for site
commissions and international calling.
504. In 2022, the Commission sought
comment on expanding the ‘‘breadth
and scope’’ of the existing consumer
disclosure requirements to reach more
ICS consumers and increase
transparency regarding the rates and
charges they pay for IPCS. In 2023, the
Commission sought ‘‘renewed
comment’’ on these matters and asked
what additional specific rule changes
would be needed to implement the
Martha Wright-Reed Act.
505. Scope of Disclosure
Requirements. We first expand the
scope of our disclosure requirements to
apply to all IPCS providers that provide
any audio IPCS or video IPCS subject to
PO 00000
Frm 00094
Fmt 4701
Sfmt 4700
our jurisdiction under the Martha
Wright-Reed Act. This essential step in
our implementation of the Act will
ensure that all IPCS consumers will
have the same transparency into their
providers’ rates, charges and practices
regardless of the type of IPCS they use.
506. Public website Disclosure.
Section 64.6110 of our rules requires
ICS providers to disclose certain
information on their websites or in
another reasonable manner readily
available to IPCS consumers. The record
suggests that this rule, as currently
written, does not allow for adequate
information for the public. Some
providers suggest that they have already
taken steps to make such information
generally available. Therefore, to
promote transparency regarding IPCS
offerings, we revise our rules to require
IPCS providers to disclose their IPCS
rates, charges, and associated practices
in an easily accessible manner on their
publicly available websites. We note
that the disclosure requirements we
impose on publicly-available websites
apply equally to IPCS providers that
offer their IPCS services through webbased applications. This information
must be available to all members of the
public, including our state regulatory
partners, and not just to consumers with
a preexisting IPCS account with the
provider at any particular facility.
Providers must not require that website
visitors open an account with the
provider as a precondition to obtaining
website access to the provider’s rates
and charges. This disclosure
requirement will enable any consumer
with internet access to make informed
decisions regarding the provider’s IPCS
offerings both prior to opening an
account and on an ongoing basis once
an account has been created. It will also
allow the Commission, our state
counterparts, and the public to evaluate
whether providers’ rates, charges, and
associated practices comply with the
rules we adopt in the Report and Order.
The Martha Wright-Reed Act makes
clear our authority over intrastate IPCS,
but such required public disclosure will
allow us to benefit from the experience
of our state regulatory partners. We
anticipate that the additional public
awareness will help consumers make
informed choices and generally promote
compliance with our IPCS rules.
507. Building upon the Commission’s
previous efforts to ensure transparency
of ICS rates and charges, providers are
required to post on their public websites
complete information about their IPCS
offerings, including information on
rates, charges, and associated practices.
One commenter expressed concern that
provider websites contain ‘‘misleading
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
information’’ that can cause consumers
to select ‘‘high priced service[s].’’
Therefore, we amend our current rules
to include information that will assist
consumers in making informed
decisions regarding IPCS. Specifically,
we find that providers must include, on
their publicly available websites,
information on how to manage an
account, fund accounts, close accounts,
and how to obtain refunds of unused
balances. The public website
disclosures must also contain sufficient
information to enable IPCS users ‘‘to
understand the cost of a call before
picking up the phone.’’
508. Methods of Disclosure. To ensure
consumers receive the information
necessary to make informed decisions,
IPCS providers must make consumer
disclosures available: (a) via the
provider’s website in a form generally
accessible to the public without needing
to have an account with the provider;
(b) via the provider’s online and mobile
application, if consumers use that
application to enroll; and (c) on paper,
upon request of the consumer. In doing
so, we respond to the record which
suggests that information about
providers’ service plans may already be
provided this way. Likewise, by
requiring different methods of
disclosure, we recognize that consumers
access these disclosures in different
ways. For example, many incarcerated
people may lack access to the internet,
and therefore may have no way of
learning of a provider’s rates and
charges where availability of these
disclosures is limited to a website or
online application. To ensure these
consumers are able to access providers’
disclosures, we require IPCS providers
to make their disclosures available on
paper if requested by a consumer,
thereby ‘‘devising a framework to ensure
that all IPCS carriers provide such
information in a concise, portable, and
easy-to understand format.’’ As one
commenter explains, a 2022 study
found that ‘‘consumers comprehended
and retained financial disclosures better
when they read them on paper than on
a computer screen; and study
participants showed even worse
retention and comprehension rates
when they read the disclosures on
smartphones.’’ We anticipate that
requiring these methods of making the
necessary disclosures will be minimally
burdensome to providers and relatively
straightforward to implement, while
also being familiar to IPCS users based
on their experiences to date.
509. Billing Statements and
Statements of Accounts. Based on the
record, we require providers to make
available billing statements and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
statements of account to all IPCS
account holders on a monthly basis, via
the provider’s website, or via the
provider’s mobile or online application,
and in any event, via paper statements
upon request. As demonstrated by the
record, however, this is not occurring.
Our new requirement will ensure that
consumers receive the necessary
disclosures. Our rules do not presently
require providers to make billing
statements and statements of account
available to ICS users. In 2022, the
Commission proposed to modify the
consumer disclosure rules to ensure
consumers receive bills or statements of
account from their providers. The
record reveals a lack of consistency as
to how IPCS providers disseminate
information regarding their rates and
charges to consumers. Securus contends
that consumers and the general public
have access to information on funding
fees and taxes and the ‘‘rates applicable
to any facility that Securus serves.’’
NCIC contends that online account
access allows ICS providers to reduce
customer service costs; consumers and
family members no longer need to call
customer service representatives or ask
facility staff for ICS account
information. Most providers offer rate
and charge information online without
providing periodic bills or statements of
account, although a few, such as Pay
Tel, issue monthly electronic statements
to account holders via online accounts
and mobile applications. We conclude
that a consistently applied and
transparent requirement is appropriate,
and that all providers must make
account-related disclosures to account
holders monthly, which will foster
consumer education and consumer
protection.
510. Receiving monthly billing
statements or statements of account will
place IPCS account holders on the same
footing as consumers generally, who
typically receive monthly bills or
statements of account (either online or
via paper statements). Indeed, this is
even more crucial for incarcerated
individuals because many do not have
the freedom to check their accounts at
regular intervals. We rely in particular
on one commenter’s assertion that
information on websites or web
applications ‘‘of varying detail and
salience’’ is not a substitute for
statements in concise, easy-to-read
formats. Stephen Raher also proposes a
model statement of account that would
provide customized information based
on a consumer’s activity. We do not
require this type of statement at this
time. In addition, Mr. Raher proposes a
working group for consumer disclosures
PO 00000
Frm 00095
Fmt 4701
Sfmt 4700
77337
and billing statements. We do not
believe this is necessary, given our
updates to the consumer disclosure
requirements. Given that IPCS providers
routinely track and maintain
information on consumers’ accounts,
they should be able to generate monthly
updates to consumers without undue
burden as other communications service
providers routinely do. Given concerns
that certain consumers may not have
access to the internet or may have
accessibility issues, we also require
providers to issue paper bills or
statements of account upon request by
a consumer. In fact, many providers
already make paper statements available
upon request. We find inapposite Pay
Tel’s opposition to providing paper
billing statements or disclosures based
on facility imposed ‘‘restrictions or
limits on paper usage, due to the cost of
processing the resulting waste.’’ Our
billing statement and disclosure rules
govern provider methods of
dissemination; facility practices over
paper use are irrelevant.
511. Each IPCS provider is required to
make available to account holders the
information they will need to
understand any transactions affecting
their accounts. We do not dictate the
format of the bills or statements of
account, but require them to include the
amount of any deposits to the account,
the duration of any calls and
communications charged to the account
on a per-minute basis, the rates and
charges applied to each call and
communication for which a charge is
assessed, and the balance remaining in
the account after the deduction of those
charges. We recognize that, in light of
action we take in the Report and Order,
site commission information does not
have to be included. Whether a provider
issues paper statements or online
statements, the disclosures must include
this same vital information.
512. Billing Statements and
Statements of Account for Alternate
Pricing Plans. We find that additional
information must be provided in billing
statements and statements of account for
alternate pricing plans. The billing
statement or statement of account must
provide for each service period: (a) call
details, including the duration of each
call, and the total minutes used for that
service period, and the total charge
including taxes and fees, with
explanations of each tax or fee; (b) the
total charges that would have been
assessed using the provider’s perminute rate; (c) the calculated perminute rate for the service period,
calculated as the charge for the service
period divided by the total minutes
used by that consumer, with an
E:\FR\FM\20SER2.SGM
20SER2
77338
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
explanation of that rate; and (d) the
breakeven point, with an explanation of
the breakeven point. Also, as discussed
above for billing statements and
statements of account for services
rendered on a per-minute basis, the
billing statements and statements of
account for an alternate pricing plan
must provide information about
deposits made to the consumer’s
account and the account balance.
513. Repeal of Site Commission
Disclosure Requirement. In light of our
action today prohibiting the payment of
site commissions related to IPCS, we
repeal § 64.6110(b) of the rules, which
requires that providers ‘‘clearly label’’ as
‘‘a separate line item on [c]onsumer
bills’’ any amounts charged consumers
for facility costs included in the
providers’ site commission payments.
Given our prohibition against IPCS
providers paying site commissions of
any kind associated with intrastate,
interstate, international, jurisdictionally
mixed, or jurisdictionally indeterminate
audio and video IPCS, including all
monetary and in-kind site commissions,
we find that this rule is no longer
needed. Similarly, given our elimination
of ancillary service charges elsewhere in
the Report and Order, we also repeal the
portion of § 64.6110(a) that requires
providers to disclose those charges to
consumers.
b. Effective Consumer Disclosures
514. Just as we have required all prior
consumer disclosures to be clear,
accurate and conspicuous, we now
conclude that all required IPCS provider
disclosures, including those
implementing our inactive account and
alternate pricing plan rules, must be
clear, accurate, and conspicuous—the
same standard our current rules set for
disclosure of audio rates and ancillary
service charges. Adherence to these
standards will allow a reasonable
person to readily understand IPCS audio
and video rates and charges. For
example, a provider should price its
products in dollars per minute, rather
than in dollars per megabyte as one
provider does and which would be
confusing to consumers. In this manner,
incarcerated people and their loved
ones will be able to understand the rates
and charges they are, or will be,
assessed and the terms and conditions
that will apply to a provider’s IPCS
offerings. This, in turn, will help them
make informed decisions about which
services to purchase and whether an
alternate pricing plan would be
beneficial.
515. We expect that the requirement
that disclosures be ‘‘clear, accurate, and
conspicuous’’ and the other disclosure
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
requirements we adopt in the Report
and Order will ensure IPCS users and
the public will timely receive clear and
transparent information about
providers’ rates, charges, and practices.
We therefore find that our revised
disclosure rules give providers ‘‘clear
guidance’’ regarding the information
providers must disclose and how it
must be disclosed, as certain
commenters urge. These requirements
will reduce consumer confusion when
accessing provider websites which,
while technically providing the
information required by our rules,
continue to be difficult for consumers to
navigate. For example, as one
commenter explains, one provider’s
‘‘terms and conditions and privacy
policy collectively total almost 18,000
words,’’ with ‘‘the sheer volume and
complexity of this information . . . not
reasonably accommodate[ing] the actual
needs of the average consumer.’’ This
same providers lists its rates and
charges under a page called ‘‘Tariffs.’’
Securus’s web page for ‘‘Rates’’ does
not, in fact, include any rate
information, instead merely stating that
its ‘‘rates are in compliance with
applicable state and federal
regulations.’’ In order to find pricing
information, consumers must navigate
to a page labeled ‘‘Tariffs’’ which links
to each individual state or federal tariff.
Thus, the requested information is on its
website, but we find it doubtful that
consumers as a whole would
understand what a tariff is and that that
is the place in which they should look
for pricing information. Another
provider’s rates and charges are
included in a page labelled ‘‘Legal and
Privacy,’’ giving no indication to
consumers that this is the location of
such information. Given these practices,
we find that it is necessary to amend our
current rules to ensure that consumers
can easily understand and access such
information by requiring that providers
make their rates, charges, and associated
practices available on their websites in
a manner in which consumers can
easily find the information. We also find
that the disclosures we require with
regard to alternate pricing plans ‘‘should
provide sufficient information to enable
consumers to assess the value to them
of the [alternate pricing] plan versus
using standard per-minute rate plans.’’
In view of these findings, we decline to
adopt a specific ‘‘IPCS label’’ for billing
statements and statements of account, as
was proposed in the record. The Public
Interest Parties assert that the
Commission should adopt a version of
the consumer broadband label adopted
in the 2022 Broadband Label Order so
PO 00000
Frm 00096
Fmt 4701
Sfmt 4700
that consumers can make informed
decisions before making a call. They
contend that the Commission should
tailor a similar label for IPCS, ‘‘and
require . . . providers to make
information about their rates, terms, and
conditions of service, including
information about site commissions and
international rate components, available
generally to the public in an easily
accessed manner.’’ We find such an
approach overly prescriptive and
unnecessary. To minimize unnecessary
burdens on providers and to allow
flexibility, we decline to prescribe a
particular format for disclosures.
c. Accessible Formats for Consumer
Disclosures
516. All disclosures concerning IPCS,
including disclosures pertaining to
inactive accounts and alternate pricing
plans, must be accessible to people with
disabilities. In 2022, the Commission
sought comment on the effectiveness of
its rules in providing information
regarding rates, charges, and fees to
people who are deaf, hard of hearing,
deaf-blind, or have a speech disability.
The Commission proposed that all
disclosures, including those regarding
reporting requirements and charges, be
made in an accessible format for
incarcerated persons with disabilities,
and invited comment on what steps it
should take to implement that proposal.
517. Based on the record, we revise
our consumer disclosure rules to specify
that consumer disclosures must be in
accessible formats for people with
disabilities. We agree with commenters
that any website disclosures, billing
statements, and statements of account
must be in accessible formats. We do
not prescribe specific mechanisms, but
afford providers flexibility to respond to
specific requests and make reasonable
accommodations.
d. Alternate Pricing Plan Consumer
Disclosure Requirements
518. We adopt consumer disclosure
requirements specific to alternate
pricing plans, including disclosures
prior to enrollment and on billing
statements and statements of account. In
2022, the Commission asked ‘‘[w]hat
type of consumer outreach or education
would be needed to ensure that
consumers are able to choose the
[alternate pricing plan] that best meets
their needs.’’ The Commission also
asked ‘‘what information consumers
would need about providers’ pilot
programs to help them make informed
choices between a pilot program and
traditional per-minute pricing,’’ and
whether it should require providers to
inform consumers ‘‘how a pilot
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
program’s prices translate on a perminute basis, to enable consumers to
make an informed decision between the
program and the traditional per-minute
pricing model.’’ These rules are in
addition to the disclosure requirements
generally applicable to IPCS.
519. Several commenters discuss the
benefits of enhanced consumer
disclosure for alternate pricing plans.
The Public Interest Parties assert that
‘‘[e]nsuring that all fees are disclosed
should help protect consumers against
junk fees, hidden-fees pricing, and
negative-option subscriptions.’’ PPI
suggests that such information would
allow consumers to ‘‘consider their
likely phone usage and compare
subscription costs to what they would
pay under per-minute pricing.’’ The
Leadership Conference requests the
Commission to ‘‘ensure that consumers
are fully informed about alternative
pricing structures so that they can make
informed decisions about their choices.’’
Securus suggests that the Commission
‘‘[r]equire baseline disclosures so [the]
consumer can make an informed
choice,’’ and that the disclosures
include the ‘‘offered terms, (e.g., X
number of calls per month for $X).’’ We
agree that consumers need some
essential information to assess whether
a particular alternate pricing plan best
meets their needs. For example, IPCS
consumers should know the format of
and charges for the alternate pricing
plan prior to enrollment. Providers also
should ensure that consumers know the
terms, conditions and procedures for
renewals, cancellations, and reporting
dropped calls, so they will be in control
of the length of time they are enrolled
in the plan and know how to report
dropped calls; the option to obtain
service on a per-minute basis, so they
are aware that enrollment in the plan is
not the only option available to them;
the breakeven point for the plan, so they
will know what their usage level needs
to be to benefit from the plan; and the
availability of their usage and billing
data upon request, so they can analyze
their past usage and make decisions
about their future enrollment in the
plan. The disclosure of the breakeven
point will especially be needed if a
provider offers an alternate pricing plan
that is designed for heavy users. A light
user of IPCS, being told what the
breakeven point is for such an alternate
pricing plan, and being given an
explanation of the breakeven point,
would have information that could be
used in deciding whether the plan
makes sense for their circumstances.
Accordingly, we find that providers
offering alternate pricing plans must
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
disclose the following information: (We
are listing these items together here to
give one list encompassing the details of
alternate pricing plan disclosures.)
—The rates and any added taxes or fees,
a detailed explanation of the taxes
and fees, total charge, quantity of
minutes, calls or communications
included in the plan, the service
period, and the beginning and end
dates of the service period;
—Terms and conditions, including
those concerning dropped calls and
communications, automatic renewals
and cancellations;
—An explanation that per-minute rates
are always available as an option to an
alternate pricing plan and that perminute rates apply if the consumer
exceeds the calls/communications
allotted in the plan;
—The breakeven point, and an
explanation in plain language that the
breakeven point is the amount of plan
usage the consumer must make to
start to save money compared to the
provider’s applicable per-minute rate
for the same type and amount of
service; and
—The ability to obtain usage and billing
data, upon request, for each of the
most recent three service periods
(where feasible), including total usage
and total charges including taxes and
fees. If the consumer had not been a
customer of the provider during one
or more of the three previous service
periods, the provider must give the
usage and billing data for whatever
service periods the consumer did use
the provider’s services and for which
the provider has retained the
information. If the consumer has
never been a customer of the provider,
then this requirement does not apply.
These disclosure requirements resolve
Leadership Conference’s concerns
that consumers be informed about
costs and refunds.
520. ViaPath opposes the adoption of
consumer disclosure rules specific to
alternate pricing plans, arguing that the
Commission’s rules ‘‘already facilitate
significant transparency,’’ and that
‘‘[c]onsumers are in the best position to
determine whether alternative pricing
arrangements meet their needs.’’
ViaPath also asserts that expanded
disclosures are not needed because
‘‘[t]here is no record evidence that prior
alternative pricing trials have resulted
in anything other than satisfied
customers.’’ The evidence ViaPath refers
to is testimony provided by Securus
from a small subset of its customers—
meaning we do not have information
about how satisfied the remaining
customers were, including the
PO 00000
Frm 00097
Fmt 4701
Sfmt 4700
77339
customers whose usage did not meet the
breakeven points in Securus’s plans. In
particular, ViaPath cites to § 64.710 of
the Commission’s rules which requires
audible information about the cost of a
call prior to call connection. However,
§ 64.710 applies to interstate calls made
from correctional facilities and therefore
does not apply to intrastate IPCS calls
over which the Commission now has
jurisdiction. Because § 64.710 was
adopted over two decades ago, it does
not require providers to give all the
terms and conditions of alternate
pricing plans. The other rule sections
referenced by ViaPath—§§ 42.10, 42.11,
64.2401 and 64.6110—fare no better.
Sections 42.10 and 42.11 of the
Commission’s rules do not apply to
intrastate services. Also, § 42.10 requires
rate information to be publicly available
at one physical location, which at a
minimum, would not be useful to
incarcerated people; and § 42.11
requires the information to be available
for submission to the Commission and
state regulatory commissions, not the
public or consumers. Section 64.2401
applies to telephone bills, not to
disclosures at other times, such as when
someone is trying to determine whether
to enroll in an alternate pricing plan.
Finally, ViaPath suggests that § 64.6110,
the section we are amending here, is
sufficient. Section 64.6110 of the
Commission’s rules requires, among
other things, that IPCS providers
disclose their rates and fees on their
websites or ‘‘in another reasonable
manner readily available to consumers.’’
Compliance with this requirement
appears less than ideal. For example,
Securus has a website with an obscure
URL, and which provides only rates, not
taxes and fees. Another Securus
website, accessed from a link at the
bottom of securustech.net, apparently
requires a user to have an account in
order to view the rates. Additionally,
despite ViaPath’s contention that it is
focused on transparency, simplification
and clarity for consumers, an internet
user would not find rates at https://
www.viapath.com/ or https://gtl.com/.
Links to rates are given at https://
www.gtl.net/. From there, interstate
rates are found via a link to a page
entitled ‘‘Federal Tariffs and Price
Lists,’’ which directs the user to a tarifflike document for ViaPath—which the
average consumer could readily decide
is too difficult to understand. Section
64.6110 currently does not apply to
intrastate or video service for example,
or the terms and conditions associated
with alternate pricing plans which we
are permitting for the first time. Taken
together, the rule sections listed by
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77340
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ViaPath do not require the disclosure of
all of the terms and conditions for
alternate pricing plans for intrastate,
interstate, and international audio and
video IPCS, with the consumer being
either an incarcerated person or a friend
or family member, with the disclosure
being made before, during or after
enrollment in a plan, and with the
disclosure being made to the public,
including the Commission. ViaPath also
cites to sections 208 and 403 of the
Communications Act, and § 1.711 of the
Commission’s rules. However, those
sections concern the Commission’s
authority to address a provider’s actions
after the fact. They do not require
disclosures to consumers. Thus, even if
IPCS providers perfectly comply with
the rule sections listed by ViaPath, the
rules are insufficient to ensure
consumers receive the kind of
information needed to make wellinformed decisions about participation
in alternate pricing plans generally, and
to inform the public so they may
analyze the provider’s compliance with
our regulations. We find that the
consumer disclosure requirements
specific to alternate pricing plans that
we adopt here are necessary to educate
and protect consumers. PPI suggests that
providers reveal information such as a
requirement that the consumer has to
pay money regardless of whether the
incarcerated caller is allowed to make
calls, or pointing out that subscriptions
are not comparable to wireless plans
which allow callers to communicate
with anyone of their choosing. We find
our consumer disclosure requirements
sufficiently robust to enable consumers
to determine whether a provider’s
alternate pricing plan is the right choice
for them. Of course, IPCS providers
readily may add additional information
that is truthful and useful to consumers
to the information that they are required
to provide, at any time they interact
with the consumers, and on website
postings that are available to the public.
521. Timing and Manner of
Disclosures. In 2022, the Commission
asked whether it should adopt rules
‘‘governing how providers should
disclose to consumers the rates, terms,
and conditions associated with any’’
alternate pricing plan. After reviewing
the record, we adopt such requirements
here, and conclude that an IPCS
provider must make the alternate
pricing plan disclosures identified
above available: (a) before a consumer
enrolls in the program (pre-enrollment);
(b) upon request, at any time after
enrollment; (c) with a billing statement
or statement of account, and any related
consumer communications; and (d) at
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the beginning of each call or
communication.
522. Pre-Enrollment Disclosures.
Before a consumer first enrolls in an
alternate pricing plan, the provider must
ensure that the consumer is fully
informed about the plan and the
disclosure must provide all plan details.
For example, if the plan consists of 60
calls per month for $30.00 plus
permissible taxes and fees totaling
$2.50, the disclosure must provide the
total dollar amount of $32.50, and the
amount of taxes and fees in detail. The
terms and conditions also must give the
total dollar amount that will be charged,
in this example $32.50. The provider
also must specify and explain the plan’s
‘‘breakeven point,’’ discussed above.
Prior to the consumer’s enrollment, the
IPCS provider also must inform the
consumer that usage and billing data
will be available upon request before
they enroll and after they enroll in the
alternate pricing plan. These disclosures
will enable a consumer to consider their
own IPCS needs and the likelihood that
their usage would reach the breakeven
point before making a decision to enroll
in the alternate pricing plan and give
them comfort that they will continue to
have access to the information they
need over time to decide whether to
remain enrolled in that alternate pricing
plan.
523. Disclosures Upon Request at Any
Time. In addition to the disclosures
being crucial to a consumer’s decision
about whether to enroll in a plan,
having access to the disclosures also is
important while a consumer is enrolled
in the plan, and after enrollment has
ended. During enrollment in a plan, a
consumer may want to check the
provider’s procedures for handling
dropped calls, for example, or compare
a billing statement to the terms of the
plan. After enrollment, a consumer may
want to check their billing statements
against the terms of the plan to ensure
the charges were correct or use the
information to determine if they want to
enroll in an alternate pricing plan again.
524. Providers must also make
available the number of remaining
minutes, calls or communications under
the consumer’s alternate pricing plan
without the consumer having to initiate
a call or communication that counts
toward the minutes, calls or
communications allotted in the plan.
This can be achieved via the consumer’s
account on the provider’s website or via
the provider’s mobile or online
application, for example. For those
without internet access a provider can
give this information via its customer
service line, or by whatever mechanism
is permitted by the facility. This
PO 00000
Frm 00098
Fmt 4701
Sfmt 4700
disclosure requirement will allow
consumers to monitor their alternate
pricing plan usage without deducting a
minute, call, or communication from
their plan. The record indicates that
Securus offered this information to
consumers of its subscription plan,
suggesting this requirement will not be
burdensome to providers. Therefore, we
include this requirement in our
alternate pricing plan consumer
disclosure rules.
525. Disclosures with a Billing
Statement or Statement of Account.
Each billing statement or statement of
account should explain how the
consumer may access the disclosures.
The methods for obtaining the
disclosures must include the ability to
request a paper copy. The other
methods could include a link to a
website or a toll-free telephone number,
or perhaps a complete copy of the
disclosures that would be included with
the billing statement or statement of
account. With such access to the
disclosures, consumers will be able to
confirm the charges on the billing
statement or statement of account, and
make decisions about their continued
use of the alternate pricing plan.
526. Disclosures at the Beginning of a
Call or Communication. In addition to
disclosing all of the terms and
conditions at other times and upon
request, providers must make available,
upon request of the consumer, specific
disclosures at the beginning of a call
made via an alternate pricing plan. For
example, a provider could offer the
option of this detailed information if a
consumer were to ‘‘press two’’ at the
beginning of a call. For example, the
availability of the alternate pricing plan
disclosures could be announced as part
of the information at the beginning of a
call, and the consumer could be told
they can ‘‘press 2’’ to hear how to obtain
the disclosure information online, or
‘‘press 3’’ to hear the disclosures read to
them. This is similar to Pay Tel’s use of
voice prompts, such as by saying: ‘‘For
rate information, press 1 now.’’ The
IPCS provider must disclose the number
of minutes, calls or communications
remaining for the service period (for
plans that have a finite number of
minutes, calls, or communications).
This will ensure that IPCS users have
the information they need to determine
whether to tailor their usage of IPCS in
a given instance based on the details of
the alternate pricing plan they are
enrolled in. The requirement to provide
disclosures at the beginning of a call is
currently in § 64.710 of the
Commission’s rules. Section 64.710 as
currently written, however, is
insufficient to provide IPCS consumers
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
with adequate information to make an
educated decision prior to making a
call. For example, § 64.710 applies to
interstate calls made from correctional
facilities, not intrastate calls, and that
section necessarily does not require the
provider to offer the disclosure of all the
terms and conditions of alternate
pricing plans which are permitted for
the first time in the Report and Order.
Therefore, we add to our rules
disclosure requirements at the
beginning of the call or communication
which are specific to alternate pricing
plans. Securus states that, for its
subscription plans, consumers were
informed of the number of calls
remaining at the beginning of each call.
Our rule amendments require providers
to give specific information about the
status of the alternate pricing plan, and
are broader than Securus’s practice, to
ensure that consumers are fully
informed about the status of their use of
the plan.
527. Billing and Usage Data. The
alternate pricing plan disclosures—
which primarily focus on the alternate
pricing plan itself—also must inform
consumers that their own prior usage
and billing data (whether under perminute pricing or an alternate pricing
plan) are available upon request. This
information will further assist a
consumer in deciding whether to enroll
in an alternate pricing plan. The
availability of that information upon
request while the consumer is enrolled
in a plan will, in turn, enable IPCS
consumers to evaluate whether to
remain enrolled in that alternate pricing
plan. It also will ensure that information
is available in a manner that is timely
for IPCS users—i.e., when they
otherwise are in a position to make such
evaluations, in the event that they have
not retained such information when it
otherwise is made available to them.
Because we require disclosures of key
information regarding alternate pricing
plans in other circumstances, we
anticipate that in many instances IPCS
consumers already will have the
information they need, and will not find
it necessary to avail themselves of this
option. That said, because the limited
experience of IPCS consumers with
such plans, IPCS consumers may not
know what information they will want
to have in order to make an assessment
of whether to remain on an alternate
pricing plan, they might not
automatically have retained that
particular information. As a result, we
expect a consumer’s ability to obtain
this information upon request will
provide an important backstop that will
not unduly burden IPCS providers
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
above and beyond the alternate pricing
plan disclosures we otherwise require.
528. The usage and billing data must
show what the provider charged for
each of the past three service periods
(where feasible), including: (a) the
minutes of use for each of the calls or
communications made and the
applicable per-minute rate that was
charged (where applicable); (b) the total
number of minutes; and (c) the totals
charged including the details of any
taxes and fees. The requirement applies
only for those service periods for which
the consumer was a customer of the
provider. A service period could be, for
example, a month or a week. If a
consumer had been enrolled in an
alternate pricing plan, the data must
include the breakeven point for the
alternate pricing plan(s), an explanation
of the breakeven point in plain
language, and the total that would have
been due for each service period if the
provider’s per-minute rate had been
used. The consumer’s prior usage and
billing data could be made available
when the consumer logs into their
account on the provider’s website and
the provider’s online and mobile
applications, but must also be made
available on paper upon request of the
consumer, and be made available at any
time, whether before, during, or after a
consumer’s enrollment in an alternate
pricing plan. As discussed above, we
require disclosures to be available on
paper so that they are accessible to
people who do not have internet access.
529. These requirements respond to a
record suggestion that ‘‘a monthly
accounting comparing the costs under a
pilot program and the applicable perminute rate would help IPCS consumers
understand whether they will benefit or
are benefitting from an alternative
pricing structure.’’ While one
commenter advocates for disclosures of
a consumer’s historical IPCS usage and
expenditures ‘‘over a long period’’ to
‘‘account[ ] for periodic variations in
usage,’’ we limit the data IPCS providers
must provide to the calling records for
the most recent three service periods
(where feasible) so as not to overwhelm
consumers with large quantities of data,
or create an overly burdensome
requirement on providers. Although
Securus stated that it made monthly
statements of account available for 90
days for services outside of its
subscription plan, we require data for at
least the most recent three ‘‘service
periods’’ so that the consumer can see
their usage during three similar periods
of time, and see the complete charges
and taxes and fees for those service
periods. The use of ‘‘three service
periods’’ also would be a more
PO 00000
Frm 00099
Fmt 4701
Sfmt 4700
77341
reasonable request for alternate pricing
plans offered on a weekly basis, rather
than requiring a provider deliver up to
90 days of data (equivalent to
approximately 12 weeks of data) which
may be overwhelming to the consumer
and may be onerous for the provider.
For an alternate pricing plan with a
service period of one month, the data
provided would be for three months—
i.e., approximately 90 days. For an
alternate pricing plan with a service
period of one week, the data provided
would be for three weeks—i.e., 21 days.
2. Treatment of Unused Balances in
IPCS Accounts
a. Adoption of Permanent Rules
530. We next adopt permanent rules
addressing the treatment of unused
funds in IPCS accounts that build upon
the interim rules that the Commission
adopted in the 2022 ICS Order. We now
update our interim rules to reflect our
expanded authority over IPCS, and
adopt permanent rules to provide IPCS
account holders with informational,
procedural, and financial protections
that help ensure that IPCS account
holders are able to maintain control over
the funds in their accounts and receive
refunds of any unused funds in a timely
manner. Collectively, these measures,
consistent with several providers’
affirmative statements that refunds are
always available, remove obstacles that,
as a practical matter, have largely
prevented account holders from
receiving refunds of unused funds.
531. We take these actions pursuant to
our authority under section 276(b)(1)(A)
of the Communications Act, as amended
by the Martha Wright-Reed Act, and, to
the extent the underlying accounts can
be used for interstate or international
telecommunications services, pursuant
to section 201(b) of the Communications
Act. We conclude that any action
(whether by a provider, a provider’s
affiliate, or an entity acting on the
provider’s or the affiliate’s behalf)
inconsistent with our revised rules for
unused IPCS account funds would
unreasonably impede our ability to
ensure just and reasonable IPCS rates
and charges, as required by section
276(b)(1)(A), and to the extent interstate
or international telecommunications
services are involved, would constitute
an unreasonable practice within the
meaning of section 201(b) of the
Communications Act. We recognize that
the 2022 ICS Order characterized the
Commission’s interim rules governing
unused balances as guarding against
‘‘unjust and unreasonable practice[s]
within the meaning of section 201(b) of
the [Communications] Act.’’ Because
E:\FR\FM\20SER2.SGM
20SER2
77342
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
section 201(b) broadly addresses just
and reasonable charges and practices for
or in connection with interstate and
international common carrier services,
the Commission had no cause at that
time to parse more closely the precise
relationship between those rules and
ensuring just and reasonable rates and
charges for IPCS. Examining that issue
more closely now, we conclude that
rules addressing the treatment of
unused funds in IPCS accounts bear on
the effective rates or charges that IPCS
users pay to establish and maintain an
account and use IPCS services. In
particular, we find that the risk that an
IPCS user will lose funds they
contributed to an IPCS account
effectively increases the overall cost of
IPCS by reducing the IPCS usage they
can count on receiving for a given
amount of funds in an IPCS account. We
therefore conclude that these
regulations—designed to mitigate that
risk—appropriately are part of a
compensation plan designed to ensure
just and reasonable rates and charges for
IPCS within the meaning of section
276(b)(1)(A). Notably, no commenter
disputes the Commission’s legal
authority in this regard.
b. Background
532. In the 2022 ICS Order, in
response to allegations of abusive
provider practices, the Commission
adopted interim rules that prohibit
providers from seizing or otherwise
disposing of funds in inactive inmate
calling services accounts until the
accounts have been continuously
inactive for at least 180 calendar days.
The record at the time showed how
providers would confiscate, for their
own use, funds in accounts they
deemed ‘‘inactive’’ after a certain period
of time, resulting in significant
windfalls. The Commission was
concerned that by taking possession of
unused funds in customers’ accounts,
providers were ‘‘depriv[ing] consumers
of money that is rightfully theirs.’’
Under the interim rules, once the 180day period has run, providers must
make reasonable efforts to refund all
funds in the accounts to the account
holders and, if those efforts are
unsuccessful, treat those funds in
accordance with any controlling judicial
or administrative mandate or applicable
state law requirements. The
Commission found, on an interim basis,
that all funds deposited into any
account that can be used to pay for
interstate or international inmate calling
services remain the property of the
account holder unless or until they are
either: (a) used to pay for products or
services purchased by the account
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
holder or the incarcerated person for
whose benefit the account was
established; or (b) disposed of in
accordance with a controlling judicial or
administrative mandate or applicable
state law requirements, including, but
not limited to, requirements governing
unclaimed property. The Commission
used its authority under section 201(b)
of the Communications Act to prohibit
unjust and unreasonable practices,
explaining that its ‘‘actions extend to
commingled accounts that can be used
to pay for both interstate and
international calling services and
nonregulated services such as tablets
and commissary services.’’
533. In the 2022 ICS Further Notice,
the Commission sought comment on
whether the Commission should adopt
additional requirements regarding
inactive accounts to protect consumers
as it adopts final rules. Specifically, the
Commission sought comment on the
length of the time before an account
could be deemed inactive, and the
actions that would be sufficient to
demonstrate activity. It also sought
comment on other issues, including
whether to require providers to issue
refunds within a specified period of
time once an account has been deemed
inactive, whether providers should be
required to collect contact information
from and provide notice to account
holders, and what types of mechanisms
providers should use to refund amounts
to consumers.
c. Discussion
(i) Consumers’ Right to Funds
534. The Commission’s interim
inactive account rules provide that
‘‘funds deposited into a debit calling or
prepaid calling account . . . shall
remain the property of the account
holder unless or until the funds are’’
used or disposed of in accordance with
our rules, including as required by
controlling adjudicatory decisions or
state law. Building on that general
foundation, the permanent rules for
inactive accounts we adopt today are
designed to safeguard the funds
consumers deposit in IPCS accounts,
thereby ensuring that the effective costs
of IPCS are not unduly increased in a
manner that is at odds with our mandate
to ensure just and reasonable rates and
charges for IPCS. Our permanent rules
also reaffirm the Commission’s interim
rules that bar IPCS providers from
improperly ‘‘seiz[ing] or otherwise
dispos[ing] of unused funds’’ in inactive
accounts,’’ and require providers to
undertake ‘‘reasonable efforts’’ to refund
unused funds.
PO 00000
Frm 00100
Fmt 4701
Sfmt 4700
(ii) Scope of the Inactive Account Rules
535. We now extend our rules to all
accounts that can be used to pay an
IPCS-related rate or charge, to the extent
the provider or its affiliate controls the
disposition of the funds in the accounts.
The interim rules for inactive accounts
apply to ‘‘all funds deposited into a
debit calling or prepaid calling
account,’’ as those terms are defined in
the Commission’s rules. While for all
practical purposes our rules do not
distinguish between debit and prepaid
calling accounts, given the prevalence of
the use of these terms in the industry,
our rules continue to reference these
terms in our definition of ‘‘IPCS
Account.’’ We now conclude that our
permanent rules for the treatment of
balances in inactive IPCS accounts
apply to any type of account, that can
be used to pay for IPCS, to the extent the
provider or its affiliate controls the
disposition of the funds in the account.
In other words, we find that our rules
are applicable to all IPCS accounts
generally to the extent they are
controlled by providers or their
affiliates. Our rules do not generally
extend to payment mechanisms other
than accounts. To the extent a provider
offers only one payment mechanism to
pay for IPCS rates and charges at a
facility, that payment mechanism is
subject to the inactive account
requirements even if that mechanism is
not an ‘‘account.’’ For example, NCIC
asserts that ‘‘[s]ome companies sell
virtual calling cards with ‘no refund’
policies.’ ’’ While we do not generally
include prepaid calling cards for the
payment of IPCS in our definition of an
IPCS account, we nonetheless conclude
that providers that do not offer
consumers an alternative means of
paying ongoing charges other than a
prepaid calling card are nonetheless
subject to the inactive account
requirements we impose here.
536. Our definition of ‘‘IPCS
account,’’ and hence the applicability of
our inactive accounts rules, extends to
all accounts administered by, or directly
or indirectly controlled by a provider or
an affiliate, that can be used to pay IPCS
rates or charges, including accounts
where the incarcerated person is the
account holder, regardless of whether
those accounts can also be used to pay
for nonregulated products or services
such as tablets and commissary services.
These accounts are used for ‘‘debit
calling’’ under our current rules. This
treatment is consistent with the
Commission’s decision, in the 2022 ICS
Order, to extend its interim inactive
account rules to commingled accounts
that could be used to pay for regulated
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
and nonregulated charges if providers
administered or controlled those
accounts. Consistent with the
Commission’s analysis in the 2022 ICS
Order, we conclude that where we have
authority under section 201(b) and/or
section 276 of the Communications Act
to regulate the rates, charges, or
practices associated with
communications services, our authority
extends to the nonregulated portion of
a mixed service where it is impossible
or impractical to separate the service’s
regulated and nonregulated
components. Because the 2022 ICS
Order was adopted before the enactment
of the Martha Wright-Reed Act, the
Commission’s decision was based on
section 201(b) of the Communications
Act. The now-revised section 276 of the
Communications Act provides
additional authority for our decision
here.
537. In the 2020 ICS Order on
Remand, the Commission found that
ancillary service charges ‘‘generally
cannot be practically segregated
between the interstate and intrastate
jurisdiction’’ except in a limited number
of cases where the ancillary service
charge clearly applies to an intrastateonly call. Applying the impossibility
exception, the Commission concluded
that providers generally may not impose
any ancillary service charges other than
those specified in the Commission’s
rules and are generally prohibited from
imposing charges in excess of the
ancillary service fee caps. Similarly,
commingled accounts offered by
providers contain funds that can be
used to pay IPCS rates and charges, over
which the Commission has jurisdiction,
as well as charges for nonregulated
products and services. Because we
cannot practically segregate the portion
of the funds in providers’ commingled
accounts that may be used to pay IPCSrelated rates and charges from the
portion that may be used to pay
nonregulated charges, we conclude that
commingled accounts should be subject
to our permanent rules regarding the
treatment of unused funds in inactive
accounts. In the 2020 ICS Order on
Remand, the Commission distinguished
between automated payments made to
fund an account before calls are
completed and fees are incurred, from
automated payments made after a call is
made and therefore the jurisdiction has
been determined. The funds at issue
here are akin to the former situation
where the funds cannot be separated by
jurisdiction, so the Commission applied
the inactive accounts rules to the
corresponding automated payment fees.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(iii) Inactive Period
538. We retain the requirement that
180 consecutive calendar days must
pass before a provider may initiate the
process of determining that an IPCS
account has become inactive, except
where state law affirmatively sets a
shorter alternative period, or the
incarcerated person for whom the
account was established is released from
confinement or transferred to another
correctional institution. In 2022, the
Commission invited comment on
whether the 180-day timeframe
specified in our interim rules is the
appropriate time frame before an IPCS
provider may deem an account to be
inactive and therefore begin the process
of making reasonable efforts to refund
the funds to the account holder.
Consistent with the position of several
commenters, we find that a 180-day
time frame offers account holders an
adequate window during which they
may exert custody or control before
their account is deemed inactive,
without imposing unwarranted burdens
on providers. In contrast, the 364-day
inactive period proposed by one
commenter, or any longer alternative
period set by state law, would
unnecessarily delay the refund to
consumers of unused funds from
accounts deemed inactive while
imposing increased burdens on
providers.
539. In 2022, the Commission asked
for comment on the release and transfer
process ‘‘to better understand the need
for rules addressing those areas.’’ Based
on the record, we find that if a provider
becomes aware that an incarcerated
person has been released or transferred,
the 180 days of inactivity will
presumptively be deemed to have run,
requiring a provider to begin processing
a refund in accordance with the
requirements we adopt in the Report
and Order subject to countervailing
direction from the account holder. We
agree with Securus that in situations
where accounts ‘‘are not specific to any
facility or incarcerated person and may
be used for calls from multiple
facilities,’’ the account holder ‘‘may
very reasonably wish to keep funds
deposited in their . . . account to
continue communicating with other
individuals.’’ To ensure that the account
holder’s preference is implemented in
situations where the provider becomes
aware that an incarcerated person has
been released or transferred, we require
that the provider contact the account
holder prior to closing the account and
refunding the remaining balance, to
determine whether the account holder
wishes to continue using the account, or
PO 00000
Frm 00101
Fmt 4701
Sfmt 4700
77343
to close it and obtain a refund from the
provider in accordance with our
requirements. If the account holder so
requests, the account will be deemed
inactive under our rules, and the
provider must issue a refund in
accordance with our requirements.
540. Consistent with the 2022 ICS
Order, our rules do not disturb the
ability of account holders to obtain a
refund upon request during the 180-day
period of inactivity. Under no
circumstances other than those
described above, however, can a
provider dispose of the funds in an IPCS
account prior to 180 days of continuous
inactivity without the account holder’s
affirmative consent. And, once the
account holder provides that consent,
the provider must refund any remaining
funds in accordance with the
requirements set forth below. Together,
these steps will help ensure that
account holders are not deprived of
funds that are rightfully theirs, thereby
effectively saddling account holders
with unjust and unreasonable rates.
541. The interim rules for inactive
accounts required that the inactivity
period be continuous and specified the
actions by the account holder or the
incarcerated person for whom the
account had been established that
would be sufficient to restart the
inactivity period—for example, adding
or withdrawing funds from the account,
expressing an interest in retaining the
account, or otherwise exerting or
attempting to exert control over the
account. In 2022, the Commission
invited comment on whether it should
refine these rules and, in particular, on
whether other actions by the account
holder or the incarcerated person
should restart the inactivity period. We
retain the requirement that the
inactivity period be continuous, as well
as the requirement that the inactivity
period restart when the account holder
or the incarcerated person for whom the
account is maintained: (a) deposits,
credits, or otherwise adds funds to the
account; (b) withdraws, spends, debits,
transfers, or otherwise removes funds
from an account; (c) expresses an
interest to the IPCS Provider in
retaining, receiving, or transferring the
funds in an account; or (d) otherwise
attempts to exert or exerts ownership or
control over the account or the funds
held in the account.
542. We also clarify that an account
holder may use any reasonable means to
convey to a provider its interest in
retaining, receiving, or transferring
funds in an account, including by
calling, emailing, or writing to the
provider, or by affirmatively responding
to a provider inquiry asking whether the
E:\FR\FM\20SER2.SGM
20SER2
77344
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
account should remain open. A means
of communication is ‘‘reasonable’’ for
this purpose if it is a means of
communication between the provider
and account holder otherwise used in
other situations, or if the service
agreement provides for it as an
additional means of communication in
the specific scenario of such
communications. This will guard
against the risk that mere difficulty in
communicating with the provider
would result in an account qualifying as
inactive under our rules, triggering the
need for the account holder to go back
through the steps of (re)establishing an
account and risking the inability to
engage in IPCS communications in the
meantime. At the same time, it only
holds the provider accountable for using
the means of communications with the
account holder that they otherwise are
using already, along with any additional
means specified for these purposes in
their service agreement.
543. In addition, the record makes
clear that providers often lack the
information they will need to complete
the refund process. To eliminate this
potential roadblock, we urge providers
to allow the account holder to specify
an individual to which a refund should
go to the extent the provider’s existing
systems can accommodate such a
change. In the Further Notice, we invite
comment on whether we should require
that all providers follow this ‘‘best
practice.’’
(iv) Required Refunds
544. We now adopt permanent rules
that reaffirm the requirement that, once
an IPCS account is deemed inactive,
providers must take proactive steps to
issue a refund to the account holder in
accordance with the requirements set
forth below. The record makes clear that
both a refund mandate and rules
implementing that mandate are needed
to keep providers from continuing to
retain the funds in inactive accounts
and appropriating them to their own
uses, which increases the effective cost
of IPCS to consumers contrary to our
statutory mandate to adopt a
compensation plan for IPCS that ensures
just and reasonable rates and charges.
The requirement to initiate a refund for
inactive accounts is consistent with and
in addition to the underlying obligation
of providers to refund accounts
generally upon request by an account
holder.
545. Both the refund mandate and our
implementing rules will apply to all
accounts within our definition of ‘‘IPCS
account.’’ We find unavailing Securus’s
argument that we should not require
refunds from accounts held by
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
incarcerated people because the funds
in them are not considered abandoned
while the account holder remains
incarcerated and ‘‘are routinely
refunded upon transfer or release.’’ We
commend correctional institutions and
certain providers for having procedures
in place to ensure that all funds in an
IPCS account are refunded once an
incarcerated person is released or
transferred. And, as Securus recognizes,
providers typically rely on correctional
institutions to advise them when an
incarcerated person is released or
transferred. Since correctional
institutions do not always share that
information with providers, Securus’s
argument underscores the need for
providers to take proactive steps to
ensure that account holders are aware
that refunds are available once their
accounts are deemed inactive. As we do
in circumstances where a provider
becomes aware that an incarcerated
person has been transferred or released,
we similarly require that when a refund
otherwise becomes due under our rules
at the expiration of the 180-day
inactivity period, the provider must
contact the account holder prior to
closing the account and refunding the
remaining balance, to determine
whether the account holder wishes to
continue using the account, or to close
it and obtain a refund from the provider
in accordance with our requirements.
546. We disagree with certain
commenters’ assertions that we should
not require refunds from accounts that
‘‘are never deemed inactive’’ or ‘‘never
expire.’’ While such accounts in theory
preserve the value of consumers’
deposits, the longevity of these accounts
is of no practical use to account holders
if they are not aware that refunds are
available. And even in situations where
account holders are aware of the
availability of refunds, the rules we
adopt today ensure that they have a
mechanism enabling them to have the
amounts in those accounts returned to
them. Thus, regardless of how providers
may characterize IPCS accounts, under
the rules we make permanent today, an
account that can be used to pay for IPCS
rates and charges becomes inactive after
180 consecutive calendar days unless
certain conditions are met.
547. We conclude that, for purposes
of the Commission’s inactive account
rules, regardless of whether an account
remains open in perpetuity, the
provider must take proactive steps to
refund the entire balance of the account
once it is deemed inactive within the
meaning of our rules. The amount
refunded must include the entire
balance of the account, and, consistent
with our elimination of ancillary service
PO 00000
Frm 00102
Fmt 4701
Sfmt 4700
charges generally, the provider shall not
impose fees or charges in order to
process the refund. Additionally, in
calculating the refund balance, the
record supports requiring that the
provider include in the refund any
deductions it may have made in
anticipation of taxes or other charges
that it assessed when funds were
deposited and that were not actually
incurred. This will prevent providers
from profiting from practices such as
assessing taxes or fees upfront on
deposited funds, rather than at the time
of the account holder’s actual payment
for service.
(a) Timing of Refunds
548. In 2022, the Commission invited
comment on whether it should adopt a
time frame for refunds to be issued and
the length of time needed to process
refunds. The Commission also asked for
comment on reasonable time frames to
issue refunds in response to requests for
refunds received before an account
became inactive, and how much time
was needed to process such requests.
Based on the record, we find that, as
part of providers’ duty to make
reasonable efforts to refund balances in
accounts deemed inactive, refunds must
be issued within 30 calendar days of an
account being deemed inactive or
within 30 calendar days of a request
from an account holder. We find
suggestions in the record that requests
for refunds should be issued within five
to seven business days to likely be too
short a time period for providers to
process refunds. We therefore find it
reasonable instead to allow 30 days for
the completion of the refund process.
While one commenter urges us to leave
this time period open ended, because
we now require that refunds be issued
automatically once an account becomes
inactive and the provider has contacted
the account holder to determine
whether the account holder prefers to
keep the account active or receive a
refund in accordance with our rules, it
is reasonable to expect that refund
issuances will be completed within 30
calendar days. Likewise, we find that
our new requirements that providers
gather contact information and the
means of issuing refunds when an
account is opened will streamline the
refund process such that a longer, or
indeterminate, time period is not
reasonable. We note that a provider’s
duty to conduct a timely refund process
is not contingent on an affirmative
request by the account holder for a
refund. The provider must make
reasonable efforts in the prescribed
timeframe, as described below, to give
account holders a reasonable
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
opportunity to receive the refund or
affirmatively request that the account be
deemed active.
549. Our rules require that ‘‘[a]fter 180
days of continuous account inactivity
have passed, or at the end of any
alternative period set by state law, the
provider must make reasonable efforts
to refund the balance in the account to
the account holder. In response to
several commenters’ suggestions, we
take the opportunity to clarify that
‘‘reasonable efforts’’ include, but are not
limited to: (a) notification to the account
holder that the account has been
deemed inactive; (b) the collection of
contact information needed to process
the refund; and (c) timely responses to
account holders’ inquiries regarding the
refund process. It is self-evident that
taking no steps to effectuate refunds is
not reasonable.
550. We agree with commenters that
account balances should be
automatically refunded once accounts
have been deemed inactive. We find
that requiring the account holder to
affirmatively request a refund is
inconsistent with the fact that the funds
in the account are the account holder’s
property. As the Commission has
recognized, providers ‘‘have strong
incentives to retain these funds for
themselves.’’ Given these incentives, we
find it appropriate to require providers
to initiate and follow through on the
refund process, including refunding all
remaining money, once an account
becomes inactive.
551. We reject certain providers’
suggestions that it is ‘‘impossible’’ or
overly burdensome for providers to
make automatic refunds. These
arguments are based on assertions that
some providers presently lack the
information needed to generate
automatic refunds or have not yet
established procedures to process
automatic refunds. Those arguments are
unavailing. We strongly disagree that
‘‘mandating routine inactivity refunds
rather than refunds upon release or
transfer will impose costs and burdens
that far outweigh any demonstrated
benefit.’’ The record of the abuses by
providers retaining account holders’
funds for their own use is extensive.
Retention of those funds has functioned
as an additional charge on consumers
that, if continued, would undermine our
efforts to establish a compensation plan
that ensures just and reasonable IPCS
rates and charges for consumers. While
the benefits of automatic refunds may
seem slight to some providers, the
record makes clear the importance
consumers place on receiving this
money. In contrast to that substantial
evidence of the benefits of such a
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
requirement, providers have failed to
adequately quantify the claimed
burdens of compliance, let alone
demonstrate outright impossibility of
complying. To the extent that providers
already issue refunds upon release or
transfer, nothing in our rules prevents
this practice from continuing and we
support any efforts taken by providers to
ensure refunds are promptly issued.
Indeed, the fact that providers have
demonstrated the ability to promptly
issue refunds based on certain triggering
events—such as release or transfer—
gives us confidence that it will be
reasonably feasible for them to establish
the processes (if not already in place) in
order to promptly issue refunds based
on the triggering event of an account’s
inactivity under our rules. We thus
require providers to collect whatever
information and establish any
procedures they will need to process
refunds expeditiously as required by our
new rules.
552. We do, however, acknowledge
commenters’ concerns regarding the
administrative burden of providing
automatic refunds for inactive account
balances that are below the cost of
issuing the refund. As Securus explains,
‘‘[i]ssuing refunds on small account
balances will result in the ICS provider
incurring costs to administer those
funds exceeding the value of the amount
refunded.’’ The record contains
relatively little quantitative data
regarding the point at which issuing a
refund would cost more than the
balance in the account. Pay Tel suggests
that an account balance of $1.00 might
be a sufficient cutoff point, while
Securus suggests that the Commission
adopt a $1.50 de minimis threshold.
Additionally, the record suggests that
there may be circumstances in which
providers might effectuate refunds
through third parties such as Western
Union and that ‘‘those third parties will
charge for their role in issuing refunds.’’
Given these choices, we adopt the more
conservative of the two options
provided to us in the record and
therefore do not require automatic
refunds where the balance in an inactive
account is $1.50 or less. This de
minimis threshold applies in the
absence of ‘‘a consumer’s specific
request’’ for a refund. Thus, if an
account holder requests a refund,
providers must comply with such a
request regardless of the amount of
money remaining in the account. And,
consistent with our rules, to the extent
providers are unable to issue a refund,
the provider shall treat such balances
consistent with appliable state law,
PO 00000
Frm 00103
Fmt 4701
Sfmt 4700
77345
including applicable state unclaimed
property law.
(b) Refund Mechanisms
553. The record suggests that there are
a variety of methods available to
providers to refund the balances in
inactive accounts. Rather than prescribe
a specific mechanism, we suggest
several options which providers may
offer to account holders that are
supported by the record. As a general
matter, Securus asserts that it ‘‘will
tailor its refund method to the method
used by the account holder to fund the
account,’’ which suggests that providers
are able to offer different refund
mechanisms. Indeed, Securus indicates
that if an account is funded via a
payment card, it will ‘‘initiate a refund
using the payment card information on
file.’’ For accounts funded using a check
or money order, Securus indicates that
it ‘‘will issue a paper check that will be
sent via postal mail using the address
information on file.’’ Other commenters
similarly suggest that ‘‘[r]efunds should
be issued either to the account holder’s
original form of payment or to a credit
or debit card provided by the account
holder at the time of the request’’ or
through an electronic fund transfer to a
bank account. Given record evidence of
the availability of a variety of refund
mechanisms, we find that providers
must issue refunds in the original form
of payment, an electronic transfer to a
bank account, a check, or a debit card.
We find that offering multiple refund
mechanisms will ensure that barriers
created by certain methods are avoided.
While providers appear to use refund
mechanisms that offer similar
optionality to consumers, we emphasize
that any refund mechanism that requires
that an account holder affirmatively
request a refund after the account has
been inactive for 180 days would violate
our rules. Such requirements may be
appropriate when an account holder
seeks a refund while an account is
active, but cannot be a barrier to
receiving a refund once an account is
deemed inactive.
(v) Required Notices
554. We conclude that additional
requirements are needed to ensure that
account holders maintain control over
IPCS accounts and receive refunds in a
timely manner. As discussed above, we
impose certain disclosure requirements
on providers, including requiring the
posting of their terms and conditions of
service on their publicly available
websites, the posting of their obligation
to refund unused balances upon request,
and other more detailed disclosure
requirements related to their inactive
E:\FR\FM\20SER2.SGM
20SER2
77346
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
account balance procedures. We now
also require providers to provide
account holders, through their billing
statements and statements of account,
notice of the status of IPCS accounts
prior to their being deemed inactive.
This notice shall initially be provided at
least 60 days prior to an account being
deemed inactive. It shall be included in
each billing statement, or statement of
account, the provider sends, or makes
available to, the account holder until
either some action by the account
holder results in the inactivity period
being restarted or the account is deemed
inactive. We agree with ViaPath that
notices should be provided to the
account holder only. This notice must
describe how the account holder can
keep the account active, as well as how
the account holder may update the
refund information associated with the
account. We emphasize that providers
may supplement their compliance with
these requirements with any additional
measures they deem appropriate to keep
account holders informed of the status
of their accounts and how to update
their account information.
(vi) Controlling Judicial or
Administrative Mandate
555. We also adopt an exception to
our permanent rules regarding the
disposition of funds in inactive
accounts that allows a provider to
dispose of funds in inactive accounts in
compliance with a controlling judicial
or administrative mandate. Our interim
rules included an identical exception,
which the Commission proposed to
retain in 2022, and was supported in the
record. We also update the definition of
‘‘controlling judicial or administrative
mandate’’ from the interim rules to
make clear that this exception to our
rules regarding the disposition of funds
in inactive accounts applies to all
incarcerated people’s communications
services now subject to our authority.
This revised definition encompasses
any final court order that requires an
incarcerated person to pay restitution,
any fine imposed as part of a criminal
sentence, and any fee imposed in
connection with a criminal conviction
to the extent that these payments are
required to be made from an account
that could be used to pay IPCS rates or
charges. The revised definition also
includes applicable state law
requirements, including, but not limited
to, requirements concerning unclaimed
property in such accounts. Finally, the
definition excludes from the scope of
our final rules acts taken pursuant to a
final court or administrative agency
order adjudicating a valid contract
between an IPCS provider and an IPCS
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
account holder, entered into prior to the
release date of the Report and Order,
that allows or requires the provider to
act in a manner that would otherwise
violate our rules regarding the
disposition of funds in inactive
accounts.
556. In 2022, we invited comment on
‘‘the ultimate disposition of unclaimed
funds in a debit calling or prepaid
calling account in circumstances where
a provider’s refund efforts fail and state
law does not affirmatively require any
particular disposition.’’ We conclude
that the provider’s inability to refund
money remaining in an inactive account
does not alter the account holder’s
entitlement to use them or ultimately
have them refunded as a matter of our
rules. Consequently, the account
holder’s preexisting entitlement to those
funds would be altered only where
controlling judicial or administrative
mandate or state law affirmatively
requires otherwise. Therefore, as
advocated by some commenters, we find
that if reasonable efforts by providers to
refund the funds in inactive accounts
fail, the ‘‘provider should be required to
treat remaining funds consistent with
applicable state law,’’ including
applicable state unclaimed property
laws. While some commenters urge us
to adopt specific unclaimed property
requirements to be applied at the state
level, we find compliance with state law
to be presumptively reasonable. We
note, however, concerns raised in the
record that providers will forum shop
for favorable unclaimed property laws
outside of the location where the
account holder resides. We find instead
that providers will be subject to the
standards the courts have articulated for
resolving choice-of-law questions
generally and rely on courts to address
abuse by providers regarding choice-oflaw matters.
H. Other Matters
1. Rule Revisions
557. In the Report and Order, we
revise our rules pursuant to the
direction of the Martha Wright-Reed
Act. In particular, we amend our rules
to make consistent use of the terms
‘‘incarcerated people’s communications
services,’’ ‘‘IPCS,’’ and ‘‘incarcerated
people,’’ as opposed to ‘‘inmate calling
services,’’ ‘‘ICS,’’ and ‘‘inmates,’’ terms
previously used in this proceeding. In
2023, the Commission proposed to
revise its rules to use the term
‘‘incarcerated people’s communications
services’’ or ‘‘IPCS’’ instead of ‘‘inmate
calling services’’ or ‘‘ICS’’ to refer to
‘‘the broader range of communications
services subject to the Commission’s
PO 00000
Frm 00104
Fmt 4701
Sfmt 4700
jurisdiction as a result of the [Martha
Wright-Reed] Act.’’ The Commission
also proposed to ‘‘change[ ] references to
‘inmates’ to ‘incarcerated people,’ ’’ as
public interest advocates urge. Nearly
all commenters addressing the subject
support these revisions. Indeed, several
commenters use the term ‘‘IPCS’’ in
place of ‘‘ICS’’ in their comments,
following the Commission’s proposed
approach. Additionally, we note that
these changes are consistent with and
advance the Commission’s goal of
digital equity for all.
558. Securus argues that the ‘‘the
replacement of ‘calling services’ with
the broader, and [in Securus’s view]
somewhat ambiguous term
‘communications services’ ’’ may
‘‘engender confusion.’’ Securus’s
concern appears to focus on ‘‘retaining
the distinction’’ between audio
communications and video
communications, ‘‘to avoid any
suggestion that they may be subject to
the same regulatory framework when in
fact they are quite different services.’’
Securus therefore suggests that we adopt
the terms ‘‘incarcerated calling services’’
and ‘‘incarcerated video services’’ to
refer to these respective types of
communications services. We are not
convinced that incorporating the term
‘‘incarcerated people’s communications
services’’ into our rules would have this
effect. First, the Act explicitly
contemplates a unified regulatory
framework for these services by granting
the Commission authority over ‘‘any
audio or video communications service
used by inmates.’’ The language of
section 276, as modified by the Act, also
refers to these types of services
collectively. Second, these respective
services share, to a substantial extent,
similar operating conditions as well as
being commonly subject to critical
aspects of our regulatory framework
(consistent with the Act), which
warrants the use of a single term that
encompasses all services under our
jurisdiction. To the extent that the
treatment of these two types of services
differ under our regulatory framework,
this distinction is effectively
encapsulated by our use of the terms
‘‘audio IPCS’’ and ‘‘video IPCS.’’
Accordingly, we revise our rules to
change all references to ‘‘inmate calling
services’’ or ‘‘ICS’’ to instead refer to
‘‘incarcerated people’s communications
services’’ or ‘‘IPCS,’’ respectively, and to
change all references to ‘‘inmates’’ to
‘‘incarcerated people.’’ We will,
however, continue to use the term
‘‘inmate calling services’’ or ‘‘ICS’’ to
refer to historic Commission actions in
WC Docket No. 12–375. We encourage
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
commenters and other participants in
this proceeding to adopt these changes
in their submissions going forward.
559. We also revise our rules to
incorporate terms used in the Martha
Wright-Reed Act and to implement our
actions in this Order. These revisions
include changes to certain definitions in
§ 64.6000 of our rules, and reflect the
extension of the application of our rules
to intrastate IPCS, the addition of new
rules addressing alternate pricing plans,
and changes to our disability access,
rate cap, ancillary service charge,
annual report and certification, inactive
account, and consumer rules.
2. Definitions of Prison and Jail
560. In 2022, the Commission sought
comment on modifying the definitions
of ‘‘Jail’’ and ‘‘Prison’’ in its rules ‘‘to
ensure that they capture the full
universe of confinement facilities’’ such
as civil commitment, residential, group
and nursing facilities. Two commenters,
the Accessibility Coalition and UCC
Media Justice, filed ex partes agreeing
that the Commission should expand the
definitions of ‘‘Prison’’ and ‘‘Jail’’ as
suggested. In addition, the Commission
sought comment on its authority to
apply the inmate calling services rules,
including those addressing
communications access for people with
disabilities, to these facilities. In
addition, the Commission asked
commenters to address whether
residents of such facilities are able to
access voice and other communications
services through providers of their own
choice, as opposed to being limited to
the providers selected by third parties.
In 2023, the Commission again invited
comment about whether to expand the
definitions of ‘‘Jail’’ and ‘‘Prison’’ to
include these facilities, or any
additional facilities, as part of the
definitions of ‘‘Jail,’’ ‘‘Prison,’’ or
‘‘Correctional Facility.’’
561. Numerous commenters support
expanding the definition of ‘‘Jail’’ to
cover ‘‘civil commitment facilities,
residential facilities, group facilities,
and nursing facilities in which people
with disabilities, substance abuse
problems, or other conditions are
routinely detained.’’ One commenter
urges the Commission to continue to
‘‘expand protections for vulnerable
populations subject to various forms of
detention.’’ Another asserts that ‘‘[j]ust
as incarcerated people with disabilities
in prisons and jails, as currently defined
in the Commission’s rules, face
inequitable access to communications
services, so too do those confined to
civil commitment facilities.’’ Two
commenters raise concerns that the
definition of ‘‘Jail,’’ as amended in the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
2022 ICS Order, ‘‘did not fully capture
the Commission’s intent to include
every type of facility where individuals
can be incarcerated or detained,’’ in
particular immigrations detention
facilities. Specifically, they point out
that, although the Commission
incorporated into its definition of ‘‘Jail’’
‘‘facilities used to detain individuals,
operated directly by the Federal Bureau
of Prisons or U.S. Immigration and
Customs Enforcement, or pursuant to a
contract with those agencies,’’ it failed
to include similar facilities operated by
Customs and Border Protection (CBP) or
the U.S. Marshals Service (USMS).
Given the similar nature of these
agencies and their corresponding
facilities, theses commenters urge us to
add detention facilities operated by, or
pursuant to a contract with, CBP or
USMS to the definition of ‘‘Jail’’ in our
rules.
562. Other commenters oppose
expanding our definition of ‘‘Jail’’ as
proposed. The National Sheriffs’
Association questions whether the types
of facilities the Commission sought
comment on including in its definition
of ‘‘Jail’’ fall within the scope of section
276 of the Act which applies to ‘‘the
provision of inmate telephone service in
correctional institutions.’’ One provider
argues that our IPCS regulations
‘‘should apply only to facilities that
contract with ICS providers to install
and maintain secure, corrections-type
communications systems.’’ The National
Sheriffs’ Association also contends that
‘‘it is unlikely that calling services in
[civil commitment, residential, group,
and nursing] facilities have the same
cost characteristics of providing calling
services in jails and prisons.’’
563. Consistent with the
Commission’s intention in the 2022 ICS
Order, we modify the definition of
‘‘Jail’’ to cover all immigration detention
facilities. This definition therefore
encompasses every immigration
detention facility operated by, or
pursuant to a contract with, ICE, CBP,
USMS, or any other federal, state, city,
county, or regional authority. This
modification to the definition of ‘‘Jail’’
addresses this unintended gap in our
rules and also follows the Martha
Wright-Reed Act’s directive that we
ensure ‘‘just and reasonable charges for
telephone and advanced
communications services in correctional
and detention facilities.’’
564. We decline at this time to make
further modifications to the definitions
of ‘‘Prison’’ and ‘‘Jail’’ in our rules.
While we agree with certain
commenters that individuals in certain
other facilities should benefit from the
protections of the IPCS rate caps and
PO 00000
Frm 00105
Fmt 4701
Sfmt 4700
77347
other rules we adopt here, based on the
current record, we find we lack
sufficient information and data to
address the issues raised in the record.
Given our lack of data, particularly on
the costs providers incur in providing
service in these types of facilities, we do
not find we have sufficient confidence
at this time that the rate caps we adopt
herein would fairly compensate
providers for providing service to such
facilities. We seek additional comment
on these issues in the attached Notice.
3. Annual Reporting and Certification
Requirement
565. Since 2013, the Commission has
required providers of communications
service to incarcerated people to file
certain pricing and related data and
information annually to promote
transparency and heighten providers’
accountability. These annual reports
enable the Commission and the public
to monitor pricing practices and trends
in the IPCS marketplace generally.
Pursuant to our rules, ICS providers
must file annual reports and
certifications by April 1 of each year.
The reports contain information and
data about the services provided for the
preceding calendar year, and an officer
or director of the provider must certify
that the information and data are
accurate and complete. We now modify
the scope and content of our annual
reports to reflect the Martha WrightReed Act’s expansion of Commission
jurisdiction over other communications
services in carceral facilities, including
video IPCS and other advanced
communications services, as well as
intrastate IPCS, and the providers that
offer these services.
a. Background
566. The Commission’s annual
reporting requirements for providers of
communications services to
incarcerated people have changed over
time reflecting the Commission’s
evolving perspective on the need for
marketplace data. The Commission first
adopted annual reporting and
certification requirements for providers
in its 2013 ICS Order. The information
and data required in the reports
included interstate and intrastate ICS
rates, ancillary service charges, and the
number of disconnected calls. An officer
or director was required to certify to the
accuracy of the data and information,
‘‘including the requirement that ICS
providers may not levy or collect an
additional charge for any form of TRS
call, and the requirement that ancillary
charges be cost-based.’’ The
Commission found that the certification
requirement would facilitate
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77348
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
enforcement and ensure that ICS
providers’ rates and practices were just,
reasonable, and fair, and in compliance
with that Order. The Commission
subsequently included additional
reporting requirements relevant to
industry oversight in 2015, and further
amended its rules in 2022 to require
data concerning various services for
individuals with disabilities. The
Commission added requirements to
report data on: (a) site commissions; (b)
the number of TTY-based ICS calls, the
number of those calls that were
dropped, and the number of complaints
related to ICS made by TTY and TRS
users; and (c) the usage, rates and
ancillary service charges for video
visitation services. In 2017, the D.C.
Circuit vacated the reporting
requirement for video visitation
services, considering the requirement
‘‘too attenuated to the Commission’s
statutory authority.’’ In the 2020 ICS
Order, the Commission removed
§ 64.6060(a)(4)—the paragraph that had
required ICS providers to submit data
on video visitation services. The
Commission required providers to
report the number of calls and number
of dropped calls for TTY-to-TTY ICS, for
direct video calls placed or received by
ASL users, and for each TRS available
at a facility, as well as the number of
complaints about dropped calls and
poor call quality for these services.
Additionally, the Commission
determined that it was no longer
necessary to collect data on dropped
calls, so it adopted the proposed
§ 64.6060(a)(5) to (6) without the
requirement to report on dropped calls,
and made a conforming modification to
§ 64.6060(a)(7) which requires reports
about complaints from TTY and TRS
users. The changes to the three
paragraphs, § 64.6060(a)(5) to (7), have
not yet gone into effect.
567. In the 2023 IPCS Order, the
Commission reaffirmed and updated its
prior delegation of authority to WCB
and Consumer and Governmental
Affairs Bureau (CGB) ‘‘to modify,
supplement, and update [the annual
reporting] instructions and . . .
template as appropriate to supplement
the information [it would] be receiving
in response to the Mandatory Data
Collection.’’ The Word and Excel
templates are FCC Form 2301(a), and
the certification is FCC Form 2301(b).
The Commission also ‘‘delegate[d] to
WCB and CGB the authority to conduct
the requisite Paperwork Reduction Act
analysis for any changes to the annual
report requirements that were
implemented pursuant to [the 2023
IPCS Order].’’ In the accompanying
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
2023 IPCS NPRM, the Commission
asked what rule changes or new rules
would be necessary to effectuate the
Martha Wright-Reed Act. No commenter
addresses possible changes to the
annual reporting and certification
requirement.
568. In the Aug. 3, 2023 IPCS Public
Notice, WCB and CGB proposed
revisions to the instructions and
templates for the annual reports and
annual certifications to implement the
Martha Wright-Reed Act and reflect the
changes that were adopted in the 2022
ICS Order. Commenters generally
supported the Commission’s efforts to
track trends in the IPCS marketplace as
long as the reporting requirements were
not unduly burdensome. However, one
commenter argued that it was premature
to require reports on video and the
expanded TRS obligations, because the
Commission had not adopted video
IPCS regulations, and the expanded TRS
regulations had not yet gone into effect.
In response, the Commission refrained
from adopting any changes to the
annual reporting requirements prior to
this Order. The Apr. 1, 2024 annual
reports and certifications used the same
forms as were used previously.
b. Discussion
569. We now modify our annual
reporting and certification requirements,
consistent with the Commission’s
expanded authority under the Martha
Wright-Reed Act, to include the full
scope of IPCS and all providers of IPCS.
These modifications will provide greater
visibility into the IPCS marketplace and
provide an objective foundation for
future Commission action to ensure
IPCS rates are just and reasonable and
IPCS providers are fairly compensated.
We also provide WCB and CGB the
flexibility to propose, seek comment on,
and adopt further revised requirements
in response to this Order and future
IPCS marketplace developments in a
timely fashion. Collectively, these
modifications to our annual reporting
requirements and our delegation of
authority to WCB and CGB to
implement these changes will enable
the Commission to better ensure it
meets its statutory directives.
570. First, we make several
modifications to the annual reporting
and certification rule. Specifically, we
revise § 64.6060(a) so the annual
reporting requirement now applies to
IPCS providers, rather than ICS
providers. Consistent with the revised
definition of IPCS, this change makes
providers of video IPCS and advanced
communications services not previously
covered by our IPCS rules subject to the
annual reporting and certification rule.
PO 00000
Frm 00106
Fmt 4701
Sfmt 4700
We also remove § 64.6060(a)(2) to (3)
which referred to ancillary service
charges and site commissions to reflect
the prohibition on those charges
adopted in this Order. We retain the
reporting requirements concerning TRS
and related communications services in
§ 64.6060(a)(5) to (7), but renumber
them as § 64.6060(2) to (4). These
requirements were originally adopted in
the 2022 ICS Order but have not yet
gone into effect. When these paragraphs
were adopted, the Commission found
that the annual reports would provide
‘‘valuable data showing to what extent
the [TRS-related] rules adopted [in that
order] are successfully implemented.’’
These requirements will allow us to
monitor incarcerated peoples’ access to
TRS and related communications
services. Finally, we modify the
certification requirement in § 64.6060(b)
to now include examples of several
executives of the provider that may
make the certification, and for
consistency. The current Annual
Reporting and Certification Instructions,
Word Template, Excel Template and
Certification Form were adopted by
WCB pursuant to authority delegated by
the Commission and after public
requests for comment and comment.
571. Next, we give WCB and CGB
flexibility in revising and updating the
annual reports, as necessary to provide
useful transparency into industry
practices and guide Commission efforts
to regulate the industry. We direct that
WCB pay particular attention to how
best to capture developments in the
rapidly changing, but nascent video
IPCS marketplace in updating the
requirements for the annual reports. We
also direct CGB to pay attention to not
only the availability of TRS, but growth
of both the user base and the use of TRS,
capturing data on the number of
individuals with disabilities who are
requesting access to the additional
forms of TRS in carceral facilities,
changes in the monthly minutes of use
for each type of TRS, and other useful
metrics. WCB and CGB therefore will be
able to respond to regulatory and
marketplace conditions more readily
than if every specific annual report
change needed to be adopted first by the
Commission. We direct WCB and CGB
to seek comment on and adopt all
necessary revisions to annual report
instructions, templates and
certifications consistent with past
practices. For example, on December 15,
2021, WCB released a Public Notice
proposing to revise the annual reports to
reflect rule amendments adopted in the
2021 ICS Order. After considering the
comments and replies submitted in
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
response to the Public Notice, WCB
adopted an order that revised the
instructions, reporting templates, and
certification. The instructions, reporting
template, and certification were made
available online.
572. We also reaffirm and update the
Commission’s prior delegation of
authority to WCB and CGB to revise the
annual reports. Accordingly, WCB and
CGB can modify, supplement, and
update the required contents of the
annual reports and the manner in which
they are to be submitted, including all
necessary instructions, templates and
the required certification form, to ensure
the reports reflect the Commission’s
expanded authority under the Martha
Wright-Reed Act and the other actions
taken in this Order. For example, this
delegation includes authority to WCB
and CGB to modify the annual reports
to include data and information
regarding the provision of TRS and
related communications services to
reflect the expanded requirements
adopted in the 2022 ICS Order, and our
removal of § 64.6060(a)(5) to (7) in this
Order. We further delegate authority to
WCB and CGB, independently or
collectively, to require IPCS providers to
submit information related to their IPCS
offerings and practices upon request, to
provide WCB and CGB flexibility to
monitor compliance with our rules in a
timely manner. Such requests for
information could result from
complaints being filed by providers or
by consumers, or on the Commission’s
or WCB’s own motion. In delegating
authority to WCB and CGB in this
regard, we do not directly or indirectly
limit or modify the otherwise-existing
authority delegated to the Enforcement
Bureau. We find that this delegation is
necessary because it is difficult in
advance to determine what information
will be needed on a case-by-case basis
by the Commission to decide whether
providers are in compliance with our
rules. Our delegations of authority to
WCB and CGB will be effective upon
publication of this Order in the Federal
Register, enabling WCB and CGB to
move expeditiously in modifying,
supplementing, and updating the
annual reports and certification for the
next reporting period and thereafter, to
facilitate the Commission’s
implementation of the Martha WrightReed Act and this Order. We also direct
the Bureaus to conduct and submit the
requisite Paperwork Reduction Act
analysis for any changes to the annual
report and certification requirements
that are implemented pursuant to this
Order.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
4. Reporting and Recordkeeping
573. Additional Data Collection. We
adopt an additional data collection
obligation to collect the data and other
information we will need to set
permanent rate caps for video IPCS,
reevaluate our rate caps for audio IPCS
if necessary, and learn more about
service quality, particularly the
prevalence of dropped calls or
communications. As the Commission
explained in the 2023 IPCS Order, the
Martha Wright-Reed Act contemplates,
among other things, the collection and
analysis of advanced communications
services’ costs and related data,
including for video communications,
among other information. The
Commission therefore directed WCB
and OEA to initiate an additional data
collection—the 2023 Mandatory Data
Collection—to obtain the data and other
information needed to implement the
statute. Also, the record in this
proceeding indicates that poor IPCS
quality of service is a recurring issue.
Therefore, in the accompanying Notice,
we seek comment on adopting IPCS
quality of service standards. Collecting
more-detailed information about service
quality, for example the frequency of
dropped calls or communications,
responds to concerns in the record and
will help inform any future action the
Commission may take regarding IPCS
quality of service. We conclude that an
additional data collection will be
needed to set permanent rate caps for
video IPCS and to update audio IPCS
rate caps if necessary, including, as
applicable, for the smallest size tier of
jails. We therefore delegate to WCB and
OEA the authority to conduct this data
collection and direct them to structure
an additional data collection as
appropriate to enable us to accomplish
these tasks.
574. In designing and structuring this
additional data collection, WCB and
OEA should consider how best and
when to collect data that demonstrate
the evolving nature of the video IPCS
marketplace. As our rate cap analysis
recognizes, the video IPCS data from the
2023 Mandatory Data Collection reflect
conditions typical of a nascent market,
including relatively high initial
investment costs and relatively low
initial demand. We anticipate that, as
the video IPCS marketplace evolves,
per-unit costs of providing video IPCS
will fall significantly—a factor that we
take into account in setting our interim
rate caps for video IPCS. Given the
importance of ensuring that the rate
caps for video IPCS are just and
reasonable and fairly compensatory over
the longer term, WCB and OEA should
PO 00000
Frm 00107
Fmt 4701
Sfmt 4700
77349
collect not just updated data on video
IPCS costs and demand, but also (to the
extent practicable) how those costs and
demand might change over time. In the
2023 Mandatory Data Collection the
Commission sought information on the
‘‘number of complaints regarding
problems experienced with disabilityrelated calls.’’ We now give WCB and
OEA the flexibility to add more
generally applicable questions regarding
IPCS quality of service to the next data
collection.
575. Consistent with the above, we
reaffirm the Commission’s prior
delegation of data collection authority to
WCB and OEA to conduct an additional
data collection to collect detailed data
and other information, at the provider,
contract and facility level, on audio and
video IPCS from all providers subject to
our expanded authority under the
Martha Wright-Reed Act and the
Communications Act. As part of their
review of the providers’ submissions in
response to the additional collection,
WCB and OEA should evaluate whether
our permanent rate caps for audio IPCS
remain just and reasonable and fairly
compensatory. To allow for consistent
data reporting, we direct WCB and OEA
to make any appropriate modifications
to the template and instructions for the
2023 Mandatory Data Collection. We
also grant WCB and OEA authority to
determine the timing and scope of the
data collection, provided that such
collection shall be conducted as soon as
practicable understanding the need to
ensure that the Commission obtains data
representative of a more mature video
IPCS marketplace and an audio IPCS
marketplace that has fully adapted to
our actions in this Order. As part of
their review of providers’ submissions,
WCB and OEA may require any
provider to clarify and supplement its
response to the data collection where
appropriate to enable a full and
meaningful evaluation of the providers’
cost, demand, and revenue data and
costing methodology.
576. No Recurring Data Collection.
We decline, at this time, to adopt a
recurring data submission obligation for
IPCS providers, as suggested in 2020
and 2021. The Commission invited
comment on whether it should conduct
data collections on a more routine,
periodic basis, as opposed to relying on
ad hoc data collections. While we agree
with several commenters that a
recurring data collection would
potentially aid us in ensuring that IPCS
rates and charges remain just and
reasonable and fairly compensatory, we
find that the burdens of a recurring data
collection on providers would exceed
any potential benefits. We also find that
E:\FR\FM\20SER2.SGM
20SER2
77350
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
the information we will obtain from our
additional data collection, coupled with
the information to be provided in the
IPCS Annual Reports as revised
pursuant to this Order, will allow us to
respond to any changes in the IPCS
marketplace in a timely manner without
unduly burdening IPCS providers. We
therefore conclude that, on balance, a
recurring collection is not warranted at
this time.
577. No Accounting Requirements.
We also decline, at this time, to impose
accounting requirements on IPCS
providers, as suggested in 2021. In that
Notice, the Commission sought
comment on specific types of
accounting requirements that may be
useful if it were to adopt a recurring
data collection. Given that we decide
not to adopt recurring data collections,
we also conclude that we should refrain
from imposing accounting requirements
on IPCS providers at this time.
ddrumheller on DSK120RN23PROD with RULES2
5. Payphones Outside the Incarceration
Context
578. We decline, at this time, to adopt
new rules applicable to the provision of
payphones outside the incarceration
context. In 2023, the Commission
observed that certain amendments that
the Martha Wright-Reed Act made to
section 276 of the Communications Act
apply to payphones generally, including
traditional payphones used outside the
incarceration context. The Commission
invited comment on whether section
3(a) of the Martha Wright-Reed Act
required the adoption of new
regulations applicable to traditional
payphone services. In response, one
commenter stated that the Commission
did not need to address its traditional
payphone compensation rules in this
proceeding, but urged us to revisit our
traditional payphone rules generally in
a separate proceeding. We find that no
modifications to our traditional
payphone rules are necessary to
implement the Martha Wright-Reed Act
and its amendments to the
Communications Act, and therefore
decline to address those regulations in
this proceeding.
6. Cost Benefit Analysis of Revised
Interstate and Intrastate Rate Caps
579. We perform an analysis of the
relative costs and benefits of
establishing revised, final rate caps for
audio IPCS and new interim rate caps
for video IPCS, and find that the
benefits of our actions greatly exceed
their cost. As in the 2021 ICS Order, we
proceed by outlining the nonquantifiable but significant benefits to
incarcerated persons and their families,
the quantifiable benefits of expanded
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
audio and video communications, and
the likely implementation costs of our
actions.
580. Expected Non-Quantifiable
Benefits. In the 2021 ICS Order, the
Commission detailed the vast, but
difficult-to-quantify, benefits of
expanded incarcerated people’s calling
at lower IPCS rates, including
maintaining incarcerated people’s
mental health, facilitating reentry, and
improving the health and well-being of
incarcerated people’s families. We
enlarge and extend all of these benefits
as we again lower rate caps for interstate
calls and mandate new, lower rate caps
for intrastate and international calls, as
well as video calls across all
jurisdictions. Although we do not alter
the termination component that can be
added to the interstate rate cap in the
case of international calls, because we
are lowering the interstate rate cap that
serves as the foundation for
international rates, we anticipate an
effective reduction in international rates
as a result. Although we make no
change to our rule allowing providers to
add an amount to the rate caps to defray
the costs of terminating international
calls, because we are lowering the
interstate rate caps that serve as the
foundation for the international rate
caps, we anticipate an effective
reduction in international audio rates.
581. Expected Quantitative Benefits of
Expanded Call and Video Volumes. In
the 2021 ICS Order, staff used available
empirical evidence to estimate the
responsiveness of incarcerated people’s
calling volumes to changes in inmate
calling services rates, known as the
price elasticity of demand for calling
services. The available estimates led the
Commission to conclude,
conservatively, that inmate calling
services have a demand elasticity of at
least 0.3. No commenter disputed our
elasticity estimate or the methodology
underlying it. For the sake of
consistency and simplicity, we continue
to rely on this demand elasticity
estimate and apply the same demand
elasticity to audio and video
incarcerated people’s communications
service. By the same token, we continue
to rely on the conclusion drawn in the
2021 ICS Order that the incremental
per-unit cost of audio IPCS is likely less
than $0.01, and may be de minimis. A
similar principle applies to video IPCS,
where many of its direct costs are also
‘‘independent of the need to carry
additional call minutes,’’ especially
given its proportionally greater share of
capital expenses versus operating
expenses. Thus, although video IPCS
exhibits greater costs per minute than
audio IPCS, the incremental per-unit
PO 00000
Frm 00108
Fmt 4701
Sfmt 4700
costs of both services should be less
than their average costs—such that the
increased demand driven by a reduction
in prices should, holding other factors
equal, reduce providers’ average costs
for both audio and video IPCS.
582. The new, lower IPCS rate caps
fall across two broad categories of call
traffic—audio and video. The new rates
for audio are: $0.06 per minute for
prisons, $0.06 per minute for large jails,
$0.07 per minute for medium-size jails,
$0.09 per minute for small jails, and
$0.12 per minute for very small jails.
The new rates for video are: $0.16 per
minute for prisons, $0.11 per minute for
large jails, $0.12 per minute for
medium-size jails, $0.14 per minute for
small jails, and $0.25 per minute for
very small jails. Our benefit estimation
methodology for the new rate caps
differs slightly from that used in the
2021 ICS Order. Previously, staff
estimated welfare gains using the
difference between the previous interim
interstate rate caps and the then new,
lower interim, interstate rate caps. The
current rate structure in the IPCS
industry is more complex. Some
interstate IPCS traffic subject to the rate
caps is priced below the caps, while the
price of intrastate, international, and
video IPCS call traffic that was
previously beyond the reach of our rate
caps can vary widely. To capture this
complexity, we measure the welfare
gains from increased call volumes using
the difference between existing
weighted average revenue per unit
(ARPU) for the different call-traffic
categories and the new rate caps. Staff
computed the average revenues per unit
(ARPUs) by dividing the total billed
revenue for each type of traffic at each
size facility by total billed minutes to
yield average revenue per minute for
intrastate audio calls for prisons,
average revenue per minute for
intrastate calls at large jails, and so on,
enabling the compilation of a complete
list of rate categories by traffic and
facility type. Staff then computed
percentage changes in price and
quantity for each rate category using the
differences between the ARPUs and the
rate caps and our price elasticity. The
net welfare gain (loss) is the gain (loss)
in IPCS consumer surplus not captured
by IPCS service providers. We divide
2022 billed revenues by billed minutes
to determine the effective rate for IPCS,
or ARPU. We then compare this
effective rate to the new rate cap for
IPCS to determine the change in price,
because going forward billed customers
will be billed a rate equal to this rate
cap (assuming the provider sets its rate
at the cap). We assume site commissions
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
the benefits and costs accruing to
different groups when estimating
aggregate net benefits. To determine the
weights, OMB recommends a constant
elasticity for subgroups defined by
income. The weight for each group is:
Wi = (Ii/IUS)-g where Wi is the weight for
subgroup i, Ii is the median income for
subgroup i, IUS is the U.S. median
income, and g is the absolute value of
the elasticity of marginal utility. Based
on an average gleaned from the
empirical literature, OMB recommends
a constant elasticity of marginal utility
of 1.4. The impact of this could be large.
Analyzing Bureau of Justice Statistics
2014 survey data for the month just
prior to incarceration, researchers for
the Prison Policy Initiative estimated a
2014 median annual income of $19,185
for incarcerated persons. U.S. median
individual income for 2014 was
$28,760. The resulting weight for
incarcerated people’s welfare gains is
1.76 (= ($19,185/$28,760)¥1.4), meaning
that every dollar in welfare gain directly
attributable to incarcerated people was
worth $1.76 in 2014. If incarcerated
people share equally in the total
estimated net welfare gain, then about
$12 million, or half, of the estimated
$24 million is directly attributable to
them, as opposed to friends and
families. At the same time, if the average
income of families and friends of
incarcerated persons was that of the
average American, then, under these
assumptions, the net welfare gain is
effectively worth about $33 million (=
($12 million * 1.76) + $12 million = $21
million + $12 million). This is likely an
underestimate, as the average income of
the families and friends of incarcerated
persons is likely below the national
average, but we do not know what this
average is.
584. Other Quantitative Benefits. In
the 2021 ICS Order, the Commission
are only paid to the extent they do not
result in rates that exceed our caps.
With this methodological change, we
estimate a total net welfare gain to
incarcerated persons and their friends,
families, and legal teams of about $386
million. Of this, $362 million is a
transfer from correctional facilities and
providers, leaving $24 million as a
welfare gain from which
implementation costs must be
subtracted. Unsurprisingly, the largest
contribution of $12.5 million is from
intrastate audio calls (5.6 billion
minutes), not currently subject to rate
caps, followed by: $7.8 million from
interstate audio (4.8 billion minutes);
$2.9 million from video (407 million
minutes); and $0.5 million from
international audio (54 million
minutes). We do not separately estimate
welfare gains for video IPCS by
jurisdiction because providers do not
have a way to reliably record the
jurisdiction associated with a video
communication. Further, nothing in the
record suggests providers charge video
IPCS rates that vary by jurisdiction. As
a matter of practice, providers charge a
single rate without regard to the
communication endpoint. The present
value of a five-year stream of $24million worth of benefits at a two
percent discount rate exceeds $113
million.
583. Benefits Weighted By Income
Strata. Weighting according to OMB
guidelines greatly increases the welfare
gain. OMB Circular A–4 enables us to
weight the benefits distributed to
incarcerated persons by the ratio of
median incarcerated people’s income to
the U.S. median income, raised to the
negative power of the absolute value of
the elasticity of income. To account for
the diminishing marginal utility of
goods and income, the revised circular
suggests that agencies apply weights to
77351
estimated that expanded inmate calling
services call volumes at the lowered
interstate rate caps would help curtail
recidivism, saving the U.S. economy
$23 million over ten years and reducing
costly foster-child placements. While
we are certain that lowering IPCS rate
caps further will increase these cost
savings, we elect not to proffer precise
estimates here, partly to avoid doublecounting previous estimates.
585. Costs of Reducing Rates for
Interstate, Intrastate, and International
Incarcerated People’s Communications
Services. In the 2021 ICS Order, the
Commission estimated that the cost of
contract revisions needed to implement
reduced interstate inmate calling
services rates would total approximately
$6 million. Adjusting for inflation, the
industry cost for the same set of contract
revisions—simultaneously lowering
interstate, intrastate, and international
incarcerated people’s communications
services rates—would be about $7
million as of April 2024. Lowering
video calling rates, which we
conservatively assume are contracted
separately, would entail another $7
million in costs. We, therefore, estimate
total implementation costs of $14
million.
586. Comparison of Benefits and
Costs. The benefits of lowering IPCS
interstate rate caps and extending IPCS
rate caps to intrastate and international
audio and video call traffic far exceed
the accompanying costs. Without either
weighting by income strata or summing
and discounting future benefits, readily
quantifiable benefits exceed costs by
$10 million (= $24¥$14) in the
inaugural year. Weighting by income
strata and summing and discounting
future benefits further increase the value
of benefits relative to costs.
TABLE 1—AUDIO AND VIDEO CALL TRAFFIC
Intrastate
Interstate
International
Rate cap
Minutes
ARPU
Gain
Minutes
ARPU
Gain
Minutes
ARPU
Gain
ddrumheller on DSK120RN23PROD with RULES2
Audio Call Traffic
Prisons, $0.06 ........................................
Large Jails, $0.06 ..................................
Medium Jails, $0.07 ...............................
Small Jails, $0.09 ..................................
Very Small Jails, $0.12 ..........................
3,095,089,972
878,094,584
850,607,843
587,159,107
207,201,790
$0.060
0.099
0.154
0.182
0.180
$884
1,990,573
5,798,496
4,094,384
628,327
3,179,735,362
686,852,024
640,947,740
243,197,254
72,774,874
$0.070
0.102
0.144
0.173
0.180
$704,910
1,761,431
3,635,531
1,461,041
217,658
34,290,298
4,767,832
10,718,912
3,373,724
743,867
$0.147
0.174
0.158
0.250
0.264
$266,659
53,188
79,202
51,747
8,743
Total ................................................
5,618,153,296
..............
12,512,663
4,823,507,254
..............
7,780,571
53,894,633
..............
459,539
0.257
0.230
0.273
0.292
0.294
471,462
567,352
1,597,262
1,257,099
30,692
Frm 00109
Fmt 4701
Video Call Traffic
Prisons, $0.16 ........................................
Large Jails, $0.11 ..................................
Medium Jails, $0.12 ...............................
Small Jails, $0.14 ..................................
Very Small Jails, $0.25 ..........................
VerDate Sep<11>2014
17:27 Sep 19, 2024
85,787,195
60,592,954
123,936,702
105,461,580
31,454,733
Jkt 262001
PO 00000
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
77352
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
TABLE 1—AUDIO AND VIDEO CALL TRAFFIC—Continued
Intrastate
Interstate
International
Rate cap
Minutes
Total ................................................
407,233,163
ddrumheller on DSK120RN23PROD with RULES2
7. Effective Dates and Compliance Dates
587. Our reforms eliminating site
commissions and our new permanent
audio and interim video rate caps will
take effect 60 days after notice of them
is published in the Federal Register, but
compliance with those reforms will be
required on a staggered basis, as set
forth below:
• January 1, 2025 for all prisons and
for jails with average daily populations
of 1,000 or more incarcerated people,
and April 1, 2025 for jails with average
daily populations of less than 1,000
incarcerated people, subject to the
following special provisions:
• Where a contract existing as of June
27, 2024 includes terms and conditions
that would require material alteration
through renegotiation due to a conflict
with our new rules involving rates,
contractually prescribed site
commissions, or passthrough charges
included in the rates, and the contract
expires on or after January 1, 2025 for
prisons and for jails with average daily
populations of 1,000 or more
incarcerated people, or on or after April
1, 2025 for jails with average daily
populations of less than 1,000
incarcerated people, the compliance
dates will be the earlier of the contract
expiration date or January 1, 2026 for
prisons and for jails with average daily
populations of 1,000 or more
incarcerated people, or the earlier of the
contract expiration date or April 1, 2026
for jails with average daily populations
of less than 1,000 incarcerated people.
We choose a date certain, which is the
date of public draft of the Report and
Order. The public draft version set forth
the Commission’s new IPCS rate caps
and site commission reforms, none of
which have changed since that time. For
purposes of the Report and Order, a
contract expires after the expiration of
its initial term in the contract without
regard to any automatic extensions that
might extend its validity.
• Where a contract existing as of June
27, 2024 includes terms and conditions
that would require renegotiation due to
a provision incorporating legally
mandated site commission payments
and the contract expires on or after July
1, 2025 for any size facility, the
compliance date will be the earlier of
the contract expiration date or April 1,
2026. To the extent any contract
VerDate Sep<11>2014
17:27 Sep 19, 2024
ARPU
Jkt 262001
..............
Gain
Minutes
ARPU
Frm 00110
Minutes
ARPU
Gain
2,885,053
referenced here includes provisions that
trigger automatic changes to contract
terms in response to changes in the
regulatory environment or, more
specifically, changes in the
Commission’s rules such that
renegotiation of contract terms would
not be required, the compliance date
extensions referenced in this paragraph
do not apply.
588. These timeframes recognize that,
as a general matter, IPCS providers,
governmental officials, and correctional
officials may need additional time
beyond January 1, 2025 or April 1, 2025
(depending on the type of facility and
the terms of the contract) to renegotiate
contracts in response to our actions
today. They also recognize that jails
with average daily populations below
1,000 may need more time than prisons
and larger jails to implement the
Commission’s new IPCS rate caps and to
transition away from site commission
payments, particularly since the smaller
facilities were largely not impacted by
the Commission’s 2021 interim rate cap
reforms. The reforms applicable to jails
with average daily populations of less
than 1,000 adopted in the 2021 ICS
Order were relatively modest, with ‘‘the
only rate cap change’’ being a reduction
of per-minute charges for collect calls
from $0.25 to $0.21 per minute. In
addition, by delaying the compliance
date of our site commission and rate
caps reforms at those correctional
facilities where providers currently pay
legally mandated site commissions, we
recognize that more time may be needed
to accommodate the legislative process
to amend state or local laws and
regulations that currently require site
commission payments.
589. We conclude that the compliance
dates we adopt for our new audio and
video rate caps and site commission
reforms ‘‘strike[ ] a reasonable balance
between [ ] competing interests.’’ On the
one hand, we recognize the need to
‘‘help alleviate the burden of
unreasonably high . . . rates on
incarcerated people and those they
[communicate with].’’ On the other
hand, and as the Commission has
previously recognized, IPCS providers
and correctional officials ‘‘will need
more than 30 days to execute any
contractual amendments necessary to
implement the new . . . rate caps and
PO 00000
Gain
Fmt 4701
Sfmt 4700
otherwise adapt to those caps.’’ And
smaller facilities likely need more time
than larger facilities to implement rate
cap and other changes. Furthermore, we
recognize that those facilities where
IPCS providers currently pay legally
mandated site commissions may likely
need additional time to come into
compliance with our reforms. Thus,
requiring compliance with the
Commission’s rate cap and site
commission reforms on a staggered basis
properly balances the need for
expedited reform contemplated by the
Martha Wright-Reed Act with the need
to allow IPCS providers and correctional
facilities sufficient time to adapt to our
rules.
590. Except for those facilities where
IPCS providers pay legally mandated
site commissions, for prisons and jails
with ADPs of 1,000 or more, we find
that there will be ample time between
adoption of this Order and January 1,
2025 for such prisons and jails with
existing contracts expiring before the
end of this year to comply with today’s
reforms and that the possible extension
of this compliance date to January 1,
2026 as outlined above will be more
than sufficient to accommodate the
contract renegotiation process. In the
2021 ICS Order, the Commission
established a 90-day transition period
following Federal Register publication
for all facilities. The Commission also
adopted a 90-day transition period for
prisons in connection with
implementing the reforms in the 2015
ICS Order. One provider supports
adopting a 90-day transition period.
Here, given the comprehensive nature of
the reforms we adopt to rate caps and
site commissions, we adopt a transition
period of slightly more than five months
from the adoption date of the Report
and Order and we permit additional
time based on the extent there are
existing contracts as of June 27, 2024
that require renegotiation due to a
conflict with our new rules. This will
allow providers and facilities
significantly longer than the 30-day
timeframe the Commission has
previously recognized would be
necessary to amend IPCS contracts.
591. We also find that delaying the
compliance date of our rate caps and
site commission reforms for jails with
ADPs below 1,000 except at those
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
correctional facilities where IPCS
providers pay legally mandated site
commissions until April 1, 2025 or, in
the alternative, until April 1, 2026 as
described above, will afford IPCS
providers and correctional officials
sufficient extra time to adapt to these
new rules. In the IPCS context, the
Commission’s use of the term ‘‘smaller’’
is focused on average daily population,
and ‘‘is not meant to imply’’ that such
facilities ‘‘are small in any absolute
sense.’’ Here, we delay the compliance
date of our rate cap and site commission
reforms for correctional facilities with
average daily populations below 1,000
except at those correctional facilities
where IPCS providers pay legally
mandated site commissions by slightly
more than eight months from the date of
adoption of the Report and Order,
which, to the extent there are existing
contracts as of June 27, 2024 that require
renegotiation due to a conflict with our
new rules, can be extended. These
timeframes will be more than sufficient
to ensure that IPCS providers and
correctional facilities are able to amend
their contracts to account for our
reforms today.
592. Recent experience at the state
level suggests that IPCS providers and
correctional facilities should be able to
adapt to regulatory changes in the
allotted timeframes. For example,
Massachusetts recently made IPCS free
to consumers, and in doing so the state
gave the industry and the state’s prisons
and jails less than five months to
implement those changes—from July 31,
2023 to December 1, 2023—to account
for budgetary impacts. On July 31, 2023,
the Massachusetts legislature enacted a
bill requiring unlimited free phone calls
to incarcerated people retroactive to July
1, 2023, as part of the state’s
appropriations bill for Fiscal Year 2024.
The free calling bill, H.4052, was
enacted as sections 50, 85, and 111 of
the appropriations bill, H.4040. The
governor returned portions of the
appropriations bill, including the
portions relating to free calling for
incarcerated people noting that making
those provisions retroactive to July 1
‘‘pos[ed] serious implementation
challenges’’ and were also
‘‘underfunded by $20M in the budget.’’
The governor thereafter proposed that
the effective date be delayed to
December 1, 2023, which would avoid
‘‘the need for retroactive
reimbursements, provide[ ] time for the
Department of Corrections and the
Sheriff’s Departments to manage vendor
contracts more effectively, and
address[ ] fiscal challenges while also
ensuring that families will be able to
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
connect with their incarcerated loved
ones during the holiday season.’’ The
Massachusetts legislature eventually
reenacted the free calling bill with a
December 1, 2023 effective date and the
governor signed it on November 15,
2023. While one commenter advocates
for a phase-out of site commission
payments, partially in recognition of the
fact many local governments continue to
rely on site commission revenues, other
commenters argue that implementing
changes ‘‘should be a relatively easy and
straightforward process’’ such that a
more immediate compliance date might
be appropriate. We find, on balance,
that the record supports a longer
transition period for smaller jails. The
timeframe we adopt for smaller facilities
is more generous than the timeframes
the Commission has adopted for such
facilities previously. Insofar as the
transition we adopt for smaller jails
today is longer than previous transitions
the Commission has adopted, we are
persuaded that this additional time is
necessary but sufficient for both IPCS
providers and correctional officials to
adapt to our rules while also ensuring
the most expeditious relief possible for
incarcerated people and their loved
ones, consistent with the Martha
Wright-Reed Act.
593. For all correctional facilities
where IPCS providers currently pay
legally mandated site commissions, we
conclude that a longer transition period
is justified such that compliance with
our site commission reforms and our
new rate caps will be required by July
1, 2025 unless a contract existing as of
June 27, 2024 includes terms and
conditions that would require
renegotiation due to a provision
incorporating legally mandated site
commission payments and the contract
expires on or after July 1, 2025, in
which case the compliance date will be
the earlier of the contract expiration
date or April 1, 2026. For such facilities,
in addition to any additional time
necessary to facilitate contract
renegotiation where applicable,
additional time is also necessary to
accommodate states’ and localities’
legislative and budgetary processes to
make the adjustments necessary to
comply with the Report and Order,
including by amending or repealing
relevant laws pursuant to state or local
statutes or other formal legal processes.
Because such processes may involve
more than amending IPCS contracts, we
expect that July 1, 2025 or, if applicable,
April 1, 2026, will afford sufficient time
for all parties involved to make the
necessary legislative and contractual
arrangements sufficient to implement
PO 00000
Frm 00111
Fmt 4701
Sfmt 4700
77353
our reforms. This determination is
distinct from the actions we take today
in preempting state and local laws or
regulations that require or allow site
commission payments. We provide this
extra time for state and local authorities
to comply with legal or administrative
processes that may be required to repeal
existing laws or regulations. The lack of
such a process does not negate our
preemption actions in connection with
site commission payments.
594. We disagree that we should delay
our compliance dates for site
commission reform, in particular,
beyond the timeframes established
herein. We note that PPI’s comments
were made prior to the enactment of the
Martha Wright-Reed Act, which gave
the Commission authority over
intrastate communications. Given that
development and the fact that our
reforms today sweep broadly to apply to
all communications over which we now
have jurisdiction, including intrastate
communications, we conclude that the
opportunities for the kind of arbitrage
identified by PPI to be greatly reduced.
IPCS providers and correctional
authorities have been on notice since at
least the 2014 ICS Notice that the
Commission might eliminate site
commissions. Against that regulatory
backdrop, to the extent IPCS providers
and correctional authorities have
continued to rely on revenues from site
commissions, they have done so at their
own risk. In addition, as discussed
above, a number of jurisdictions have
eliminated site commissions, which
presumably triggered state budgetary
processes to account for the lost
revenues. Our extended implementation
deadlines here attempt to account for
these state and local budgetary
processes to the extent possible. Any
further delays in requiring compliance
with our rate cap and site commission
reforms risks perpetuating unjust and
unreasonable rates and charges for IPCS
consumers or yielding unfair
compensation for IPCS providers,
contrary to the directives of the Martha
Wright-Reed Act. Section 276(b)(1)(A) of
the Communications Act, as amended
by the Martha Wright-Reed Act, directs
the Commission to establish a
compensation plan to ensure IPCS
providers are ‘‘fairly compensated’’ and
that ‘‘all rates and charges are just and
reasonable.’’
595. Other Deadlines. Except for rules
and requirements subject to OMB
review under the Paperwork Reduction
Act, all other rules and requirements
adopted in this Order also will take
effect 60 days after notice is published
in the Federal Register, except the
removal of § 64.6090, which will not
E:\FR\FM\20SER2.SGM
20SER2
77354
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
take effect until other rules requiring
OMB review take effect. These
timeframes are consistent with the terms
of the Martha Wright-Reed Act, which
requires the Commission to promulgate
regulations necessary to implement the
Act not earlier than 18 months and not
later than 24 months after the date of
enactment. Martha Wright-Reed Act
§ 3(a). Section 64.6090 prohibits flat-rate
calling and will be removed to permit
the offering of alternate pricing plans.
With regard to reforms other than those
related to our new rate caps and site
commission prohibition that are not
subject to the PRA, such as our rules
pertaining to the seizing of balances in
inactive accounts by providers, we find
that making these changes effective 60
days after notice is published in the
Federal Register best balances the need
to bring these important, pro-consumer
rules into effect expeditiously while
affording IPCS providers sufficient time
to implement any changes necessary to
comply with our rules. Unlike our rate
cap and site commission reforms, which
may take longer to implement due to the
need for contractual amendments or
municipal budget adjustments, we do
not view these other reforms as
involving similar complexities such that
a longer effective date period is
necessary.
596. Our delegations of authority to
WCB and CGB to revise the annual
reports will be effective upon
publication of the Report and Order in
the Federal Register, as will our
delegations of authority to WCB and
OEA to conduct an additional data
collection.
8. Enforcement
597. We will be vigilant in monitoring
compliance with the reforms we adopt
today and will take action to vigorously
enforce our rules where appropriate.
Compliance with the Commission’s
IPCS rules is essential to ensuring that
incarcerated people and their loved
ones receive the full range of benefits
resulting from today’s reforms. As NCIC
illustrates, certain providers took
advantage of our prior regulatory regime
to engage in practices or other behavior
in contravention of our rules. Robust
enforcement is therefore necessary. To
that end, we direct the Enforcement
Bureau to work with CGB to develop a
new IPCS complaint category, in
addition to the existing informal
consumer complaint process, within its
existing intake system to ensure that
IPCS industry providers, watchdogs,
and other stakeholders have a
mechanism for CGB to immediately
bring any potential rule violations to the
Enforcement Bureau’s attention for
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
investigation. We clarify that informal
IPCS-related consumer inquiries and
complaints should continue to be made
to CGB, using established practices and
procedures. Should the Commission
observe or be made aware of practices,
conduct, or other behavior that evades
or is designed to evade our rules, we
will not hesitate to take appropriate
remedial action up to and including
enforcement action, which may subject
IPCS providers to, among other
penalties, the imposition of monetary
forfeitures. Thus, practices such as price
gouging through, for example, charging
rates above our rate caps, imposing
ancillary service charges, or attempting
to recover costs associated with the
payment of site commissions, whether
monetary or in-kind, through regulated
rates may subject IPCS providers to
investigation by the Commission’s
Enforcement Bureau and enforcement
action. Similarly, practices that deprive
consumers of funds in their IPCS
accounts, circumvent the safeguards we
adopt today governing alternate pricing
plans or the Commission’s disability
access rules pertaining to IPCS may also
subject IPCS providers to investigation
and enforcement action by the
Enforcement Bureau. At the same time,
IPCS providers and other stakeholders
are encouraged to provide the
Commission with information at any
time, whether through an informal
complaint or otherwise, regarding
attempts to skirt our rules or possible
violations of our rules. In addition, the
Commission will monitor providers’
annual reports, which are due April 1
each year, for developments that may
suggest noncompliance with our rules.
Close scrutiny of these and other
practices and behaviors, including
through enforcement action where
appropriate, will ensure that the reforms
we adopt today are fully implemented.
I. Severability
598. The rules and policies adopted in
this Order are designed to ensure that
the rates and charges for IPCS are both
just and reasonable for consumers and
provide fair compensation for providers,
in accordance with section 276, as
amended by the Martha Wright-Reed
Act, along with section 201(b) of the
Communications Act. Other rules and
policies seek to improve
communications services for
incarcerated people with disabilities.
Each of the separate reforms we
undertake here serves a particular
function towards these goals. Therefore,
it is our intent that each of the rules and
policies adopted herein shall be
severable. If any of the rules or policies
is declared invalid or unenforceable for
PO 00000
Frm 00112
Fmt 4701
Sfmt 4700
any reason, the unaffected rules shall
remain in full force and effect. We find
premature ViaPath’s request that we
make clear that the rules and policies
we adopt that are ‘‘related to IPCS rates
and charges’’ are not severable from
each other. In the unlikely event any of
those rules or policies is declared
invalid or unenforceable, interested
parties are free to bring the matter to our
attention or raise such arguments in
court, as appropriate.
IV. Procedural Matters
599. Final Regulatory Flexibility
Analysis. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), the Commission has prepared a
Final Regulatory Flexibility Analysis
(FRFA) relating to the Report and Order
and this Order on Reconsideration,
Clarification and Waiver. The FRFA is
set forth in below.
600. Congressional Review Act. The
Commission has determined, and the
Administrator of the Office of
Information and Regulatory Affairs,
Office of Management and Budget,
concurs that this rule is ‘‘major’’ under
the Congressional Review Act, 5 U.S.C.
804(2). The Commission will send a
copy of this 2024 IPCS Order and 2024
IPCS Notice to Congress and the
Government Accountability Office
pursuant to 5 U.S.C. 801(a)(1)(A).
601. Paperwork Reduction Act
Analysis. The 2024 IPCS Order may
contain new or modified information
collection requirements subject to the
Paperwork Reduction Act of 1995
(PRA), Public Law 104–13. All such
requirements will be submitted to the
Office of Management and Budget
(OMB) for review under Section 3507(d)
of the PRA. OMB, the general public,
and other federal agencies will be
invited to comment on any new or
modified information collection
requirements contained in this
proceeding. In addition, we note that
pursuant to the Small Business
Paperwork Relief Act of 2002, Public
Law 107–198, see 44 U.S.C. 3506(c)(4),
we previously sought specific comment
on how the Commission might further
reduce the information collection
burden for small business concerns with
fewer than 25 employees.
602. In this present document, we
have assessed the effects of the
information collection burdens imposed
on small businesses and, in particular,
businesses with fewer than 25
employees as a result of the Report and
Order. Those requirements include
consumer disclosure and inactive
account requirements. We find that
those requirements, including the
posting of certain information on
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
publicly available websites, do not
impose undue burdens on smaller
businesses. We also find that obligations
to collect and maintain consumer
information in order to refund inactive
account balances are commensurate
with the number of customers served
and therefore impose proportionate
burdens on smaller businesses given the
scale of their operations.
603. Providing Accountability
Through Transparency Act. Consistent
with the Providing Accountability
Through Transparency Act, Public Law
118–9, a summary of the 2024 IPCS
Order will be available on https://
www.fcc.gov/proposed-rulemakings.
604. OPEN Government Data Act. The
OPEN Government Data Act, requires
agencies to make ‘‘public data assets’’
available under an open license and as
‘‘open Government data assets,’’ i.e., in
machine-readable, open format,
unencumbered by use restrictions other
than intellectual property rights, and
based on an open standard that is
maintained by a standards organization.
Congress enacted the OPEN Government
Data Act as Title II of the Foundations
for Evidence-Based Policymaking Act of
2018. This requirement is to be
implemented ‘‘in accordance with
guidance by the Director’’ of the OMB.
OMB has not yet issued final guidance.
The term ‘‘public data asset’’ means ‘‘a
data asset, or part thereof, maintained
by the Federal Government that has
been, or may be, released to the public,
including any data asset, or part thereof,
subject to disclosure under [the
Freedom of Information Act (FOIA)].’’ A
‘‘data asset’’ is ‘‘a collection of data
elements or data sets that may be
grouped together,’’ and ‘‘data’’ is
‘‘recorded information, regardless of
form or the media on which the data is
recorded.’’ We delegate authority to the
Wireline Competition Bureau, in
consultation with the agency’s Chief
Data and Analytics Officer and after
seeking public comment to the extent it
deems appropriate, to determine
whether any data assets maintained or
created by the Commission pursuant to
the rules adopted in the 2024 IPCS
Order are ‘‘public data assets’’ and if so,
to determine when and to what extent
such information should be published
as ‘‘open Government data assets.’’ In
doing so, WCB shall take into account
the extent to which such data assets
should not be made publicly available
because they are not subject to
disclosure under the Freedom of
Information Act. See, e.g., 5 U.S.C.
552(b)(4), (6) to (7) (exemptions
concerning confidential commercial
information, personal privacy, and
information compiled for law
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
enforcement purposes, respectively). We
also seek comment in the 2024 IPCS
Notice on whether any of the
information proposed to be collected in
the Notice would constitute ‘‘data
assets’’ for purposes of the OPEN
Government Data Act and, if so,
whether such information should be
published as ‘‘open Government data
assets.’’
605. 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 and Governmental
Affairs Bureau at 202–418–0530.
606. Availability of Documents.
Comments, reply comments, and ex
parte submissions will be publicly
available online via ECFS.
607. Further Information. For further
information, contact Stephen Meil, at
(202) 418–7233 or Stephen.Meil@fcc.gov
or IPCS@fcc.gov.
V. Final Regulatory Flexibility Analysis
608. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), Initial Regulatory Flexibility
Analyses (IRFAs) were incorporated in
the Incarcerated People’s
Communications Services;
Implementation of the Martha WrightReed Act; Rates for Interstate Inmate
Calling Services, Notice of Proposed
Rulemaking (Notice) in WC Docket Nos.
23–62 and 12–375 (released in March
2023), in the Sixth Further Notice of
Proposed Rulemaking in WC Docket No.
12–375 (released in September 2022),
and in the Fifth Further Notice of
Proposed Rulemaking in WC Docket No.
12–375 (released in May 2021). The
Federal Communications Commission
(Commission) sought written public
comment on the proposals in those
Notices, including comment on the
IRFAs. No comments were filed
addressing the IRFA. This present Final
Regulatory Flexibility Analysis (FRFA),
relating to the Report and Order and the
Order on Reconsideration, Clarification
and Waiver (collectively, Report and
Order), conforms to the RFA.
A. Need for, and Objectives of, the
Report and Order
609. The Report and Order
implements the expanded authority
granted to the Commission by the
Martha Wright-Reed Act to establish a
compensation plan that ensures both
just and reasonable rates and charges for
incarcerated people’s audio and video
communications services and fair
compensation for incarcerated people’s
communication services (IPCS)
providers. The Report and Order
PO 00000
Frm 00113
Fmt 4701
Sfmt 4700
77355
fundamentally reforms the regulation of
IPCS in all correctional facilities,
regardless of the technology used to
deliver these services, and significantly
lowers the IPCS rates that incarcerated
people and their loved ones will pay.
610. The reforms adopted by the
Report and Order: (1) utilize the
expanded authority granted the
Commission, in conjunction with the
Commission’s preexisting statutory
authority, to adopt just and reasonable
IPCS rates and charges for all intrastate,
interstate, and international audio and
video IPCS, including video visitation
services, that ensure fair compensation
for providers; (2) lower existing perminute rate caps for audio IPCS, based
on industry-wide cost data submitted by
IPCS providers, while permitting states
to maintain IPCS rates lower than the
Commission’s rate caps; (3) lower the
overall prices consumers pay for IPCS
and simplify the pricing structure by
incorporating the costs of ancillary
services in the rate caps and prohibiting
providers from imposing any separate
ancillary service charges on IPCS
consumers; (4) prohibit IPCS providers
from making site commission payments
for IPCS and preempt state and local
laws and regulations requiring such
commissions; (5) limit the costs
associated with safety and security
measures that can be recovered in the
per-minute rates to only those costs that
the Commission finds used and useful
in the provision of IPCS; (6) allow,
subject to conditions, IPCS providers to
offer alternate pricing plans for IPCS
that comply with the rate caps we
establish; (7) revise and strengthen
accessibility requirements for IPCS for
incarcerated people with disabilities; (8)
revise and strengthen existing consumer
disclosure and inactive account
requirements; and (9) revise the existing
annual reporting and certification
requirements. The Report and Order
also addresses petitions for
reconsideration, clarification and waiver
pending in this proceeding.
B. Summary of Significant Issues Raised
by Public Comments in Response to the
IRFA
611. There were no comments filed
that specifically addressed the proposed
rules and policies presented in the
IRFA.
C. Response to Comments by the Chief
Counsel for Advocacy of the Small
Business Administration
612. Pursuant to the Small Business
Jobs Act of 2010, which amended the
RFA, the Commission is required to
respond to any comments filed by the
Chief Counsel for Advocacy of the Small
E:\FR\FM\20SER2.SGM
20SER2
77356
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
Business Administration (SBA), and to
provide a detailed statement of any
change made to the proposed rules as a
result of those comments. The Chief
Counsel did not file any comments in
response to the proposed rules in this
proceeding.
D. Description and Estimate of the
Number of Small Entities to Which
Rules Will Apply
613. 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 rules they adopt. 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 Small Business
Administration (SBA).
614. Small Businesses, Small
Organizations, Small Governmental
Jurisdictions. Our actions, over time,
may affect small entities that are not
easily categorized at present. We
therefore describe, at the outset, three
broad groups of small entities that could
be directly affected herein. First, while
there are industry specific size
standards for small businesses that are
used in the regulatory flexibility
analysis, according to data from the
Small Business Administration’s (SBA)
Office of Advocacy, in general a small
business is an independent business
having fewer than 500 employees. These
types of small businesses represent
99.9% of all businesses in the United
States, which translates to 33.2 million
businesses.
615. Next, the type of small entity
described as a ‘‘small organization’’ is
generally ‘‘any not-for-profit enterprise
which is independently owned and
operated and is not dominant in its
field.’’ The Internal Revenue Service
(IRS) uses a revenue benchmark of
$50,000 or less to delineate its annual
electronic filing requirements for small
exempt organizations. Nationwide, for
tax year 2022, there were approximately
530,109 small exempt organizations in
the U.S. reporting revenues of $50,000
or less according to the registration and
tax data for exempt organizations
available from the IRS.
616. Finally, the small entity
described as a ‘‘small governmental
jurisdiction’’ is defined generally as
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
‘‘governments of cities, counties, towns,
townships, villages, school districts, or
special districts, with a population of
less than fifty thousand.’’ U.S. Census
Bureau data from the 2022 Census of
Governments indicate there were 90,837
local governmental jurisdictions
consisting of general purpose
governments and special purpose
governments in the United States. Of
this number, there were 36,845 general
purpose governments (county,
municipal, and town or township) with
populations of less than 50,000 and
11,879 special purpose governments
(independent school districts) with
enrollment populations of less than
50,000. Accordingly, based on the 2022
U.S. Census of Governments data, we
estimate that at least 48,724 entities fall
into the category of ‘‘small
governmental jurisdictions.’’
617. Wired Telecommunications
Carriers. The U.S. Census Bureau
defines this industry as establishments
primarily engaged in operating and/or
providing access to transmission
facilities and infrastructure that they
own and/or lease for the transmission of
voice, data, text, sound, and video using
wired communications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies. Establishments in this
industry use the wired
telecommunications network facilities
that they operate to provide a variety of
services, such as wired telephony
services, including VoIP services, wired
(cable) audio and video programming
distribution, and wired broadband
internet services. By exception,
establishments providing satellite
television distribution services using
facilities and infrastructure that they
operate are included in this industry.
Wired Telecommunications Carriers are
also referred to as wireline carriers or
fixed local service providers.
618. The SBA small business size
standard for Wired Telecommunications
Carriers classifies firms having 1,500 or
fewer employees as small. U.S. Census
Bureau data for 2017 show that there
were 3,054 firms that operated in this
industry for the entire year. Of this
number, 2,964 firms operated with
fewer than 250 employees.
Additionally, based on Commission
data in the 2022 Universal Service
Monitoring Report, as of December 31,
2021, there were 4,590 providers that
reported they were engaged in the
provision of fixed local services. Of
these providers, the Commission
estimates that 4,146 providers have
1,500 or fewer employees.
Consequently, using the SBA’s small
business size standard, most of these
PO 00000
Frm 00114
Fmt 4701
Sfmt 4700
providers can be considered small
entities.
619. Local Exchange Carriers (LECs).
Neither the Commission nor the SBA
has developed a size standard for small
businesses specifically applicable to
local exchange services. Providers of
these services include both incumbent
and competitive local exchange service
providers. Wired Telecommunications
Carriers is the closest industry with an
SBA small business size standard.
Wired Telecommunications Carriers are
also referred to as wireline carriers or
fixed local service providers. The SBA
small business size standard for Wired
Telecommunications Carriers classifies
firms having 1,500 or fewer employees
as small. U.S. Census Bureau data for
2017 show that there were 3,054 firms
that operated in this industry for the
entire year. Of this number, 2,964 firms
operated with fewer than 250
employees. Additionally, based on
Commission data in the 2022 Universal
Service Monitoring Report, as of
December 31, 2021, there were 4,590
providers that reported they were fixed
local exchange service providers. Of
these providers, the Commission
estimates that 4,146 providers have
1,500 or fewer employees.
Consequently, using the SBA’s small
business size standard, most of these
providers can be considered small
entities.
620. Incumbent Local Exchange
Carriers (Incumbent LECs). Neither the
Commission nor the SBA have
developed a small business size
standard specifically for incumbent
local exchange carriers. Wired
Telecommunications Carriers is the
closest industry with an SBA small
business size standard. The SBA small
business size standard for Wired
Telecommunications Carriers classifies
firms having 1,500 or fewer employees
as small. U.S. Census Bureau data for
2017 show that there were 3,054 firms
in this industry that operated for the
entire year. Of this number, 2,964 firms
operated with fewer than 250
employees. Additionally, based on
Commission data in the 2022 Universal
Service Monitoring Report, as of
December 31, 2021, there were 1,212
providers that reported they were
incumbent local exchange service
providers. Of these providers, the
Commission estimates that 916
providers have 1,500 or fewer
employees. Consequently, using the
SBA’s small business size standard, the
Commission estimates that the majority
of incumbent local exchange carriers
can be considered small entities.
621. Competitive Local Exchange
Carriers (CLECs). Neither the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Commission nor the SBA has developed
a size standard for small businesses
specifically applicable to local exchange
services. Providers of these services
include several types of competitive
local exchange service providers. Wired
Telecommunications Carriers is the
closest industry with a SBA small
business size standard. The SBA small
business size standard for Wired
Telecommunications Carriers classifies
firms having 1,500 or fewer employees
as small. U.S. Census Bureau data for
2017 show that there were 3,054 firms
that operated in this industry for the
entire year. Of this number, 2,964 firms
operated with fewer than 250
employees. Additionally, based on
Commission data in the 2022 Universal
Service Monitoring Report, as of
December 31, 2021, there were 3,378
providers that reported they were
competitive local service providers. Of
these providers, the Commission
estimates that 3,230 providers have
1,500 or fewer employees.
Consequently, using the SBA’s small
business size standard, most of these
providers can be considered small
entities.
622. Interexchange Carriers (IXCs).
Neither the Commission nor the SBA
have developed a small business size
standard specifically for Interexchange
Carriers. Wired Telecommunications
Carriers is the closest industry with a
SBA small business size standard. The
SBA small business size standard for
Wired Telecommunications Carriers
classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau
data for 2017 show that there were 3,054
firms that operated in this industry for
the entire year. Of this number, 2,964
firms operated with fewer than 250
employees. Additionally, based on
Commission data in the 2022 Universal
Service Monitoring Report, as of
December 31, 2021, there were 127
providers that reported they were
engaged in the provision of
interexchange services. Of these
providers, the Commission estimates
that 109 providers have 1,500 or fewer
employees. Consequently, using the
SBA’s small business size standard, the
Commission estimates that the majority
of providers in this industry can be
considered small entities.
623. Local Resellers. Neither the
Commission nor the SBA have
developed a small business size
standard specifically for Local Resellers.
Telecommunications Resellers is the
closest industry with a SBA small
business size standard. The
Telecommunications Resellers industry
comprises establishments engaged in
purchasing access and network capacity
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
from owners and operators of
telecommunications networks and
reselling wired and wireless
telecommunications services (except
satellite) to businesses and households.
Establishments in this industry resell
telecommunications; they do not
operate transmission facilities and
infrastructure. Mobile virtual network
operators (MVNOs) are included in this
industry. The SBA small business size
standard for Telecommunications
Resellers classifies a business as small if
it has 1,500 or fewer employees. U.S.
Census Bureau data for 2017 show that
1,386 firms in this industry provided
resale services for the entire year. Of
that number, 1,375 firms operated with
fewer than 250 employees.
Additionally, based on Commission
data in the 2022 Universal Service
Monitoring Report, as of December 31,
2021, there were 207 providers that
reported they were engaged in the
provision of local resale services. Of
these providers, the Commission
estimates that 202 providers have 1,500
or fewer employees. Consequently,
using the SBA’s small business size
standard, most of these providers can be
considered small entities.
624. Toll Resellers. Neither the
Commission nor the SBA have
developed a small business size
standard specifically for Toll Resellers.
Telecommunications Resellers is the
closest industry with a SBA small
business size standard. The
Telecommunications Resellers industry
comprises establishments engaged in
purchasing access and network capacity
from owners and operators of
telecommunications networks and
reselling wired and wireless
telecommunications services (except
satellite) to businesses and households.
Establishments in this industry resell
telecommunications; they do not
operate transmission facilities and
infrastructure. Mobile virtual network
operators (MVNOs) are included in this
industry. The SBA small business size
standard for Telecommunications
Resellers classifies a business as small if
it has 1,500 or fewer employees. U.S.
Census Bureau data for 2017 show that
1,386 firms in this industry provided
resale services for the entire year. Of
that number, 1,375 firms operated with
fewer than 250 employees.
Additionally, based on Commission
data in the 2022 Universal Service
Monitoring Report, as of December 31,
2021, there were 457 providers that
reported they were engaged in the
provision of toll services. Of these
providers, the Commission estimates
that 438 providers have 1,500 or fewer
PO 00000
Frm 00115
Fmt 4701
Sfmt 4700
77357
employees. Consequently, using the
SBA’s small business size standard,
most of these providers can be
considered small entities.
625. Other Toll Carriers. Neither the
Commission nor the SBA has developed
a definition 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. Wired
Telecommunications Carriers is the
closest industry with a SBA small
business size standard. The SBA small
business size standard for Wired
Telecommunications Carriers classifies
firms having 1,500 or fewer employees
as small. U.S. Census Bureau data for
2017 show that there were 3,054 firms
in this industry that operated for the
entire year. Of this number, 2,964 firms
operated with fewer than 250
employees. Additionally, based on
Commission data in the 2022 Universal
Service Monitoring Report, as of
December 31, 2021, there were 90
providers that reported they were
engaged in the provision of other toll
services. Of these providers, the
Commission estimates that 87 providers
have 1,500 or fewer employees.
Consequently, using the SBA’s small
business size standard, most of these
providers can be considered small
entities.
626. Payphone Service Providers
(PSPs). Neither the Commission nor the
SBA have developed a small business
size standard specifically for payphone
service providers, a group that includes
incarcerated people’s services providers.
Telecommunications Resellers is the
closest industry with a SBA small
business size standard. The
Telecommunications Resellers industry
comprises establishments engaged in
purchasing access and network capacity
from owners and operators of
telecommunications networks and
reselling wired and wireless
telecommunications services (except
satellite) to businesses and households.
Establishments in this industry resell
telecommunications; they do not
operate transmission facilities and
infrastructure. Mobile virtual network
operators (MVNOs) are included in this
industry. The SBA small business size
standard for Telecommunications
Resellers classifies a business as small if
it has 1,500 or fewer employees. U.S.
Census Bureau data for 2017 show that
1,386 firms in this industry provided
resale services for the entire year. Of
that number, 1,375 firms operated with
fewer than 250 employees.
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77358
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Additionally, based on Commission
data in the 2022 Universal Service
Monitoring Report, as of December 31,
2021, there were 36 providers that
reported they were engaged in the
provision of payphone services. Of these
providers, the Commission estimates
that 32 providers have 1,500 or fewer
employees. Consequently, using the
SBA’s small business size standard,
most of these providers can be
considered small entities.
627. Telecommunications Relay
Service (TRS) Providers.
Telecommunications relay services
enable individuals who are deaf, hard of
hearing, deafblind, or who have a
speech disability to communicate by
telephone in a manner that is
functionally equivalent to using voice
communication services. Internet-based
TRS connects an individual with a
hearing or a speech disability to a TRS
communications assistant using an
internet Protocol-enabled device via the
internet, rather than the public switched
telephone network. Video Relay Service
(VRS) one form of internet-based TRS,
enables people with hearing or speech
disabilities who use sign language to
communicate with voice telephone
users over a broadband connection
using a video communication device.
Internet Protocol Captioned Telephone
Service (IP CTS) another form of
internet-based TRS, permits a person
with hearing loss to have a telephone
conversation while reading captions of
what the other party is saying on an
internet-connected device. A third form
of internet-based TRS, Internet Protocol
Relay Service (IP Relay), permits an
individual with a hearing or a speech
disability to communicate in text using
an Internet Protocol-enabled device via
the internet, rather than using a text
telephone (TTY) and the public
switched telephone network. Providers
must be certified by the Commission to
provide VRS and IP CTS and to receive
compensation from the TRS Fund for
TRS provided in accordance with
applicable rules. Analog forms of TRS,
text telephone (TTY), Speech-to-Speech
Relay Service, and Captioned Telephone
Service, are provided through state TRS
programs, which also must be certified
by the Commission.
628. Neither the Commission nor the
SBA have developed a small business
size standard specifically for TRS
Providers. All Other
Telecommunications is the closest
industry with a SBA small business size
standard. Internet Service Providers
(ISPs) and Voice over Internet Protocol
(VoIP) services, via client-supplied
telecommunications connections are
included in this industry. The SBA
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
small business size standard for this
industry classifies firms with annual
receipts of $35 million or less as small.
U.S. Census Bureau data for 2017 show
that there were 1,079 firms in this
industry that operated for the entire
year. Of those firms, 1,039 had revenue
of less than $25 million. Based on
Commission data there are 14 certified
internet-based TRS providers and two
analog forms of TRS providers. The
Commission however does not compile
financial information for these
providers. Nevertheless, based on
available information, the Commission
estimates that most providers in this
industry are small entities.
629. All Other Telecommunications.
This industry is comprised of
establishments primarily engaged in
providing specialized
telecommunications services, such as
satellite tracking, communications
telemetry, and radar station operation.
This industry also includes
establishments primarily engaged in
providing satellite terminal stations and
associated facilities connected with one
or more terrestrial systems and capable
of transmitting telecommunications to,
and receiving telecommunications from,
satellite systems. Providers of internet
services (e.g., dial-up ISPs) or Voice
over Internet Protocol (VoIP) services,
via client-supplied telecommunications
connections are also included in this
industry. The SBA small business size
standard for this industry classifies
firms with annual receipts of $40
million or less as small. U.S. Census
Bureau data for 2017 show that there
were 1,079 firms in this industry that
operated for the entire year. Of those
firms, 1,039 had revenue of less than
$25 million. Based on this data, the
Commission estimates that the majority
of ‘‘All Other Telecommunications’’
firms can be considered small.
E. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements for Small Entities
630. IPCS providers, including any
that may be small entities, will need to
change their operations, recordkeeping,
and reporting to comply with the
requirements of the Report and Order.
These requirements include compliance
with the rate caps the Report and Order
establishes for IPCS. While the new rate
cap structure is lower than the
preexisting per-minute rate caps, given
that the rate caps are based on cost data
provided by IPCS providers, including
smaller providers, small entities are
likely to be able to recover their costs in
the same manner as larger providers.
Additionally, because the rate caps
apply to both interstate and intrastate
PO 00000
Frm 00116
Fmt 4701
Sfmt 4700
IPCS, the new rate cap structure reduces
the recordkeeping and reporting
burdens of complying with the
Commission’s rules with regards to
audio IPCS because providers will no
longer need to determine the
jurisdictional nature of each call. The
Report and Order’s requirements also
include a prohibition on the assessment
of ancillary service charges associated
with IPCS, which will greatly reduce the
recordkeeping burdens on providers and
simplify their billing operations.
631. The Report and Order prohibits
IPCS providers from paying site
commissions of any kind associated
with IPCS and eliminates the
requirement under the Commission’s
rules for providers to label, and disclose
the source of, those payments on
consumers’ bills. The Report and Order
requires that, where facilities claim to
incur costs related to IPCS, providers
are to determine whether those costs are
in fact used and useful in the provision
of IPCS and are, therefore, reimbursable
under the Commission’s rules. These
changes will reduce the burdens of the
Commission’s billing rules, while
requiring that IPCS providers make
determinations regarding whether cost
claims submitted to them by facilities
are consistent with Commission
requirements.
632. The Report and Order allows
providers the option to offer alternate
pricing plans in addition to providing
IPCS at per-minute rates. IPCS providers
may elect whether to offer such plans,
and should they elect to do so, they may
determine the format of such plans,
provided that these plans comply with
the Commission’s generally applicable
IPCS rules, certain specified limitations,
and other safeguards adopted in the
Report and Order. The Report and Order
establishes additional requirements for
alternative pricing plans regarding
dropped communications, automatic
renewals, and consumer cancellation.
633. The Report and Order adopts
consumer disclosure requirements
applicable to all IPCS, including
requirements that providers disclose
their IPCS rates, charges, and associated
practices on their publicly available
websites in a manner that is easily
accessible and available to all members
of the public. Providers must also make
these disclosures available via their
online and mobile applications, if
consumers use such applications to
enroll, and on paper, upon a consumer’s
request. The Report and Order further
requires providers to make available
billing statements and statements of
account to account holders on a
monthly basis, and details regarding the
timing, manner, and content
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
requirements for these and other
disclosure documents for alternate
pricing plans. The Report and Order
also ensures that the consumer
disclosure rules, as amended, apply to
all IPCS providers subject to the
Commission’s expanded jurisdiction
under the Martha Wright-Reed Act.
634. The Report and Order extends
the Commission’s rules regarding
inactive accounts to apply to all
accounts that can be used to pay an
IPCS-related rate or charge, to the extent
they are controlled by IPCS providers or
their affiliates. The Report and Order
reaffirms that providers are barred from
improperly disposing of unused funds
in inactive accounts (which includes
disposing of such funds before 180
calendar days of continuous account
inactivity has passed), and are required
to undertake reasonable efforts to refund
unused funds. The Report and Order
expands upon these rules, including by
requiring providers to (1) contact the
relevant account holder if and when
they become aware that an incarcerated
person has been released or transferred
or upon the expiration of the 180-day
inactivity period, (2) issue refunds
within 30 calendar days of a request
from an account holder, or of an account
being deemed inactive (even in the
absence of such a request), and (3)
notify account holders of the status of
IPCS accounts prior to their being
deemed inactive. However, the Report
and Order limits the requirement for
automatic refunds (i.e., in the absence of
a consumer’s specific request) to
account balances of greater than $1.50.
The Report and Order also clarifies what
‘‘reasonable efforts’’ entail, the
procedures to follow if ‘‘reasonable
efforts’’ to refund inactive accounts fail,
and which refund mechanisms
providers may use. Additionally, the
Report and Order reaffirms and clarifies
the exception to these rules that allows
a provider to dispose of funds in
inactive accounts in compliance with a
controlling judicial or administrative
mandate.
635. The Report and Order modifies
the scope and content of the annual
reporting requirements, to reflect the
Commission’s expanded jurisdiction
under the Martha Wright-Reed Act, to
include the full scope of IPCS and all
providers of IPCS, and to reflect the
changes to the Commission’s rules
adopted in the Report and Order. The
Report and Order also amends the
Commission’s Part 14 rules as
appropriate to reflect the Martha
Wright-Reed Act’s expansion of the
Communications Act’s definition of
‘‘advanced communication service.’’ It
also modifies the Commission’s rules to
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
allow a form of enterprise registration
for the use of Internet Protocol
Captioned Telephone Service (IP CTS)
in carceral facilities and clarifies that
internet-based IPCS providers may
provide access to traditional (TTYbased) TRS via real-time text. The
Report and Order on Reconsideration
also amends the Commission’s rules to
require that VRS and IP CTS providers
update an incarcerated person’s
registration information within 30 days
of receiving written notification from
such person, the correctional authority,
or IPCS provider of an incarcerated
person’s release or transfer.
F. Steps Taken To Minimize the
Significant Economic Impact on Small
Entities, and Significant Alternatives
Considered
636. The RFA requires an agency to
provide, ‘‘a description of the steps the
agency has taken to minimize the
significant economic impact on small
entities . . . including a statement of
the factual, policy, and legal reasons for
selecting the alternative adopted in the
final rule and why each one of the other
significant alternatives to the rule
considered by the agency which affect
the impact on small entities was
rejected.’’
637. In the Report and Order, the
Commission adopts a new, more
comprehensive set of rate caps that
differentiate between prisons and jails,
and between four different sizes of
jails—large, medium, small and very
small—based on average daily
population (ADP). The use of four
different size tiers is supported in the
record and accounts for differences in
costs incurred by providers serving
these different facility sizes. The
Commission conducts a cost analysis
specific to each size tier using data
submitted by IPCS providers and adopts
new rate caps for each of these facility
size and type categories for both audio
and video IPCS. The Commission
believes that these actions properly
recognize that some jails may be more
costly for providers to serve than
prisons, and similarly that jails with
smaller ADPs may be more costly for
providers to serve than those with larger
ADPs.
638. Compliance with the
Commission’s new audio and video rate
caps and its rules eliminating site
commission payments will be required
by January 1, 2025 for prisons and for
jails with ADPs of 1,000 or above
incarcerated persons where no site
commissions mandated by law are
currently paid; by April 1, 2025 for jails
with ADPs less than 1,000 where no site
commissions mandated by law are
PO 00000
Frm 00117
Fmt 4701
Sfmt 4700
77359
currently paid; and by July 1, 2025 for
all size facilities where site
commissions mandated by law are
currently paid. The Commission
extended the compliance deadline for
providers serving smaller jails to
account for the additional time that
these facilities, and the providers that
serve them, may need to adapt to the
changes adopted in the Report and
Order.
639. The Commission recognizes that
it cannot foreclose the possibility that in
certain limited instances, certain
providers, possibly smaller providers
with less ability to spread their costs
over a larger number of facilities or
minutes of use, may not be able to
recover their costs of providing IPCS
under the rate caps adopted in the
Report and Order. To minimize the
burden on such providers, the
Commission retains, with modifications,
its waiver process, which allows
providers to seek relief from its rules at
the facility or contract level if they can
demonstrate that they are unable to
recover their used and useful IPCSrelated costs at that facility or for that
contract. The Commission modifies this
process to reflect the provisions of the
Martha Wright-Reed Act, including its
new authority thereunder. The waiver
process will allow the Commission to
review individual providers’ data and
potentially allow these providers to
charge rates that enable them to recover
their costs of providing IPCS at that
facility or under that contract. This
waiver process should benefit any IPCS
providers that may be small businesses
unable to recover their costs under the
new rate caps.
640. In the Report and Order, the
Commission prohibits providers from
assessing ancillary service charges in
addition to per-minute rates for IPCS.
The Commission incorporates the costs
of providing ancillary services in its rate
caps to allow providers the opportunity
to recover their average costs of
providing these ancillary services, while
eliminating the burden of administering
independent billing processes for each
of these services. At the same time,
eliminating all separately assessed
ancillary service charges prevents
providers from engaging in rent-seeking
activity in their application of these
charges, helping to ensure that IPCS
rates and charges are just and
reasonable.
641. The Commission revises its rules
to make clear that IPCS providers may
meet the requirement to provide access
to traditional TRS via real-time text, as
an alternative to TTY transmissions, if
real-time text transmission is supported
by the available devices and reliable
E:\FR\FM\20SER2.SGM
20SER2
77360
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
service can be provided by this method.
Permitting this alternative affords
providers further flexibility in
conducting their operations, and
accommodates the needs of smaller
providers that may have insufficient
resources to expand or otherwise adjust
their service format and infrastructure to
enable TTY transmission.
642. The Commission revises its rules
to permit providers to implement
alternate pricing plans, other than perminute pricing, subject to rules and
conditions to protect IPCS consumers.
Any provider that adopts these plans
must offer them as a voluntary
alternative to per-minute pricing.
Providers are not required to offer such
plans, but should they elect to do so,
they will have the flexibility to
determine the format of the plans they
offer. Permitting this additional means
of providing IPCS affords providers,
including smaller providers, further
flexibility in conducting their
operations.
643. The Commission’s rate caps
incorporate the costs of only a subset of
the safety and security measures
reported by providers. The rate caps
incorporate the costs of the two
categories that the Commission finds to
be both used and useful in the provision
of IPCS: Communications Assistance for
Law Enforcement Act (CALEA)
compliance measures and
communications security services.
Because cost recovery through the rate
caps is only accommodated for a more
limited set of such measures, providers,
particularly smaller providers, may not
need to be capable of offering more
sophisticated safety and security
services in order to successfully
compete for IPCS contracts.
ddrumheller on DSK120RN23PROD with RULES2
G. Report to Congress
644. The Commission will send a
copy of the Report and Order, including
this FRFA, in a report to be sent to
Congress pursuant to the Congressional
Review Act. In addition, the
Commission will send a copy of the
Report and Order, including this FRFA,
to the Chief Counsel for Advocacy of the
SBA. A copy of the Report and Order
and FRFA (or summaries thereof) will
also be published in the Federal
Register.
VI. Ordering Clauses
645. Accordingly, it is ordered that,
pursuant to the authority contained in
sections 1, 2, 4(i) to (j), 201(b), 218, 220,
225, 255, 276, 403, and 716 of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i) to
(j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Just and Reasonable Communications
Act of 2022, Public Law 117–338, 136
Stat 6156 (2022), the Report and Order,
Order on Reconsideration, Clarification
and Waiver, and Further Notice of
Proposed Rulemaking are adopted.
646. It is further ordered that,
pursuant to the authority contained in
sections 1, 2, 4(i) to (j), 201(b), 218, 220,
225, 255, 276, 403, and 716, of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i) to
(j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed
Just and Reasonable Communications
Act of 2022, Public Law 117–338, 136
Stat 6156 (2022), the Report and Order
shall be effective sixty (60) days after
publication of a summary of it in the
Federal Register, except as stated
below. Amendments to sections
64.611(l)(2), (3), (5), (6); 64.6040(f);
64.6060; 64.6110; 64.6120; 64.6130(d),
(e), (f), (h) to (k); 64.6140(c), (d), (e)(2)
to (4), (f)(2), and (f)(4) will not become
effective until the Office of Management
and Budget (OMB) completes any
review that the Wireline Competition
Bureau or the Consumer and
Governmental Affairs Bureau determine
is required under the Paperwork
Reduction Act (PRA). The removal of
§ 64.6090 will not become effective until
after OMB completes any review of
§ 64.6140. The Commission directs the
Wireline Competition Bureau and
Consumer and Governmental Affairs
Bureau to announce effective dates for
these sections by publication in the
Federal Register and by subsequent
Public Notice.
647. It is further ordered that,
pursuant to the authority contained in
sections 1, 2, 4(i) to (j), 201(b), 218, 220,
225, 255, 276, 403, and 716, of the
Communications Act of 1934, as
amended, 47 U.S.C. 151, 152, 154(i) to
(j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed
Just and Reasonable Communications
Act of 2022, Public Law 117–338, 136
Stat 6156 (2022), the delegations of
authority to the Wireline Competition
Bureau, Office of Economics and
Analytics, and the Consumer and
Governmental Affairs Bureau shall be
effective upon publication in the
Federal Register.
648. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
the Report and Order and Further
Notice of Proposed Rulemaking,
including the Initial Regulatory
Flexibility Analysis and the Final
Regulatory Flexibility Analyses, to the
Chief Counsel for Advocacy of the Small
Business Administration.
PO 00000
Frm 00118
Fmt 4701
Sfmt 4700
649. It is further ordered that the
Office of the Managing Director,
Performance Evaluation and Records
Management, shall send a copy of the
Report and Order and Further Notice of
Proposed Rulemaking in a report to be
sent to Congress and the Government
Accountability Officer pursuant to the
Congressional Review Act, 5 U.S.C.
801(a)(1)(A).
List of Subjects in 47 CFR Parts 14 and
64
Advanced Services, Communications,
Communications common carriers,
Communications equipment, Computer
technology, Individuals with
disabilities, Prisoners, Reporting and
recordkeeping requirements, Security
measures, Telecommunications,
Telephone, Video, Waivers.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons set forth above, the
Federal Communications Commission
amends parts 14 and 64 of Title 47 of
the Code of Federal Regulations as
follows:
PART 14—ACCESS TO ADVANCED
COMMUNICATIONS SERVICES AND
EQUIPMENT BY PEOPLE WITH
DISABILITIES
1. The authority citation for part 14
continues to read as follows:
■
Authority: 47 U.S.C. 151–154, 255, 303,
403, 503, 617, 618, 619 unless otherwise
noted.
2. Amend § 14.10 by revising
paragraph (c) to read as follows:
*
*
*
*
*
(c) The term advanced
communications services means:
(1) Interconnected VoIP service, as
that term is defined in paragraph (l) of
this section;
(2) Non-interconnected VoIP service,
as that term is defined in paragraph (q)
of this section;
(3) Electronic messaging service, as
that term is defined in paragraph (i) of
this section;
(4) Interoperable video conferencing
service, as that term is defined in
paragraph (m) of this section; and
(5) Any audio or video
communications services used by
inmates for the purposes of
communicating with individuals
outside the correctional institution
where the inmate is held, regardless of
technology used.
*
*
*
*
*
■
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
PART 64—MISCELLANEOUS RULES
RELATING TO COMMON CARRIERS
3. The authority citation for part 64 is
revised to read as follows:
■
Authority: 47 U.S.C. 151, 152, 154, 201,
202, 217, 218, 220, 222, 225, 226, 227, 227b,
228, 251(a), 251(e), 254(k), 255, 262, 276,
403(b)(2)(B), (c), 616, 620, 716, 1401–1473,
unless otherwise noted; Pub. L. 115–141, Div.
P, sec. 503, 132 Stat. 348, 1091; Pub. L. 117–
338, 136 Stat. 6156.
4. The authority citation for subpart F
is revised to read as follows:
■
Authority: 47 U.S.C. 151–154, 225, 255,
303(r), 616, and 620; Pub. L. 117–338, 136
Stat. 6156.
5. Amend section 64.601 by
redesignating paragraphs (a)(21) through
(a)(56) as paragraphs (a)(23) through
(a)(58) and adding paragraphs (a)(21)
and (a)(22) to read as follows:
*
*
*
*
*
(a) * * *
(21) Incarcerated People’s
Communications Service or IPCS. The
term ‘‘Incarcerated People’s
Communications Service’’ or ‘‘IPCS’’
has the meaning given such term under
§ 64.6000.
(22) Incarcerated Person or
Incarcerated People. The term
‘‘Incarcerated Person’’ or ‘‘Incarcerated
People’’ has the meaning given such
term under § 64.6000.
*
*
*
*
*
■ 6. Amend section 64.611 by revising
paragraph (k) and adding paragraph (l)
to read as follows:
■
§ 64.611
Internet-based TRS registration.
ddrumheller on DSK120RN23PROD with RULES2
*
*
*
*
*
(k) Individual registration for use of
TRS in correctional facilities—(1)
Registration information and
documentation. If an individual eligible
to use TRS registers with an internetbased TRS provider while incarcerated,
the provider shall collect and transmit
to the TRS User Registration Database
the information and documentation
required by the applicable provisions of
this section, except that:
(i) The residential address specified
for such Incarcerated Person shall be the
name of the correctional authority with
custody of that person along with the
main or administrative address of such
authority;
(ii) A Registered Location need not be
provided; and
(iii) If an Incarcerated Person has no
Social Security number or Tribal
Identification number, an identification
number assigned by the correctional
authority along with the facility
identification number, if there is one,
may be provided in lieu of the last four
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
digits of a Social Security number or a
Tribal Identification number.
(2) Verification of VRS and IP CTS
registration data. An Incarcerated
Person’s identity and address may be
verified pursuant to § 64.615(a)(6) of
this chapter, for purposes of VRS or IP
CTS registration, based on
documentation, such as a letter or
statement, provided by an official of a
correctional authority that states the
name of the person; the person’s
identification number assigned by the
correctional authority; the name of the
correctional authority; and the address
of the correctional facility. The VRS or
IP CTS provider shall transmit such
documentation to the TRS User
Registration Database administrator.
(3) Release or transfer of an
Incarcerated Person. Upon release (or
transfer to a different correction
authority) of an Incarcerated Person
who has registered for VRS or IP CTS,
the VRS or IP CTS provider with which
such person has registered shall update
the person’s registration information
within 30 days of receiving written
notification from such person or the
correctional authority of such release or
transfer. Such updated information shall
include, in the case of release, the
individual’s full residential address,
Registered Location (if required by this
section or part 9 of this chapter), and
any other registration information
required by this section and not
previously provided, and in the case of
transfer shall include the information
required by paragraph (k)(2) of this
section.
(4) Dial-around calls for VRS. VRS
providers shall not allow dial-around
calls by Incarcerated People.
(l) Enterprise registration for the use
of TRS in correctional facilities.
(1) Notwithstanding the other
provisions of this section, a TRS
provider may provide VRS, IP Relay, or
IP CTS to an Incarcerated Person,
without individual user registration, if
the TRS provider has completed
enterprise registration of the
correctional facility or correctional
authority for which service will be
provided.
(2) [Reserved]
(3) [Reserved]
(4) Confidentiality. The TRS provider
shall maintain the confidentiality of any
registration and certification
information obtained by the TRS
provider, and shall not disclose such
registration and certification
information, or the content of such
registration and certification
information, except as required by law
or regulation.
PO 00000
Frm 00119
Fmt 4701
Sfmt 4700
77361
7. Delayed indefinitely, amend
§ 64.611 by adding paragraphs (l)(2), (3),
(5) and (6) to read as follows:
■
§ 64.611
Internet-based TRS registration.
*
*
*
*
*
(l) * * *
(2) Signed certification—(i) VRS and
IP Relay. For enterprise registration to
use VRS or IP Relay, the TRS provider
shall obtain a signed certification from
the individual responsible for the
devices used to access VRS or IP Relay
(who may be an employee of the
correctional authority or a provider of
Incarcerated People’s Communications
Services), attesting that:
(A) The individual understands the
functions of the devices used to access
the service and that the cost of this relay
service is financed by the federally
regulated Interstate TRS Fund; and
(B) The correctional authority (or the
provider of Incarcerated People’s
Communications Services, if the
individual is employed by such a
provider) will make reasonable efforts to
ensure that only persons with a hearing
or speech disability are permitted to use
the service.
(ii) IP CTS. For enterprise registration
to use IP CTS, the TRS provider shall
obtain a signed certification from the
individual responsible for the devices
used to access IP CTS (who may be an
employee of the correctional authority
or of a provider of Incarcerated People’s
Communications Services), attesting
that:
(A) The individual understands the
functions of IP CTS and that the cost of
IP CTS is supported by the federally
regulated Interstate TRS Fund; and
(B) The correctional authority (or the
provider of Incarcerated People’s
Communications Services, if the
individual is employed by such a
provider) will make reasonable efforts to
ensure that only persons with hearing
loss that necessitates the use of IP CTS
to communicate by telephone are
permitted to use IP CTS.
(iii) Electronic signatures. The
certification required by paragraph (l)(2)
of this section shall be made on a form
separate from any other agreement or
form, and must include a separate
signature specific to the certification.
For the purposes of this paragraph
(l)(2)(iii), an electronic signature,
defined by the Electronic Signatures in
Global and National Commerce Act as
an electronic sound, symbol, or process,
attached to or logically associated with
a contract or other record and executed
or adopted by a person with the intent
to sign the record, has the same legal
effect as a written signature. For the
purposes of this paragraph (l)(2)(iii), an
E:\FR\FM\20SER2.SGM
20SER2
77362
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
electronic record, defined by the
Electronic Signatures in Global and
National Commerce Act as a contract or
other record created, generated, sent,
communicated, received, or stored by
electronic means, constitutes a record.
(3) Consent for transmission of
registration information. A VRS or IP
CTS provider shall obtain consent from
the individual making the certification
described in paragraph (l)(2) of this
section to transmit the information
required by this section to the TRS User
Registration Database. Before obtaining
such consent, the TRS provider shall
describe, using clear, easily understood
language, the specific information being
transmitted, that the information is
being transmitted to the TRS User
Registration Database to ensure proper
administration of the TRS program, and
that failure to provide consent will
result in denial of service. The TRS
provider shall obtain and keep a record
of affirmative acknowledgment of such
consent.
*
*
*
*
*
(5) Registration data. To complete
enterprise registration, a VRS or IP CTS
provider shall collect and transmit to
the TRS User Registration Database, in
a format prescribed by the Database
administrator:
(i) The TRS provider’s name;
(ii) The telephone numbers or unique
identifiers assigned to the relevant TRS
device(s) at the correctional facility or
correctional authority;
(iii) The name and address of the
affected correctional facility or
correctional authority;
(iv) The date of initiation of service
and;
(v) The name of the individual
executing the certification required by
paragraph (l)(2) of this section, and the
date the certification was obtained.
(6) When a VRS or IP CTS provider
ceases providing relay service to a
correctional authority via enterprise
registration, the provider shall transmit
the date of termination of such service
to the TRS User Registration Database
Administrator.
■ 8. Revise the heading to subpart FF to
read as follows:
ddrumheller on DSK120RN23PROD with RULES2
Subpart FF—Incarcerated People’s
Communications Services
■
9. Revise § 64.6000 to read as follows:
§ 64.6000
Definitions.
As used in this subpart:
Alternate Pricing Plan or Plan means
the offering of Incarcerated People’s
Communications Services to Consumers
using a pricing structure other than perminute pricing.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Ancillary Service Charge means any
charge to Consumers associated with the
provision or use of Incarcerated People’s
Communications Services that is not:
(1) Included in the per-minute charges
assessed, in accordance with §§ 64.6010
and 64.6030, for individual Incarcerated
People’s Communications Services;
(2) Included in the charges assessed,
in accordance with § 64.6140, in
connection with an Alternate Pricing
Plan; or
(3) An Authorized Fee, a Mandatory
Fee, or a Mandatory Tax.
Authorized Fee means a government
authorized, but discretionary, fee which
a Provider must remit to a federal, state,
or local government, and which a
Provider is permitted, but not required,
to pass through to Consumers for or in
connection with intrastate, interstate, or
international Incarcerated People’s
Communications Services. An
Authorized Fee may not include a
markup, unless the markup is
specifically authorized by a federal,
state, or local statute, rule, or regulation.
Average Daily Population or ADP
means the sum of all Incarcerated
People in a Correctional Facility for
each day of the preceding calendar year
divided by the number of days in that
year, calculated each year on or before
April 30.
Billing Statement or Statement of
Account means the vehicle by which
IPCS Account information is provided
to the Consumer on a monthly basis,
regardless of IPCS Account type,
including: (a) the amount of any
deposits in the IPCS Account; (b) the
duration of any call(s) or
communication(s) for which a charge is
assessed; and (c) the balance remaining
in the IPCS Account after deduction of
those charges.
Breakeven Point means, for purposes
of an Alternate Pricing Plan, the usage
amount:
(1) Below which a Consumer would
pay more under the Alternate Pricing
Plan than the Consumer would have
paid under the Provider’s per-minute
rates, and
(2) At or above which the cost of the
Alternate Pricing Plan would be less
than or equal to what the Consumer
would pay under the Provider’s perminute rates.
Collect Calling means an arrangement
whereby the called party takes
affirmative action clearly indicating that
it will pay the charges associated with
a communication originating from an
Incarcerated Person’s Communications
Device.
Consumer means the party paying a
Provider of Incarcerated People’s
Communications Services.
PO 00000
Frm 00120
Fmt 4701
Sfmt 4700
Controlling Judicial or Administrative
Mandate means:
(1) A final court order requiring an
Incarcerated Person to pay restitution;
(2) A fine imposed as part of a
criminal sentence;
(3) A fee imposed in connection with
a criminal conviction; or
(4) A final court or administrative
agency order adjudicating a valid
contract between the Provider and the
IPCS Account holder, entered into prior
to July 22, 2024 that allows or requires
that a Provider of Incarcerated People’s
Communications Services act in a
manner that would otherwise violate
§ 64.6130.
Correctional Facility, Facility, or
Correctional Institution means a Jail or
a Prison.
Debit Calling means a presubscription
or comparable service which allows an
Incarcerated Person, or someone acting
on an Incarcerated Person’s behalf, to
fund an IPCS Account set up through a
Provider that can be used to pay for
Incarcerated People’s Communications
Services originated by the Incarcerated
Person.
Facility-Related Rate Component
means either the Legally Mandated
Facility Rate Component or the
Contractually Prescribed Facility Rate
Component identified in § 64.6030(d).
Incarcerated Person or Incarcerated
People means a person or persons
detained at a Jail or Prison, regardless of
the duration of the detention.
Incarcerated People’s
Communications Service or IPCS means
the provision of telephone service;
interconnected VoIP service; noninterconnected VoIP service;
interoperable video conferencing
service; and any audio or video
communications service used by
Incarcerated People for the purpose of
communicating with individuals
outside the Facility where the
Incarcerated Person is held, regardless
of the technology used and regardless of
interstate, intrastate or international
jurisdiction.
Incarcerated People’s
Communications Service Account or
IPCS Account means any type of
account administered, or directly or
indirectly controlled by a Provider or an
affiliate of a Provider that can be used
to pay IPCS rates and charges, including
accounts where the Incarcerated Person
is the account holder.
Incarcerated Person’s
Communications Device means a
telephone instrument or other device
capable of initiating communications,
set aside by authorities of a Correctional
Facility for use by one or more
Incarcerated People.
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Interconnected Voice over Internet
Protocol or Interconnected VoIP means
a service that:
(1) Enables real-time, two-way voice
communications;
(2) Requires a broadband connection
from the user’s location;
(3) Requires internet protocolcompatible customer premises
equipment; and
(4) permits users generally to receive
calls that originate on the public
switched telephone network and to
terminate calls to the public switched
telephone network.
Interoperable Video Conferencing
Service means a service that provides
real-time video communications,
including audio, to enable users to share
information of the user’s choosing.
International Communications means
communications that originate in the
United States and terminate outside the
United States.
International Destination means the
rate zone in which an International
Communication terminates. For
countries that have a single rate zone,
International Destination means the
country in which an International
Communication terminates.
Inmate means a person detained at a
Jail or Prison, regardless of the duration
of the detention;
Inmate Calling Service means a
service that allows Inmates to make
calls to individuals outside the
Correctional Facility where the Inmate
is being held, regardless of the
technology used to deliver the service;
Inmate Telephone means a telephone
instrument, or other device capable of
initiating calls, set aside by authorities
of a Correctional Facility for use by
Inmates;
Jail means a Facility of a local, state,
or federal law enforcement agency that
is used to primarily hold individuals
who are:
(1) Awaiting adjudication of criminal
charges;
(2) Post-conviction and committed to
confinement sentences of one year or
less; or
(3) Post-conviction and awaiting
transfer to another Facility. The term
also includes city, county, or regional
facilities that have contracted with a
private company to manage day-to-day
operations; privately owned and
operated Facilities primarily engaged in
housing city, county or regional
Incarcerated People; immigration
detention facilities operated by, or
pursuant to contracts with, federal,
state, city, county, or regional agencies;
juvenile detention centers; and secure
mental health facilities.
Jurisdiction means:
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(1) The state, city, county, or territory
where a law enforcement authority is
operating or contracting for the
operation of a Correctional Facility; or
(2) The United States for a
Correctional Facility operated by or
under the contracting authority of a
Federal law enforcement agency.
Jurisdictionally Mixed Charge means
any charge Consumers may be assessed
for use of Incarcerated People’s
Communications Services that is not
included in the per-minute charges
assessed for individual communications
and that are assessed for, or in
connection with, uses of Incarcerated
People’s Communications Service to
make such communications that have
interstate or international and intrastate
components that are unable to be
segregated at the time the charge is
incurred.
Mandatory Tax or Mandatory Fee
means a fee that a Provider is required
to collect directly from Consumers, and
remit to federal, state, or local
governments. A Mandatory Tax or
Mandatory Fee that is passed through to
a Consumer for, or in connection with,
Incarcerated People’s Communications
Services may not include a markup,
unless the markup is specifically
authorized by a federal, state, or local
statute, rule, or regulation.
Non-interconnected VoIP means a
service, other than an Interconnected
VoIP service, that enables real-time
voice communications that originate
from, or terminate to, the end-user’s
location using Internet Protocol or any
successor protocol and that requires
Internet Protocol compatible customer
premises equipment.
Per-Call, Per-Connection, or PerCommunication Charge means a onetime fee charged to a Consumer of IPCS
at call or communication initiation.
Prepaid Calling means a
presubscription or comparable service
in which a Consumer, other than an
Incarcerated Person, funds an account
set up through a Provider of
Incarcerated People’s Communications
Services. Funds from the account can
then be used to pay for Incarcerated
People’s Communications Services that
originate with the same Incarcerated
Person.
Prepaid Collect Calling means a
calling arrangement that allows an
Incarcerated Person to initiate an
Incarcerated People’s Communications
Services communication without having
a pre-established billing arrangement
and also provides a means, within that
communication, for the called party to
establish an arrangement to be billed
directly by the Provider of Incarcerated
People’s Communications Services for
PO 00000
Frm 00121
Fmt 4701
Sfmt 4700
77363
future communications from the same
Incarcerated Person.
Prison means a Facility operated by a
territorial, state, or Federal agency that
is used primarily to confine individuals
convicted of felonies and sentenced to
terms in excess of one year. The term
also includes public and private
facilities that provide outsource housing
to other agencies such as the State
Departments of Correction and the
Federal Bureau of Prisons; and facilities
that would otherwise fall under the
definition of a Jail but in which the
majority of Incarcerated People are postconviction and are committed to
confinement for sentences of longer
than one year.
Provider of Incarcerated People’s
Communications Services or Provider
means any communications service
provider that provides Incarcerated
People’s Communications Services,
regardless of the technology used.
Provider-Related Rate Component
means the interim per-minute rate
specified in either § 64.6030(b) or (c)
that Providers at Jails with Average
Daily Populations of 1,000 or more
Incarcerated People and all Prisons may
charge for interstate Collect Calling,
Debit Calling, Prepaid Calling, or
Prepaid Collect Calling.
Site Commission means any form of
monetary payment, in-kind payment,
gift, exchange of services or goods, fee,
technology allowance, or product that a
Provider of Incarcerated People’s
Communications Services or affiliate of
a Provider of Incarcerated People’s
Communications Services may pay,
give, donate, or otherwise provide to an
entity that operates a Correctional
Institution, an entity with which the
Provider of Incarcerated People’s
Communications Services enter into an
agreement to provide Incarcerated
People’s Communications Services, a
governmental agency that oversees a
Correctional Facility, the city, county, or
state where a Facility is located, or an
agent of any such Facility.
■ 10. Add § 64.6010 to read as follows:
§ 64.6010 Incarcerated People’s
Communications Services rate caps.
(a) A Provider must offer each
Incarcerated People’s Communications
Service it provides at a per-minute rate.
A Provider may also offer an
Incarcerated People’s Communications
Service under one or more Alternate
Pricing Plans, pursuant to § 64.6140.
(b) A Provider must not charge a perminute rate for intrastate or interstate
audio Incarcerated People’s
Communications Services in excess of
the following rate caps on or after the
dates specified below:
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77364
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
(1) $0.06 per minute for each Prison;
(2) $0.06 per minute for each Jail
having an Average Daily Population of
1,000 or more Incarcerated People;
(3) $0.07 per minute for each Jail
having an Average Daily Population of
between and including 350 and 999
Incarcerated People;
(4) $0.09 per minute for each Jail
having an Average Daily Population of
between and including 100 and 349
Incarcerated People; and
(5) $0.12 per minute for each Jail
having an Average Daily Population of
below 100 Incarcerated People.
(c) A Provider must not charge a perminute rate for video Incarcerated
People’s Communications Services in
excess of the following interim rate caps
except as set forth in paragraph (d) of
this section:
(1) $0.16 per minute for each Prison;
(2) $0.11 per minute for each Jail
having an Average Daily Population of
1,000 or more Incarcerated People;
(3) $0.12 per minute for each Jail
having an Average Daily Population of
between and including 350 and 999
Incarcerated People;
(4) $0.14 per minute for each Jail
having an Average Daily Population of
between and including 100 and 349
Incarcerated People; and
(5) $0.25 per minute for each Jail
having an Average Daily Population of
below 100 Incarcerated People.
(d) A Provider must charge the rate
caps described in paragraphs (b) and (c)
of this section beginning January 1, 2025
for all Prisons and for Jails with Average
Daily Populations of 1,000 or more
Incarcerated People, and April 1, 2025
for Jails with Average Daily Populations
of less than 1,000 Incarcerated People,
subject to the following special
provisions.
(1) Where a contract existing as of
June 27, 2024 includes terms and
conditions that would require material
alteration through renegotiation due to a
conflict with our new rules involving
rates, contractually-negotiated Site
Commission payments or passthrough
charges included in the rates, and the
contract expires on or after January 1,
2025 for Prisons and for Jails with
Average Daily Populations of 1,000 or
more Incarcerated People, or on or after
April 1, 2025 for Jails with Average
Daily Populations of less than 1,000
Incarcerated People, the compliance
dates for the rate caps set forth in
paragraphs (b) and (c) of this section
and the Site Commission rules set forth
in § 64.6015 will be the earlier of the
contract expiration date or January 1,
2026 for Prisons and for Jails with
Average Daily Populations of 1,000 or
more Incarcerated People, or the earlier
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
of the contract expiration date or April
1, 2026 for Jails with Average Daily
Populations of less than 1,000
Incarcerated People.
(2) Where a contract existing as of
June 27, 2024 includes terms and
conditions that would require
renegotiation due to a provision
incorporating legally-mandated Site
Commission payments and the contract
expires on or after July 1, 2025 for any
size Facility, the compliance date for
paragraphs (b) and (c) of this section
and the Site Commission rules set forth
in § 64.6015 will be the earlier of the
contract expiration date or April 1,
2026.
(e) A Provider must not charge a perminute rate for international audio
Incarcerated People’s Communications
Services in each Prison or Jail it serves
in excess of the applicable interstate and
intrastate cap set forth in paragraph (b)
of this section plus the average amount
that the Provider paid its underlying
international service providers for audio
communications to the International
Destination of that communication, on a
per-minute basis. A Provider shall
determine the average amount paid for
communications to each International
Destination for each calendar quarter
and shall adjust its maximum rates
based on such determination within one
month of the end of each calendar
quarter.
■ 11. Add § 64.6015 to read as follows:
§ 64.6015 Prohibition against Site
Commissions.
A Provider must not pay any Site
Commissions associated with its
provision of Incarcerated People’s
Communications Services on or after the
dates specified below:
(a) Providers must comply with this
section beginning January 1, 2025 for all
Prisons and for Jails with Average Daily
Populations of 1,000 or more
Incarcerated People, and April 1, 2025
for Jails with Average Daily Populations
of less than 1,000 Incarcerated People,
subject to the special provisions in
paragraphs (b) and (c) of this section.
(b) Where a contract existing as of
June 27, 2024 includes terms and
conditions that would require material
alteration through renegotiation due to a
conflict with our new rules involving
rates, contractually-negotiated Site
Commission payments or pass-through
charges included in the rates, and the
contract expires on or after January 1,
2025 for Prisons and for Jails with
Average Daily Populations of 1,000 or
more Incarcerated People, or on or after
April 1, 2025 for Jails with Average
Daily Populations of less than 1,000
Incarcerated People, the compliance
PO 00000
Frm 00122
Fmt 4701
Sfmt 4700
dates for this section will be the earlier
of the contract expiration date or
January 1, 2026 for Prisons and for Jails
with Average Daily Populations of 1,000
or more Incarcerated People, or the
earlier of the contract expiration date or
April 1, 2026 for Jails with Average
Daily Populations of less than 1,000
Incarcerated People.
(c) Where a contract existing as of
June 27, 2024 includes terms and
conditions that would require
renegotiation due to a provision
incorporating legally-mandated Site
Commission payments and the contract
expires on or after July 1, 2025 for any
size Facility, the compliance date for
this section will be the earlier of the
contract expiration date or April 1,
2026.
■ 12. Revise § 64.6020 to read as
follows:
§ 64.6020
Ancillary Service Charges.
A Provider of Incarcerated People’s
Communications Services must not
charge any Ancillary Service Charge, as
defined in § 64.6000 of this chapter.
■ 13. Revise § 64.6030 by adding
paragraph (f) to read as follows:
§ 64.6030 Inmate Calling Services interim
rate caps.
*
*
*
*
*
(f) Paragraphs (a) through (e) of this
section shall cease to be effective upon
the individual compliance dates
prescribed in the revisions to § 64.6010
and the addition of § 64.6015 for the
Providers serving the Facilities subject
to each such date.
■ 14. Amend § 64.6040 by revising
paragraph (b)(1) and adding paragraph
(e) to read as follows:
§ 64.6040 Communications access for
Incarcerated People with disabilities.
*
*
*
*
*
(b)(1) A Provider shall provide access
for Incarcerated People with hearing or
speech disabilities to Traditional (TTYBased) TRS and STS. As an alternative
to supporting transmissions from a TTY
device, where broadband internet access
service is available, an IPCS Provider
may provide access to Traditional TRS
via real-time text, in accordance with 47
CFR part 67, if real-time text is
supported by the available devices and
reliable access to a provider of
traditional TRS service can be provided
by this method.
*
*
*
*
*
(e)(1) Paragraphs (a) through (c) of this
section apply to services offered
pursuant to an Alternate Pricing Plan, as
defined in § 64.6000.
(2) Except as provided in this
paragraph (e) of this section, in the
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
context of a Provider offering an
Alternate Pricing Plan, the Provider
shall not levy or collect any charge or
fee, or count any minute(s) of use, or
call(s) or communication(s), toward the
amount included in an Alternate Pricing
Plan, on or from any party to a TRS call
to or from an Incarcerated Person, or
any charge for the use of a device or
transmission service when used to
access TRS from a Correctional Facility,
or any charge for the internet or other
connections needed for services covered
by this section.
(3) When providing access to IP CTS
or CTS within the context of a Provider
offering an Alternate Pricing Plan:
(i) If the Alternate Pricing Plan
consists of a fixed number of calls or
communications, the IP CTS or CTS call
shall count as one call or
communication.
(ii) If the Alternate Pricing Plan offers
a fixed number of minutes, the IP CTS
or CTS call shall count as the number
of minutes used for the voice portion of
the IP CTS or CTS call.
(iii) If the Alternate Pricing Plan offers
an unlimited number of minutes, calls
or communications, the IP CTS or CTS
call shall be counted as part of the
unlimited number of minutes, calls or
communications.
(iv) There shall be no charge or fee for
any internet or data portion of an IP CTS
or CTS call.
(4) When providing access to a pointto-point video service, as defined in
§ 64.601(a), within the context of a
Provider offering an Alternate Pricing
Plan for Incarcerated People with
hearing or speech disabilities who can
use ASL:
(i) If the Alternate Pricing Plan
consists of a fixed number of calls or
communications, the point-to-point call
shall be counted as one video
communication (if only video is
included in the Alternate Pricing Plan),
or one audio call (if audio is included
in the Alternate Pricing Plan).
(ii) If the Alternate Pricing Plan offers
a fixed number of minutes, then the
point-to-point call shall count as the
number of minutes used and shall apply
to the minutes provided for video, if
only video is including in the Alternate
Pricing Plan, or shall apply to the
minutes provided for audio, if audio is
included in the Alternate Pricing Plan.
(iii) If the Alternate Pricing Plan offers
an unlimited number of minutes, calls
or communications, the point-to-point
call shall count as a video
communication (if only video is
provided as part of the Alternate Pricing
Plan) or as an audio call (if audio is
provided as part of the Alternate Pricing
Plan).
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(iv) Regardless of the format of the
Alternate Pricing Plan, there shall be no
charge or fee for the use of the
equipment.
(5) When providing access for TTY-toTTY use within the context of a
Provider offering an Alternate Pricing
Plan that includes audio service:
(i) If the Plan consists of a fixed
number of calls, the TTY-to-TTY call
shall count as one call;
(ii) If the Plan offers a fixed number
of minutes, then the TTY-to-TTY call
shall count as no more than one-fourth
of the minutes used; and
(iii) If the Plan offers an unlimited
number of minutes, or calls, the TTY-toTTY call shall count as an audio call.
■ 15. Delayed indefinitely, amend
§ 64.6040 by adding paragraph (f) to
read as follows:
§ 64.6040 Communications access for
Incarcerated People with disabilities.
*
*
*
*
*
(f)(1) A Provider shall ensure that the
information and documentation that it
provides to current or potential
Consumers of Incarcerated People’s
Communications Services is accessible.
Such information and documentation
includes, but is not limited to,
disclosures of charges, user guides, bills,
installation guides for end user devices,
and product support communications.
(2) The term ‘‘accessible’’ has the
same meaning given such term under
§ 14.10 of this chapter, as such section
may be amended from time to time.
(3) The requirement to ensure the
information is accessible also includes
ensuring access, at no extra cost, to call
centers and customer support regarding
the products and services for current or
potential Consumers of Incarcerated
People’s Communications Services.
■ 16. Revise § 64.6050 to read as
follows:
§ 64.6050
Billing-related call blocking.
No Provider shall prohibit or prevent
completion of a Collect Calling IPCS
communication or decline to establish
or otherwise degrade any Collect Calling
IPCS communication solely for the
reason that it lacks a billing relationship
with the called party’s communications
service provider unless the Provider
offers Debit Calling, Prepaid Calling, or
Prepaid Collect Calling for IPCS
communications.
■ 17. Delayed indefinitely, revise
§ 64.6060 to read as follows:
§ 64.6060 Annual reporting and
certification requirement.
(a) Each Provider must submit a
report to the Commission, by April 1 of
each year, regarding intrastate, interstate
PO 00000
Frm 00123
Fmt 4701
Sfmt 4700
77365
and international audio and video IPCS
for the prior calendar year. The report
shall be categorized both by service type
and Facility type and size and shall
contain:
(1) Current intrastate, interstate, and
international rates for Incarcerated
People’s Communications Services.
(2) For each Facility served, the kinds
of TRS that may be accessed from the
Facility.
(3) For each Facility served, the
number of calls completed during the
reporting period in each of the following
categories:
(i) TTY-to-TTY calls;
(ii) Point-to-point video calls placed
or received by ASL users as those terms
are defined in § 64.601(a) of this
chapter; and
(iii) TRS calls, broken down by each
form of TRS that can be accessed from
the Facility.
(4) For each Facility served, the
number of complaints that the reporting
Provider received in each of the
categories set forth in paragraph (a)(3) of
this section.
(5) Such other information as the
Consumer and Governmental Affairs
Bureau or the Wireline Competition
Bureau may require.
(b) The Chief Executive Officer, Chief
Financial Officer, or other senior
executive of the reporting Provider, with
first-hand knowledge of the
truthfulness, accuracy, and
completeness of the information
provided pursuant to paragraph (a) of
this section, must certify that the
reported information and data are true,
accurate and complete to the best of his
or her knowledge, information, and
belief.
■ 18. Revise § 64.6070 to read as
follows:
§ 64.6070
Taxes and fees.
(a) A Provider must not charge a
Consumer any tax or fee associated with
Incarcerated People’s Communications
Services other than a Mandatory Tax, a
Mandatory Fee, or an Authorized Fee, as
defined in § 64.6000 of this chapter.
■ 19. Revise § 64.6080 to read as
follows:
§ 64.6080 Per-Call, Per-Connection or PerCommunication Charges.
A Provider must not impose a PerCall, Per-Connection, or PerCommunication Charge on a Consumer
for any Incarcerated People’s
Communications Services
communication.
§ 64.6090
[Removed and reserved].
20. Delayed indefinitely, remove and
reserve § 64.6090.
■
E:\FR\FM\20SER2.SGM
20SER2
77366
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
21. Revise § 64.6100 to read as
follows:
■
§ 64.6100 Minimum and maximum Prepaid
Calling and Debit Calling account balances.
(a) No Provider shall institute a
minimum balance requirement for a
Consumer to use Debit or Prepaid
Calling for Incarcerated People’s
Communications Services.
(b) No Provider shall prohibit a
Consumer from depositing at least $50
per transaction to fund a Debit or
Prepaid Calling account that can be
used for Incarcerated People’s
Communications Services.
■ 22. Delayed indefinitely, revise and
republish § 64.6110 to read as follows:
ddrumheller on DSK120RN23PROD with RULES2
§ 64.6110 Consumer Disclosure of
Incarcerated People’s Communications
Services Rates.
(a) Providers must clearly, accurately,
and conspicuously disclose their
intrastate, interstate, and international
Incarcerated People’s Communications
Services rates, charges and associated
practices on their publicly available
websites. In connection with
international rates, Providers shall also
separately disclose the rate component
for terminating calls to each
International Destination where that
Provider terminates International
Communications.
(1) In addition to the information
required in paragraph (a) of this section,
the Provider must disclose information
on:
(i) How to manage an IPCS Account;
(ii) How to fund an IPCS Account;
(iii) How to close an IPCS Account
and how to obtain a refund of any
unused balance in that account; and
(iv) How to obtain a refund of any
unused balance in inactive accounts
pursuant to § 64.6130 of this chapter.
(b) Providers must clearly label the
Facility-Related Rate Component (either
the Legally Mandated Facility Rate
Component or the Contractually
Prescribed Facility Rate Component)
identified in § 64.6030(d) as a separate
line item on Consumer bills for the
recovery of permissible facility-related
costs contained in Site Commission
payments. To be clearly labeled, the
Facility-Related Rate Component shall:
(1) Identify the Provider’s obligation
to pay a Site Commission as either
imposed by state statutes or laws or
regulations that are adopted pursuant to
state administrative procedure statutes
where there is notice and an
opportunity for public comment that
operates independently of the
contracting process between
Correctional Institutions and Providers
or subject to a contract with the
Correctional Facility;
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(2) Where the Site Commission is
imposed by state statute, or law or
regulation adopted pursuant to state
administrative procedure statutes where
there is notice and an opportunity for
public comment and that operates
independently of the contracting
process between Correctional
Institutions and Providers, specify the
relevant statute, law, or regulation.
(3) Identify the amount of the Site
Commission payment, expressed as a
per-minute or per-call charge, a
percentage of revenue, or a flat fee; and
(4) Identify the amount charged to the
Consumer for the call or calls on the
bill.
(c) Providers must clearly label all
charges for International
Communications in § 64.6010(d) of this
chapter as a separate line item on
Consumer Billing Statements and
Statements of Account. To be clearly
labeled, Providers must identify the
amount charged to the Consumer for the
International Communication, including
the costs paid by the provider to its
underlying international providers to
terminate the International
Communication to the International
Destination of the call.
(d) Providers shall make disclosures
pursuant to this section available:
(1) Via the Provider’s website in a
form generally accessible to the public
without needing to have an IPCS
Account with the Provider;
(2) Via the Provider’s online or mobile
application, if Consumers use that
application to create an IPCS Account
with the Provider; and
(3) On paper, upon request of the
Consumer.
(e) Billing Statements and Statements
of Account:
(1) Providers must make available
Billing Statements and Statements of
Account to all IPCS Account holders on
a monthly basis via:
(i) The Provider’s website;
(ii) The Provider’s online or mobile
application; or
(iii) On paper, upon request of the
Consumer.
(2) Billing Statements and Statements
of Account shall include:
(i) The amount of any deposits to the
account;
(ii) The duration of any calls and
communications for which a charge is
assessed; and
(iii) The balance remaining in the
IPCS Account after the deduction of
those charges.
(f) All disclosures made pursuant to
this section, and §§ 64.6130 and 64.6140
shall be clear, accurate, and
conspicuous, and shall be available in
accessible formats for people with
disabilities.
PO 00000
Frm 00124
Fmt 4701
Sfmt 4700
(g) Paragraph (b) of this section shall
cease to be effective upon the individual
compliance dates prescribed in the
revisions to § 64.6010 and the addition
of § 64.6015.
23. Delayed indefinitely, revise
§ 64.6120 to read as follows:
§ 64.6120
Waiver process.
(a) A Provider may seek a waiver of
the rate caps established in § 64.6010 on
a Correctional Facility or contract basis
if the applicable rate caps prevent the
Provider from recovering the costs of
providing Incarcerated People’s
Communications Services at a
Correctional Facility or at the
Correctional Facilities covered by a
contract.
(b) At a minimum, a Provider seeking
such a waiver must submit:
(1) The Provider’s total company
costs, including the nonrecurring costs
of the assets it uses to provide
Incarcerated People’s Communications
Services, and its recurring operating
expenses for these services at the
Correctional Facility or under the
contract;
(2) The methods the Provider used to
identify its direct costs of providing
Incarcerated People’s Communications
Services, to allocate its indirect costs
between its Incarcerated People’s
Communications Services and other
operations, and to assign its direct costs
to and allocate its indirect costs among
its Incarcerated People’s
Communications Services contracts and
Correctional Facilities;
(3) The Provider’s demand for
Incarcerated People’s Communications
Services at the Correctional Facility or
at each Correctional Facility covered by
the contract;
(4) The revenue or other
compensation the Provider receives
from the provision of Incarcerated
People’s Communications Services at
the Correctional Facility or at each
Correctional Facility covered by the
contract;
(5) A complete and unredacted copy
of the contract for the Correctional
Facility or Correctional Facilities, and
any amendments to such contract;
(6) Copies of the initial request for
proposals and any amendments thereto,
the Provider’s bid in response to that
request, and responses to any
amendments (or a statement that the
Provider no longer has access to those
documents because they were executed
prior to the effective date of this rule);
(7) A written explanation of how and
why the circumstances associated with
that Correctional Facility or contract
differ from the circumstances at similar
Correctional Facilities the Provider
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
serves, and from other Correctional
Facilities covered by the same contract,
if applicable; and
(8) An attestation from a company
officer with knowledge of the
underlying information that all of the
information the Provider submits in
support of its waiver request is complete
and correct.
(c) A Provider seeking a waiver
pursuant to section 64.6120(a) must
provide any additional information
requested by the Commission during the
course of its review.
24. In § 64.6130 revise paragraphs (a)
through (c) to read as follows:
ddrumheller on DSK120RN23PROD with RULES2
§ 64.6130 Interim protections of consumer
funds in inactive accounts
(a) All funds deposited into an IPCS
Account shall remain the property of
the account holder unless or until the
funds are either:
(1) Used to pay for products or
services purchased by the account
holder or the Incarcerated Person for
whose benefit the account was
established;
(2) Disposed of in accordance with a
Controlling Judicial or Administrative
Mandate; or
(3) Disposed of in accordance with
applicable state law, including, but not
limited to, laws governing unclaimed
property.
(b) No Provider may dispose of
unused funds in an IPCS Account until
at least 180 calendar days of continuous
account inactivity have passed, or at the
end of any longer, alternative period set
by state law, except as provided in
paragraphs (a) and (d) of this section or
through a refund to the IPCS Account
holder or such other individual as the
account holder may have designated to
receive a refund.
(c) The 180-day period, or any longer
alternative period set by state law, must
be continuous. Any of the following
actions by the IPCS Account holder or
the Incarcerated Person for whose
benefit the account was established
ends the period of inactivity and restarts
the 180-day period:
(1) Depositing, crediting, or otherwise
adding funds to an IPCS Account;
(2) Withdrawing, spending, debiting,
transferring, or otherwise removing
funds from an IPCS Account; or
(3) Expressing an interest in retaining,
receiving, or transferring the funds in an
IPCS Account, or otherwise attempting
to exert or exerting ownership or control
over the account or the funds held
within the IPCS Account.
*
*
*
*
*
■ 25. Delayed indefinitely, revise and
republish § 64.6130 to read as follows:
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
§ 64.6130 Protection of consumer funds in
inactive accounts.
(a) All funds deposited into an IPCS
Account shall remain the property of
the account holder unless or until the
funds are either:
(1) Used to pay for products or
services purchased by the account
holder or the Incarcerated Person for
whose benefit the account was
established;
(2) Disposed of in accordance with a
Controlling Judicial or Administrative
Mandate; or
(3) Disposed of in accordance with
applicable state law, including, but not
limited to, laws governing unclaimed
property.
(b) No Provider may dispose of
unused funds in an IPCS Account until
at least 180 calendar days of continuous
account inactivity have passed, or at the
end of any longer, alternative period set
by state law, except as provided in
paragraphs (a) and (d) of this section or
through a refund to the IPCS Account
holder or such other individual as the
account holder may have designated to
receive a refund.
(c) The 180-day period, or any longer
alternative period set by state law, must
be continuous. Any of the following
actions by the IPCS Account holder or
the Incarcerated Person for whose
benefit the account was established
ends the period of inactivity and restarts
the 180-day period:
(1) Depositing, crediting, or otherwise
adding funds to an IPCS Account;
(2) Withdrawing, spending, debiting,
transferring, or otherwise removing
funds from an IPCS Account; or
(3) Expressing an interest in retaining,
receiving, or transferring the funds in an
IPCS Account, or otherwise attempting
to exert or exerting ownership or control
over the account or the funds held
within the IPCS Account.
(d) After 180 days of continuous
account inactivity have passed, or at the
end of any longer alternative period set
by state law, the Provider must:
(1) Contact the account holder prior to
closing the account and refunding the
remaining balance to determine whether
the account holder wishes to continue
using the IPCS Account, or to close it
and obtain a refund; and
(2) Make reasonable efforts to refund
the balance in the IPCS Account to the
account holder or such other person as
the account holder has specified.
Reasonable efforts include, but are not
limited to:
(i) Notification to the account holder
that the account has been deemed
inactive;
PO 00000
Frm 00125
Fmt 4701
Sfmt 4700
77367
(ii) The collection of contact
information needed to process the
refund; and
(iii) Timely responses to inquiries
from an account holder.
(e) If a Provider’s reasonable efforts to
refund the balance of the IPCS Account
fail, the Provider must dispose of
remaining funds in accordance with
applicable state consumer protection
law concerning unclaimed funds or the
disposition of such accounts.
(f) If a Provider becomes aware that an
Incarcerated Person has been released or
transferred, the 180-day inactivity
period shall be deemed to have run and
the Provider shall begin processing a
refund in accordance with this section.
The Provider shall contact the account
holder prior to closing the IPCS Account
and refunding the remaining balance in
the IPCS Account, to determine whether
the account holder wishes to continue
using the IPCS Account, or to close it
and obtain a refund from the Provider.
(g) Any refund made pursuant to this
section must include the entire balance
of the IPCS Account, including any
deductions the Provider may have made
in anticipation of taxes or other charges
that it assessed when funds were
deposited and that were not actually
incurred. The Provider shall not impose
any fees or charges for processing the
refund.
(h) Any refund made pursuant to this
section shall be issued within 30
calendar days of the IPCS Account being
deemed inactive or within 30 calendar
days of a request for a refund from an
account holder or other such individual
as the account holder may have
specified to receive a refund.
(i) In the absence of a Consumer’s
request for a refund, the requirement to
provide a refund in accordance with
this section shall not apply where the
balance in an inactive IPCS Account is
$1.50 or less. To the extent a Provider
is unable to issue a refund requested by
a Consumer, the Provider shall treat
such balances consistent with
applicable state consumer protection
law concerning unclaimed funds or the
disposition of such accounts.
(j) Providers shall issue refunds
required pursuant to this section
through:
(1) The IPCS Account holder’s
original form of payment;
(2) An electronic transfer to a bank
account;
(3) A check; or
(4) A debit card.
(k) Providers shall clearly, accurately,
and conspicuously disclose to IPCS
Account holders, through their Billing
Statements or Statements of Account,
E:\FR\FM\20SER2.SGM
20SER2
77368
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
notice of the status of IPCS Accounts
prior to their being deemed inactive.
(1) This notice shall initially be
provided at least 60 calendar days prior
to an IPCS Account being deemed
inactive.
(2) The notice shall be included in
each Billing Statement or Statement of
Account the Provider sends, or makes
available to, the account holder until the
IPCS Account holder takes one of the
actions sufficient to restart the 180-day
period in paragraph (c) of this section or
the IPCS Account becomes inactive
pursuant to this section.
(3) All notices provided pursuant to
this paragraph shall describe how the
IPCS Account holder can keep the IPCS
Account active and how the IPCS
Account holder may update the refund
information associated with the IPCS
Account.
■ 26. Add § 64.6140 to read as follows:
ddrumheller on DSK120RN23PROD with RULES2
§ 64.6140
Alternate Pricing Plans.
(a) General Parameters. (1) A Provider
offering IPCS via an Alternate Pricing
Plan must comply with this section as
well as § 64.710 and this subpart FF.
(2) Enrollment in an Alternate Pricing
Plan must be optional for the Consumer.
(3) A service period for an Alternate
Pricing Plan shall be no longer than one
month.
(4) When determining the format of an
Alternate Pricing Plan, Providers must
consider:
(i) Any limits on the number of and
length of calls or communications
imposed by the Correctional Facility;
(ii) The availability of correctional
staff to manage the use of IPCS at the
Correctional Facility; and
(iii) Equipment availability for the
calls or communications at the
Correctional Facility.
(b) Alternate Pricing Plan Rates. (1)
An Alternate Pricing Plan must be
offered at a rate such that the Breakeven
Point is at or below the applicable rate
cap(s).
(i) A consumer complaint about an
IPCS Provider’s Alternate Pricing Plan
rates will not be entertained under the
rules in this section unless the
consumer’s usage meets or exceeds the
Breakeven Point(s) for the Alternate
Pricing Plan.
(2) If a Consumer believes that the
rates under an Alternate Pricing Plan
exceed the applicable per-minute rates
for that Correctional Facility, the
Consumer must show that their usage
meets or exceeds the Breakeven Point
for the Alternate Pricing Plan. It is the
Provider’s burden to demonstrate that
the rate charged to that Consumer under
its Alternate Pricing Plan is less than or
equal to the applicable rate cap.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(3) After a Consumer uses all of the
minutes, calls, or communications
available during a service period of an
Alternate Pricing Plan, the charge for
subsequent minutes, calls, or
communications during the remaining
part of the service period shall not
exceed the Provider’s per-minute rate
for the corresponding service.
(c) [Reserved]
(d) [Reserved]
(e) Automatic Renewals and Related
Consumer Disclosures. (1) If a Provider
of an Alternate Pricing Plan offers
automatic renewals, the automatic
renewals must be optional to the
Consumer.
(2) [Reserved]
(f) Cancellation by the Consumer and
Related Consumer Disclosures. (1) A
Provider must allow a Consumer using
an Alternate Pricing Plan to cancel their
participation in the Alternate Pricing
Plan at any time during the relevant
service period and revert to per-minute
pricing. The Consumer may end their
participation in the Alternate Pricing
Plan on the date of their choosing. The
process for cancelling an Alternate
Pricing Plan must be readily accessible
to the Consumer and must include the
method that the Consumer used to
enroll in the Alternate Pricing Plan.
(2) [Reserved]
(3) The refund amount provided to
the Consumer upon the Consumer’s
cancellation of an Alternate Pricing Plan
for the special circumstances provided
in paragraph (f)(2) of this section must
be at least the pro-rated amount that
corresponds to the unused portion of
the service period.
(g) Application to
Telecommunications Relay Service
(TRS) and Related Communications
Services. A Provider that offers an
Alternate Pricing Plan shall make TRS
and related communications services
available via the Alternate Pricing Plan,
pursuant to § 64.6040 of this chapter.
■ 27. Delayed indefinitely, amend
§ 64.6140 by adding paragraphs (c), (d),
(e)(2) through (4), (f)(2) and (f)(4) to read
as follows:
§ 64.6140
Alternate Pricing Plans.
*
*
*
*
*
(c) Consumer Disclosures. (1) A
Provider offering an Alternate Pricing
Plan must comply with the consumer
disclosure requirements in § 64.6110 as
well as the requirements in this section.
(2) Before a Consumer enrolls in an
Alternate Pricing Plan; upon request, at
any time after Alternate Pricing Plan
enrollment; with a Billing Statement or
Statement of Account, and any related
communications; and at the beginning
of each call or communication, the
PO 00000
Frm 00126
Fmt 4701
Sfmt 4700
Provider also must make disclosures
that include the following information
for each Alternate Pricing Plan offered
by the Provider:
(i) The rates and any added
Mandatory Taxes or Mandatory Fees, a
detailed explanation of the Mandatory
Taxes and Mandatory Fees, total charge,
quantity of minutes, calls or
communications included in the Plan,
the service period, and the beginning
and end dates of the service period;
(ii) Terms and conditions, including
those concerning dropped calls and
communications in paragraph (d) of this
section, automatic renewals in
paragraph (e) of this section and
cancellations in paragraph (f) of this
section;
(iii) An explanation that per-minute
rates are always available as an option
to an Alternate Pricing Plan and that
per-minute rates apply if the Consumer
exceeds the calls/communications
allotted in the Plan;
(iv) The Breakeven Point indicating at
the amount of Alternate Pricing Plan
usage above which the Consumer will
save money compared to the Provider’s
applicable per-minute rate for the same
type and amount of service at the
Correctional Facility; and
(v) The ability to obtain prior usage
and billing data, upon request, for each
of the most recent three service periods
(where feasible), including total usage
and total charges including taxes and
fees.
(3) The Provider must make the
disclosures for Alternate Pricing Plans
pursuant to this paragraph (c) of this
section available: to the public on the
Provider’s website; on the Provider’s
online or mobile application, if
Consumers use the application to enroll
in the Plan; via paper upon request; and
via the methods for general IPCS
disclosures pursuant to § 64.6110
before, during, and after a Consumer’s
enrollment in a Plan.
(4) In every communication between
the Provider and a Consumer (or the
Incarcerated Person, if they are not the
Consumer) concerning the Alternate
Pricing Plan, the Provider must either
include the disclosures for Alternate
Pricing Plans pursuant to paragraph (c)
of this section, or provide clear, easy to
follow, instructions for how the
consumer (or Incarcerated Person, if not
the Consumer) may immediately obtain
access to those disclosures.
(5) Before a Consumer enrolls in a
Plan, and at any time upon Consumer
request, the Provider must also provide
to the Consumer:
(i) The rates, Breakeven Point, and
total cost including any Mandatory
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Taxes or Mandatory Fees associated
with the Plan; and
(ii) An explanation that the
Consumer’s prior usage and billing data
is available upon request through a
readily accessible means and must
include:
(A) For the Provider’s most recent
three service periods (where feasible):
the minutes of use for each of the calls
or communications made by the
Consumer and the applicable perminute rate that was charged; the total
number of minutes; and the totals
charged for each service period
including the details of any Mandatory
Taxes and Mandatory Fees; and
(B) This prior usage and billing data
must be made available to the Consumer
via the Provider’s website or online or
mobile application or via paper upon
request of the Consumer.
(6) After the Consumer enrolls in a
Plan, the Provider must provide Billing
Statements and Statements of Account
for the Plan via the same method the
Consumer used to sign up for the Plan,
and via paper upon Consumer request.
The Billing Statements and Statements
of Account must include information
specific to the Alternate Pricing Plan for
the service period but the Consumer
must be able to receive, upon request,
information for the past three service
periods (where feasible). The Billing
Statement or Statement of Account must
include for each service period:
(i) Call details, including the duration
of each call made, and the total minutes
used for that service period, and the
total charge including Mandatory Taxes
and Mandatory Fees, with explanations
of each Mandatory Tax or Mandatory
Fee;
(ii) The charges that would have been
assessed for each call using the
Provider’s per-minute rate, and the total
of those charges;
(iii) The calculated per-minute rate for
the service period under the Alternate
Pricing Plan, calculated as the charge for
the service period divided by the total
minutes used by that Consumer, with an
explanation of that rate;
(iv) The Breakeven Point with an
explanation of the Breakeven Point; and
(v) Information about deposits made
to the Consumer’s IPCS Account and the
IPCS Account balance.
(7) The Provider must make available
the number of minutes, calls, or
communications remaining under a
Consumer’s Alternate Pricing Plan for
the service period without the
Consumer having to initiate a call or
communication that would count
toward a fixed allotment of minutes,
calls, or communications in an
Alternate Pricing Plan.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
(d) Dropped Calls or Communications
and Related Consumer Disclosures. (1)
A Provider offering an Alternate Pricing
Plan must explain its policies regarding
dropped calls or communications in
plain language in its consumer
disclosures.
(2) The consumer disclosures must
include:
(i) The types of dropped calls and
communications that a Consumer can
seek a credit or refund for;
(ii) How the Provider will calculate a
credit or refund for a dropped call or
communication; and
(iii) The method the Consumer must
use to request a credit or refund for a
dropped call or communication, and
that method must be easy for the
Consumer to complete.
(e) * * *
(2) A Provider offering an Alternate
Pricing Plan must explain the terms and
conditions of the automatic renewal in
plain language in its consumer
disclosures when it initially offers the
automatic renewal option and before
any automatic renewal is about to occur
by whatever method the Provider has
established for consumer notifications
to the Consumer.
(3) The consumer disclosures must
include an explanation that if a
Consumer who requested automatic
renewals does not later want the
Alternate Pricing Plan to be renewed,
the Consumer may cancel their
participation in the Alternate Pricing
Plan.
(4) The Provider must give notice of
an upcoming renewal for an Alternative
Pricing Plan directly to the Consumer
no later than three business days prior
to the renewal date. Along with
providing the notice, the Provider must
explain, in plain language, the terms
and conditions of the automatic renewal
using, at a minimum, the method of
communication the Consumer agreed to
at the time they enrolled in the
Alternate Pricing Plan.
(f) * * *
(2) A Provider must issue a refund for
the remaining balance on an Alternate
Pricing Plan if:
(i) The Incarcerated Person is
released;
(ii) The Incarcerated Person is
transferred to another Correctional
Facility; or
(iii) The Incarcerated Person is not
permitted to make calls or
communications for a substantial
portion of the subscription period.
*
*
*
*
*
(4) Consumer disclosures related to
Consumer cancellation of an Alternate
Pricing Plan must include:
PO 00000
Frm 00127
Fmt 4701
Sfmt 4700
77369
(i) An explanation that a Consumer
enrolled in an Alternate Pricing Plan
may cancel at any time and where
applicable, the Provider will begin
billing the Consumer at the Provider’s
per-minute rates by the first day after
the termination date;
(ii) An explanation of the process for
requesting cancellation of the Alternate
Pricing Plan;
(iii) An explanation that the
Consumer can end the Alternate Pricing
Plan on a specific termination date of
their choosing; and
(iv) The special circumstances for
which a Consumer who has cancelled
their enrollment shall receive a refund
and how that refund will be calculated.
*
*
*
*
*
Note: The following appendices will not
appear in the Code of Federal Regulations.
Appendix D: Data Collection
1. This appendix and the other technical
appendices that follow outline the data
compilation and analysis that the
Commission staff (staff) conducted using the
2023 Mandatory Data Collection as part of
the Commission’s efforts to determine just
and reasonable and fairly compensatory rate
caps for incarcerated people’s
communications services (IPCS).
Collectively, the appendices provide: a
description of the database compilation
(Appendix A); a description of methods
(Appendix B); summary statistics (Appendix
C); a least absolute shrinkage and selection
operator (Lasso) analysis to determine what
characteristics of IPCS provision have a
meaningful association with providers’
reported per-minute expenses (Appendix D);
our upper bound analysis (Appendix E); our
lower bound analysis, including validation
analyses (Appendix F); and a validation
analysis of the rate caps adopted in the Order
(Appendix G).
2. Description of Data Collection. On July
26, 2023, the Wireline Competition Bureau
and the Office of Economics and Analytics
released an Order implementing the 2023
Mandatory Data Collection regarding IPCS.
All providers of IPCS were required to
respond to the data request by October 31,
2023. For the purposes of the 2023
Mandatory Data Collection, a provider is
defined as any contractor or subcontractor
that provides IPCS, regardless of whether that
entity has a contract directly with the facility
or with another provider. The aim of this
collection was to acquire IPCS providers
financial and operating data as part of the
Commission’s efforts to set just and
reasonable and fairly compensatory rate caps.
Generally, the data collection required IPCS
providers to report, for 2022, billed and
unbilled demand (minutes and
communications) and billed revenues for
audio and video IPCS and ancillary services;
monetary and in-kind site commission
payments, both legally mandated and
contractually prescribed; and investments
and expenses for audio and video IPCS,
safety and security measure services,
E:\FR\FM\20SER2.SGM
20SER2
ddrumheller on DSK120RN23PROD with RULES2
77370
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ancillary services, and all other products and
services. Throughout Appendices D through
J, we use terms defined in the 2023
Mandatory Data Collection. Unless otherwise
specified, we observe the following
conventions: ‘‘minutes’’ refers to Billed and
Unbilled Minutes sometimes also written
‘‘billed and unbilled minutes’’; ‘‘IPCS
minutes’’ refers to the sum of Audio IPCS
Billed and Unbilled Minutes and Video IPCS
Billed and Unbilled Minutes; ‘‘audio IPCS
services’’ is typically shortened to ‘‘audio
services’’; ‘‘video IPCS services’’ is typically
shortened to ‘‘video services’’; ‘‘audio
minutes’’ refer to Audio IPCS Billed and
Unbilled Minutes; ‘‘video minutes’’ refer to
Video IPCS Billed and Unbilled Minutes; the
same conventions for minutes apply to
communications, which generally can be
thought of as calls; ‘‘revenues’’ refer to Billed
Revenues; ‘‘safety and security measure
services’’ are typically shortened to ‘‘safety
and security services’’; and ancillary services
refer to the five types of services defined in
the data collection as ‘‘Permissible Ancillary
Services,’’ for which the Commission’s rules
allowed providers to assess charges: (i)
automated payment services, (ii) live agent
services, (iii) paper bill/statement services,
(iv) single-call and related services, and (v)
third-party financial transaction services (all
other ancillary services are defined as ‘‘Other
Ancillary Services’’). To minimize the
burden of the collection, we required
providers to supply information based on
their internal accounts, while remaining
consistent with their financial reports and
GAAP.
3. The data collection requested
information from providers at company-wide
and facility levels, as well as by various
categories of investments and expenses. We
required reports at the company level for two
reasons: such reports may be compared with
company financial statements and doing so
constrains the investments and expenses to
be allocated among IPCS and IPCS-related
services and non-IPCS. We required reports
at the facility level to give us insight into
how costs might vary with facility size and
type. Staff also prepared a detailed set of
instructions for providers, which required
providers to allocate their reported
investments and expenses among IPCS and
IPCS-related services and other products and
services and to further allocate the IPCS
investments and expenses among facilities.
Specifically, we required providers to
allocate their investments and expenses, to
the extent possible, in the following order:
direct assignment; direct attribution based on
factors that cause a particular business
activity and thus investments or expenses to
increase or decrease; indirect attribution in
proportion to related categories of
investments or expenses that are directly
assigned or directly attributed; or allocation
based on the share of the total of all
investments or expenses already directly
assigned or attributed.
4. Structure of the Collection. To collect
these financial and operating data, and to
help the Commission understand the data at
different levels and across different
categories, staff developed an Excel template
and a Word template, which we required
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
providers to populate. Providers were
required to report information at the
company-wide level (worksheets C1–C2),
including total company investments, capital
expenses, operating expenses, and revenues.
Investments (capital assets) categories
include: tangible assets; capitalized research
and development; purchased software;
internally developed software; trademarks;
capitalized site commissions; other
identifiable intangible assets; and goodwill.
Gross investment, accumulated depreciation
or amortization, and net investment are
reported separately for each of these
categories of assets. The remaining
investment categories are: accumulated
deferred federal income taxes, accumulated
deferred state income taxes, customer
prepayments or deposits, cash working
capital, and net capital stock. None of these
categories is specific to any category of
capital assets. The Excel template calculates
net capital stock—gross investment in assets,
net of accumulated depreciation and
amortization, accumulated deferred federal
and state income taxes, and customer
prepayments or deposits, plus an allowance
for cash working capital. Capital expenses
categories include: depreciation—tangible
assets; amortization—capitalized research
and development; amortization—purchased
software; amortization—internally developed
software; amortization—trademarks;
amortization—capitalized site commissions
(includes amortization recognized as an
offset against gross revenues); amortization—
other identifiable intangible assets;
amortization—goodwill; return; interest other
than interest paid on customer prepayments
or deposits; interest paid on customer
prepayments or deposits; federal income tax;
state income tax. The Excel template
calculates return by multiplying net capital
stock by the provider’s claimed weighted
average cost of capital or the default after-tax
rate of return of 9.75%. Federal and state
income taxes are not allocated. The Excel
template uses the provider’s reported federal
and state income tax rates and tax-deductible
interest expense to calculate the federal and
state income tax income taxes that
correspond to the taxable fraction of the
return. Operating expenses categories are:
maintenance, repair, and engineering of site
plant, equipment, and facilities; payments to
telecommunications carriers or other entities
for interstate, international, or intrastate
communications other than extra payments
to telecommunications carriers or other
entities for international communications;
extra payments to telecommunications
carriers or other entities for international
communications; field services; network
operations; call center; data center and
storage; payment of site commissions
recognized as an expense or an offset against
gross revenues when paid or when the
commissions-related transaction occurred;
billing, collection, client management, and
customer care; sales and marketing; general
and administrative; other overhead; taxes
other than income taxes; transactions related
to mergers and acquisitions; and bad debt.
Annual total expenses is the sum of annual
operating expenses and annual capital
expenses (including a return on net capital
PO 00000
Frm 00128
Fmt 4701
Sfmt 4700
stock to cover the cost of capital). Providers
were also required to allocate their data
across ten (10) categories of services: audio
IPCS, video IPCS, safety and security
measures, permissible ancillary services
(automated payment services, live agent
services, paper bill/statement services,
single-call and related services, and thirdparty financial transaction services), other
ancillary services, and other products and
services. Site commissions are reported only
for the entire company; they are not allocated
among services or facilities. Ancillary service
reports are not split out as between audio and
video. Providers also were required to report
their revenues from each of the 10 service
categories.
5. Providers were further required to
allocate their company-wide investments and
expenses to the facility level for audio and
video IPCS costs, respectively (worksheet
D1). These data are providers’ allocations of
the annual expenses they incurred to supply
IPCS to each facility. Providers were also
required to report revenues and demand for
audio IPCS, video IPCS, and ancillary
services at the facility level, by reporting
billed revenues and total billed and unbilled
minutes of use for each facility. For audio
and video IPCS, providers reported billed,
unbilled, and the total of billed and unbilled
communications and minutes and billed
revenues for each facility. In addition to the
billed totals, billed communications,
minutes, and revenues are reported
separately for interstate, international, and
intrastate communications for each facility.
For ancillary services, providers reported
billed demand separately for automated
payment service (number of uses), live agent
service (uses), paper bill/statement service
(uses), single-call and related services
(number of transactions), and third-party
financial transaction service (transactions),
and billed revenues separately for each these
services for each facility. Providers were
required to report company-wide annual
safety and security expenses among seven
different safety and security categories: (i) the
Communications Assistance for Law
Enforcement Act (CALEA) compliance
measures; (ii) law enforcement support
services; (iii) communication security
services; (iv) communication recording
services; (v) communication monitoring
services; (vi) voice biometrics services; and
(vii) other safety and security measures
(worksheet C3). Safety and security expenses
were allocated across four different service
categories: (a) audio IPCS; (b) video IPCS; (c)
ancillary services; and (d) other products and
services. The company-wide safety and
security expenses for audio and video IPCS
were then allocated among facilities as well
(worksheet D2.c). Providers were directed
simply to use estimates to allocate their
safety and security expenses.
6. Providers also were required to report
site commissions attributable to all company
products and services. They were further
required to report company-wide ‘‘IPCS and
associated ancillary services,’’ to report site
commissions as either legally-mandated or
contractually-prescribed, and were further
required to sub-categorize these commissions
as monetary, in-kind, fixed, upfront, and
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
variable site commissions (worksheet C3).
Throughout Appendices D–J, the term ‘‘site
commissions’’ without further modification
means all site commissions of all forms.
These company-wide site commission figures
were also required to be allocated among
facilities (worksheet D2.b). There was no
requirement to allocate site commissions
between audio IPCS, and video IPCS and
associated ancillary services separately.
7. Providers were required to identify any
affiliates or third parties they used to provide
ancillary services, to report any payments to
third parties for ancillary services, and to
quantify any third-party fees they paid for
ancillary services that they passed through to
their customers (worksheet C3). Providers
were also required to report any IPCS or
ancillary services revenues passed through to
their affiliates and any payments made to
their affiliates to complete international
communications. Similarly, providers were
required to supply these responses at a
facility level (worksheet D2.e).
8. Breadth of the Collection. Twenty-one
providers submitted responses to the 2023
Mandatory Data Collection. The list of filers
with associated short names or acronyms
used for these providers in appendices D
through J: Ameelio, Inc. (Ameelio); ATN, Inc.
(ATN); City Tele-Coin Co. (City Tele-Coin);
Correct Solutions, LLC (Correct); Combined
Public Communications (CPC); Crown
Correctional Telephone, Inc. (Crown);
Consolidated Telecom, Inc. (Consolidated);
Custom Teleconnect (Custom); Encartele, Inc.
(Encartele); Global Tel*Link Corporation d/b/
a ViaPath (ViaPath); HomeWAV, LLC
(HomeWAV); ICSolutions, LLC (ICSolutions);
iWebVisit.com, LLC (iWeb); NCIC Inmate
Communications (NCIC); Pay Tel
Communications, Inc. (Pay Tel); Prodigy
Solutions, Inc. (Prodigy); Reliance Telephone
of Grand Forks, Incorporated (Reliance);
Securus Technologies, LLC (Securus); Smart
Communications (Smart); Talton
Communications, Inc. (Talton); and TKC
Telecom, LLC (TKC). Of this group, twelve
provided data, or revisions to their data,
before May 1, 2024, which, as explained
below, we were able to process and include
in our provider database: ATN, City TeleCoin, CPC, ICSolutions, HomeWAV, NCIC,
Pay Tel, Prodigy, Securus, Smart, TKC, and
ViaPath. Staff made the IPCS database
available to Reviewing Parties in accordance
with the relevant Protective Orders and
Public Notice. The resulting IPCS database
covers 2,750 contracts and 4,537 facilities,
accounting for an average daily population of
2,112,042 incarcerated people and 11.3
billion billed and unbilled minutes of audio
and 563 million billed and unbilled minutes
of video. Unless otherwise indicated, our
analyses and tables that follow are derived
from this database.
9. The IPCS database provides a helpful
depiction of the IPCS industry. The
database’s twelve providers represent the
vast majority of the IPCS industry, and their
worksheets, though not audited, are broadly
consistent with their submitted financial
accounts. For seven providers beyond these
twelve, staff were able to capture data such
as minutes and/or revenues, though not the
same data from each. The additional seven
77371
are from Ameelio, Correct, Crown,
Consolidated, Custom, iWeb, and Talton. For
the remaining two providers, {[REDACTED]}.
Incorporating these data shows that the
database of twelve providers covers
approximately 84% of reported facilities, and
approximately 87% of incarcerated persons.
Table 1 reports shares of minutes,
communications (the number of audio or
video calls), and revenues covered by the
twelve providers included in the database
alongside the shares of the seven providers
we excluded to the extent those seven
providers provided processable data (the data
from {[REDACTED]} were either missing or
unreliable). As described above, our database
includes twelve providers: ATN, CPC, City
Tele-Coin, HomeWAV, ICSolutions, NCIC,
Pay Tel, Prodigy, Securus, Smart, TKC, and
ViaPath. There are another seven providers
reflected in this table’s second row whose
data we could process in part, but who were
ultimately excluded from the database for the
reasons discussed below: Ameelio, Correct,
Crown, Consolidated, Custom, iWeb, and
Talton. Finally, staff could not process the
submissions of Encartele and Reliance. The
table marginally overstates the relative
marketplace significance of the providers
included in the database, though the impact
is de minimis. The overstatement arises for
several reasons: some of {[REDACTED]}; and
some very small providers did not file. It is
staff’s view that if data were available for all
these providers, the impact on our
conclusions would amount to no more than
a rounding error.
Table 1: Relative Percentage of Minutes, Communications, and Revenue in Database
Audio
Video
Percent
Percent Billed
Percent
Percent
Percent Billed
Percent
Billed and
and Unbilled
Revenue
Billed and
and Unbilled
Revenue
Unbilled
Communications
Unbilled
Communications
Minutes
Providers in
Minutes
99.03%
99.27%
96.89%
99.95%
99.97%
99.98%
0.97%
0.73%
3.11%
0.05%
0.03%
0.02%
Database (12)
Providers
Excluded from
Note: Based on providers' submitted worksheets aggregated up from the facility-level with minimal processing.
A. Description of Initial Data Processing,
Data Cleaning, and Database Compilation
10. This subsection reviews the steps we
took to process, clean, and combine the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
collected 2023 Mandatory Data Collection
data into a database.
11. Data Combination. Staff created
variable names for each row of data in the
Excel templates. Staff combined the
PO 00000
Frm 00129
Fmt 4701
Sfmt 4700
processed twelve provider submissions into
a database, segmented by tabs organized by
worksheet from the submissions. Since the
same facilities appear in multiple
worksheets, staff took care to ensure the
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.000
ddrumheller on DSK120RN23PROD with RULES2
Database (7)
77372
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
database linked the same facilities across all
worksheets.
12. Data Review. Staff reviewed each
submission, including the narratives
supplied in the Word template, and checked
for errors to evaluate whether the submitted
data complied with the Excel template
parameters. To minimize data submission
errors, the Excel template included formulas
to check for consistency between provider’s
company-wide and facility-specific entries.
In all cases, staff communicated issues
identified in our review, and allowed
providers to resubmit corrected data. This
resulted in some form of extended interaction
between staff and providers in all cases
except Consolidated, Custom, and Talton. In
these communications, staff answered
provider questions about the data collection
requirements and/or explained the data
collection process to aid submission. We
received 14 refilings as a result of our error
check process. The following providers
refiled: Ameelio, CPC, Correct, City TeleCoin, HomeWAV, ICSolutions, NCIC,
Prodigy, Securus, Smart, TKC, ViaPath, and
Pay Tel on two occasions. The conversations
which staff had with these providers to
prompt their refiling illustrates that the
Commission ‘‘made inquiries to providers
during the data-collection process regarding
‘‘questionable’’ cost data.’’
13. Removing Invalid or Incomplete Data.
Despite these efforts, staff concluded that we
could not incorporate into the database
worksheets submitted by nine providers:
Ameelio, Correct, Crown, Consolidated,
Custom, Encartele, iWeb, Reliance, and
Talton. Staff would have removed
{[REDACTED]}. Most commonly, filings
could not be incorporated because providers’
reports of expense, revenue, or demand data
were wholly or partially omitted. For
example, among other problems,
{[REDACTED]} did not provide costs at the
facility level. Thus, their data could not be
used to analyze how per-minute expenses
vary by facility type, a matter which is
central to the analysis. Similarly, among
other problems, {[REDACTED]} did not
provide IPCS minutes, making analysis of
per-minute expenses, which is the basis for
capping rates, impossible. In other cases, the
provider failed to fully allocate investments
or expenses, failed to identify the relevant
subcontractor, or failed to report video
expenses at a facility level, among other
problems. For example, {[REDACTED]} did
not allocate investments or expenses to the
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
other products and services category (though
it supplies other services, e.g., electronic
incarcerated person messaging services and
management services) overstating
{[REDACTED]} IPCS expenses.
{[REDACTED]} also did not identify the
name of the subcontractor, address, and
facility geographic coordinates for all
facilities making it impossible to match
{[REDACTED]} expense reports with those of
its subcontractors, making analysis of
{[REDACTED]} facilities impossible.
{[REDACTED]} did not allocate IPCS costs
between audio IPCS and video IPCS (though
it provides both services). {[REDACTED]}
provided no financial statements, providing
no means of cross-checking their expense
reports. Without such cross checks staff and
outside parties cannot even determine
whether {[REDACTED]} reports are
internally consistent. {[REDACTED]} also left
the company-wide investment and expenses
and facility video worksheets blank (though
it sells video), making analysis of its
expenses, and of video services impossible.
In contrast to claims in the record, no
provider was excluded from the database
based on the provider’s costs relative to
industry costs.
14. Excluding an Anomalous Provider.
{[REDACTED]}
15. Excluding Federally Managed
Facilities. Staff also excluded from the
database facilities subject to the Immigration
and Customs Enforcement (ICE) and the
Bureau of Prisons (BOP) contracts because
these facilities are not comparable to other
correctional facilities. Significant portions of
incarcerated people’s communications
services in these institutions are managed by
a federal incarceration authority rather than
the reporting provider. As was the case in the
2021 ICS Order, {[REDACTED]}.
{[REDACTED]} under those subcontracts
from the database. Staff removed all BOP
contracts they were able to identify. In 2021
ICS Order, staff allocated the shared costs to
the BOP contract before dropping it, but that
is not necessary for this data collection as it
required providers to allocate all their costs
down to the facility, {[REDACTED]}.
16. Data Corrections. For the 12 filings
reflected in the database, staff made
corrections where necessary and feasible. In
cases where unique facility identifiers were
not identical across worksheets due to
misspellings, abbreviations, or other mistakes
(e.g., ‘‘Couny’’ versus ‘‘County’’), staff
corrected these. In cases where the provider
PO 00000
Frm 00130
Fmt 4701
Sfmt 4700
did not identify the facility as a jail or prison,
and staff was able to do so, staff inserted the
relevant facility type. Twenty-four entries
could not be identified as a jail or prison, and
were removed. Of these 24 facilities,
{[REDACTED]} entries given at the contract
level that could not be matched to a facility.
Two more entries do not correspond to a
specific facility, and are instead attributed to
‘No Specific Contract’ and ‘Other Non IPCS
Facility Sites.’ The last is an {[REDACTED]}.
ViaPath submitted average daily population
(ADP) and site commissions data at the
contract level, so staff allocated ADP from
contracts to facilities in proportion to
ViaPath’s total audio and video IPCS
communications. Communications were
chosen as the allocator variable as it
correlates strongly with ADP in ViaPath’s
single-facility contracts. Communications
was chosen over minutes as the allocator as
the Pearson correlation coefficient was higher
between ADP and communications than ADP
and minutes. However, the impact of this
choice is small. The difference in
methodologies influences the industry perminute IPCS expenses by no more than
$0.0046 and by no more than 2.22% in any
size-bracket, audio or video. This largest
difference can be found in video IPCS perminute expenses for very small jails, where
the minutes-weighted methodology is
$0.0046 lower than the calls-weighted
methodology. Additionally, for some
facilities reported total (billed + unbilled)
minutes of use did not match the sum of
billed and unbilled minutes of use. To fix
these discrepancies, for both audio and
video, total minutes of use were recalculated
by summing billed and unbilled minutes of
use.
17. Treatment of Subcontractors. At certain
facilities, IPCS is provided by a contractor
and a subcontractor. In some cases, both the
contractor and subcontractor submitted cost
or demand data for a single facility, because
each incurred some part of costs or bills for
service. To account for this, staff matched or
removed facilities across contractor/
subcontractor pairs to avoid double counting
the same facility. As facility IDs are not
consistent among providers, staff performed
many matches by examining information on
address, counterparty, building, type,
latitude, and longitude. Table 2 below
depicts the attempted and successful
matches:
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77373
Matched
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
18. In cases where the contractor and
subcontractor both submitted data that could
be incorporated into the dataset, multiple
entries for a single facility were merged into
one. For non-numeric descriptive data and
numeric data that could not easily aggregate
across entries, such as max call duration,
average daily population, or tax rates, staff
used the values given by the contractor for
the merged entry if available. Staff summed
numeric data that would not be duplicated
across entries, such as revenue, cost, and
minute information. In total, staff merged 82
subcontractor entries with 81 contractor
entries. In one case, a facility is reported by
three providers, with {[REDACTED]} both
acting as subcontractors. In the three
instances where a match was attempted but
could not be made, staff removed the
facilities, as identified. Additionally,
{[REDACTED]} remain in the dataset, but
staff removed the video information. In other
cases, where the subcontractor was not
incorporated into the dataset, either because
it never filed or was excluded, staff removed
those facility entries. This accounts for the
removal of 354 facility entries, which, in
addition to the other steps, leaves 4,537
facility entries in the dataset.
19. Geocoding. The providers were asked
to provide address and coordinate
information for each facility. However, many
facilities lacked coordinate information. Staff
used address information, where given, to
geocode the dataset to generate coordinate
information. As many providers’ coordinates
were incomplete, inaccurate, had low
precision, or were different from staffgeocoded coordinates by a large distance,
staff-geocoded coordinates were used where
possible. To identify facilities as urban or
rural, staff used Census-block data published
by the US Census Bureau. The US Census
identifies urban census tracts with five-digit
UACE codes. Using UACE codes provided in
the 2020 Census, staff identified 2,474 urban
and 1,975 rural facilities, for a total of 4,449
identified facilities. 98% of included
facilities across all providers could be
identified as urban or rural using provider
coordinates or geocoded addresses. This is
used in the Lasso Analysis in Appendix D.
VerDate Sep<11>2014
Contractor
17:27 Sep 19, 2024
Jkt 262001
Appendix E: Rate Cap Methodology
1. This appendix describes the method
staff used to analyze the 2023 Mandatory
Data Collection data and estimate the upper
and lower bounds of our zones of
reasonableness for incarcerated people’s
communications services (IPCS) per-minute
expenses. The structure of the data collection
allows staff to determine the fully distributed
cost of providing IPCS for each provider and
the entire industry. Providers were required
to directly assign, attribute, or allocate all of
their investments and expenses among audio
IPCS, video IPCS, safety and security
measures, ancillary services, and other
products and services. Our measure of the
fully distributed cost of providing a service,
annual total expenses, sums the provider’s
operating expenses and capital expenses,
including an allowance for recovery of its
cost of capital. As described in Appendix A
above, annual total expenses accounts for all
of a provider’s expenses, including
maintenance, repair, and engineering and 14
other categories of operating expenses,
depreciation and amortization expenses,
federal and state income taxes, and the
provider’s cost of capital. Annual total
expenses were reported for audio IPCS, video
IPCS, safety and security measures, and
ancillary services at the company level and
separately for audio IPCS and video IPCS at
each facility. Company-wide annual total
expenses of providing safety and security
were allocated among seven different safety
and security categories separately for audio
IPCS, video IPCS, ancillary services, and
other products and services. Audio IPCS and
video IPCS safety and security expenses were
further allocated by category among facilities.
We determine our lower and upper bounds
described in this Order by dividing allowable
amounts of the reported expenses for various
IPCS components by billed and unbilled
minutes separately for prisons and different
jail sizes. In this appendix, we outline the
critical components of this analysis necessary
to set just and reasonable rate caps for the
provision of IPCS.
2. Unit of Analysis. As discussed in the
data collection description section, the 2023
Mandatory Data Collection required
providers to report audio IPCS and video
IPCS investments and expenses at two levels:
PO 00000
Frm 00131
Fmt 4701
Sfmt 4700
that of the provider (company-wide) and that
of individual facilities the provider serves.
Our analysis of providers’ costs is performed
primarily at the level of the individual
facility. This is in contrast to the 2021 ICS
Order where staff analyzed provider data at
the level of the contract, which was
necessary because, in the ordinary course of
business, many filers did not maintain
requested cost data at the facility level.
Relying on multi-facility contracts
encompassing facilities of varying sizes, and
in particular contracts that included facilities
with less than 1,000 ADP, likely led to an
overestimate of interim rate caps. The ratesetting methodology staff employ in this
rulemaking relies on reported facility-level
data, and thus avoids this problem. The
structure of the 2023 Mandatory Data
Collection, delineated by a detailed set of
instructions requiring providers to assign,
attribute, or allocate reported audio IPCS and
video IPCS investments and expenses among
facilities, allows for a more granular facilitylevel analysis. This ensures that the analysis
is fully consistent with our rate-setting
approach, which establishes rate caps for
facilities rather than for contracts.
3. Separation into Tiers. Staff separate
facility observations into prisons versus jails
and into jail size tiers based on average daily
population (ADP), analyzing provider IPCS
investments and expenses separately within
each tier. Staff establish the following tiers
for the purposes of rate setting: prisons; large
jails (ADP ≥ 1,000); medium jails (350 ≤ ADP
< 1,000); small jails (100 ≤ ADP < 350); and
very small jails (ADP < 100). This approach
is largely consistent with the approach taken
in the 2021 ICS Order and is similarly
consistent with record evidence of the cost
differences among facilities of different sizes.
However, whereas the 2021 ICS Order did
not adopt rate caps for jails with ADP less
than 1,000, the 2023 Mandatory Data
Collection enables us to address IPCS
facilities of all sizes. As such, staff must
establish additional jail size tiers for the
purposes of rate setting. Staff analysis of the
variation in IPCS costs across jails of
different sizes showed that significant cost
differences exist among facilities served.
These cost differences reflect progressively
greater costs for jails with smaller ADPs,
which warrants a more granular tiering
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.001
ddrumheller on DSK120RN23PROD with RULES2
Table 2: Subcontractor to Contractor Matchin2 Results
Subcontractor
Contractor
Facilities with
Successfully
ddrumheller on DSK120RN23PROD with RULES2
77374
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
structure for jails than that adopted in
previous orders, comprising four tiers based
on jail size. Staff examined per-minute costs
both graphically and using simple
regressions. While there were no sharply
obvious break points, per-minute costs
increased at an increasingly steep rate as
facility ADP fell. This suggested use of the
tiers adopted in the Rates for Inmate Calling
Services, WC Docket No. 12–375, Second
Report and Order and Third Further Notice
of Proposed Rulemaking, 30 FCC Rcd 12763
(2015) with the small jails tier split into two
tiers, now called small jails and very small
jails. Grouping facilities into the tiers
outlined above is necessary to ensure that our
rate caps reflect underlying differences in the
cost of IPCS provision across different types
and sizes of facilities. Prisons and jails are
distinguished under our rules largely by their
respective confinement periods, with prisons
used to confine individuals ‘‘sentenced to
terms in excess of one year’’ and jails used
to confine those with shorter sentences. This
definitional difference entails a meaningful
difference in average confinement periods
and turnover rates, which drives part of the
difference in costs between the two types of
facilities. Thus, by accounting for facility
type, our rate caps account for the impact of
turnover on costs. We examine the impact of
other factors in the Lasso analysis below.
4. Unit of Sale. Our rate setting
methodology relies on the sum of billed and
unbilled minutes of audio or video IPCS as
the unit of sale. That is, we divide annual
total expenses by billed and unbilled minutes
to determine separate per-minute rate caps
for audio and video IPCS for each facility
tier. Use of a per-minute rate structure is
consistent with past Commission action,
reflects the predominant industry pricing
strategy for IPCS, and is consistent with
existing Commission rules covering interstate
and international audio IPCS, which require
providers to charge for service on a perminute basis. While this rulemaking allows
alternate pricing plans, such as monthly
plans for a set number of calls or minutes,
subject to certain specified conditions, all
providers still must offer per-minute pricing
for audio and video IPCS. The use of both
billed and unbilled minutes is an
improvement from the 2021 ICS Order,
which divided expenses by paid minutes,
and better reflects the cost of actual minutes.
This approach helps ensure all incarcerated
persons are charged no more than the cost of
their calls, and treats all minutes equally,
regardless of a facility’s or a provider’s policy
decisions on whether and how to provide
free minutes. We disagree with commenters
who argue that, similar to the 2021 ICS
Order, we should have calculated per-minute
costs on the basis of billed minutes rather
than the sum of billed and unbilled minutes.
The ratio of billed minutes to unbilled
minutes varies across facilities, and rate caps
based on the average cost of a billed minute
would allow over recovery of costs, and
therefore unreasonably high rates, in
facilities that had a lower ratio than the
average facility in 2022, while allowing
under-recovery in other facilities. As a result,
such an approach would also mean the
Commission was effectively requiring
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
incarcerated people who receive relatively
few free minutes to subsidize other users.
Further, if the relative proportions of billed
to unbilled minutes were to shift in the
future, a rate cap based on the amount of
billed minutes would become outdated. It is
true that many ‘‘IPCS providers—particularly
those serving jails—are required to provide
certain calls (e.g., calls for booking and calls
to public defenders) free of charge.’’ The
Report and Order does not prevent or in any
way discourage this. Just as correctional
authorities may pay providers to offer calling
plans that (from the incarcerated person’s
perspective) are free, correctional authorities
may enter into arrangements with providers
that allow incarcerated people to make
certain types, or a certain number, of free
calls. Correctional authorities remain free to
decide whether and how providers should
offer unbilled minutes. We further note that
there is no strict parallel between ‘‘Paid
Minutes,’’ as used in the 2021 ICS Order, and
‘‘Billed Minutes’’ as used in the 2023
Mandatory Data Collection. Billed minutes
do not equal paid minutes to the extent
minutes are billed for, but not paid. The
instructions for the 2023 Mandatory Data
Collection define billed minutes as the
number of audio or video IPCS minutes
supplied for which payment is demanded,
and define unbilled minutes as the number
of audio or video IPCS minutes supplied for
which payment is not demanded. Thus,
billed minutes reported in response to the
2023 Mandatory Data Collection are intended
to include minutes billed to the caller, called
party, incarcerated authority, or any other
third party whether or not these bills were
actually paid. By contrast, paid minutes
reported in response to the Second
Mandatory Data Collection were intended to
exclude minutes which were billed, but for
which the bills were not actually paid. (Our
measure of expenses reflected in the rate caps
includes an allowance for bad debt expense
to recognize unpaid bills that are no longer
expected to be collected due to customer
default.)
5. Industry Average Costs. The Martha
Wright-Reed Act expressly granted the
Commission authority to use industry-wide
average costs to set IPCS rate caps. Our ratesetting approach relies on this new statutory
authority. As such, our analysis of provider
investments and expenses calculates the
minute-weighted average expense of IPCS
provision, separately for audio and video
IPCS and within each rate tier. If staff were
confident of three things: That the providers’
cost allocations reasonably reflect costcausation; there was no underlying cost
variation within each of our five facility
categories when looking at audio and video
separately; and there was no overstatement of
costs—then rate caps based on the industry
average would be far too high from an
efficiency perspective. For example, our
analysis showed no material variation from
facility to facility in local market conditions.
However, it is unlikely that any of these three
things are true, so instead staff use the
minute-weighted industry average to account
for potential variation in costs within our
categories, and discount certain costs using a
zone of reasonableness analysis, to account
PO 00000
Frm 00132
Fmt 4701
Sfmt 4700
for potentially misallocated or cost variation
otherwise not controlled for. Specifically, our
analysis calculates the minute-weighted
average expense of providing IPCS,
separately for audio and video IPCS for each
facility tier (prisons, and jails of differing
sizes). Staff calculate minute-weighted
average costs as annual total expense divided
by total billed and unbilled minutes,
separately for audio and video IPCS and
within each rate tier. Staff reliance on
industry average costs is further supported by
the Brattle Group’s analysis of the 2023
Mandatory Data Collection data. Brattle finds
considerable variation in costs among IPCS
providers and the facilities they serve,
particularly in the provision of video IPCS,
and ultimately drop all facility observations
with costs above $0.25 per minute in their
analysis of per-minute expenses. We have
concerns with such an approach, as dropping
observations creates a delta between
company-wide expenses and those reported
across providers’ facilities. In addition, any
threshold relied upon for pruning outliers
must either be untenably high or would
potentially drop valid data points. However,
given that Brattle relies on simple, rather
than weighted, averages of facility-level perminute expenses, pruning of outliers needs to
take place to obtain meaningful results.
Staff’s use of weighted industry average
expenses per minute avoids this concern,
allowing even significant outlier observations
to be included in the calculation of rate caps
while ensuring that such observations do not
have a disproportionate impact on the
results. We disagree with commenters who
argue that the use of the industry average to
develop our caps is ‘‘confiscatory.’’
6. Staff consider that the industry minuteweighted averages, controlling for audio or
video service, and whether the facility is a
prison or a jail of a particular size, are good,
if high, estimates of efficient costs for the
following reasons. First, providers differ in
their cost accounting practices, and use
different and necessarily imperfect cost
allocators. These cost allocation variations
create cost differences across facilities that
are not related to the efficient cost of service
delivery. However, by definition, these cost
allocation problems cancel out across each
provider—that is, if costs are overallocated to
one facility, they must be under allocated to
another. This conclusion does not apply, of
course, to costs that are improperly allocated
to IPCS rather than to nonregulated services.
If these inappropriate cost allocations are
relatively random across all facilities, and
there is no evidence to the contrary, then the
use of the per-minute weighted mean would,
as a good approximation, net these
differences out. The Commission could only
take a different action if there was a known
correctable cost allocation bias. Second,
given providers’ incentives, costs are likely
overstated, biasing the industry mean toward
overstating efficient costs. That
{[REDACTED]} reported company-wide IPCS
revenues that were respectively about 15%,
15%, and 25% below their reported IPCS
costs plus site commissions is evidence of
cost overstatement. There are many ways that
costs could be overstated which we cannot
audit on the record before us and, to the
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
extent additional information would help us
resolve the matter, within the timeframe the
Martha Wright-Reed Act sets for Commission
action. Securus argues that ‘‘the assumption
that costs must be inflated is contrary to the
draft’s conclusion that the cost information is
reliable.’’ We disagree. Third, to the extent
that providers’ cost reports are not overstated
in the sense that they reflect actual costs,
many providers appear to be inefficient,
implying that the industry mean is further
biased toward overstating efficient costs. For
example, there is substantial variation in
provider costs that quality or scale
differences do not readily explain. While the
largest providers, {[REDACTED]}. These
disparities are not likely explained by quality
differences, since, for example, the large
providers tend to offer more features than
smaller ones, suggesting they should have
higher per-minute costs. Fourth, while there
may be some variation in efficient costs, after
controlling for audio or video service, and
whether the facility is a prison or a jail of a
particular size, the cost variation that can be
attributed to any given factor is relatively
small compared with the preceding two
sources of difference. The record suggests the
key drivers of audio cost are facility-type and
size, which are already controlled for in our
rate-setting approach. The Lasso analysis
shows the relationship between costs and
other variables, apart from provider identity
and state, to be largely statistically
insignificant. Although our Lasso analysis
points to provider identity and state as the
dominant predictors of costs, we find that
these variables are not appropriate for
incorporation into our rate caps. In summary,
when taking the industry mean, the variation
due to the first of these points likely cancels
out; the variation due to the second and third
points likely results in substantial
overstatement of efficient per-minute
expenses; and the true cost variation of the
fourth point is small. Thus, the industry
minute-weighted mean likely lies above
efficient costs. This is further supported by
analysis of facility per-minute revenues.
7. Overview of Our Zones of
Reasonableness. Staff establish zones of
reasonableness, separately for audio and
video IPCS and for each facility tier, and
determine final audio and interim video IPCS
rate caps from within these zones. A zone of
reasonableness approach helps avoid giving
undue weight to imprecise and likely
overstated provider cost data, as well as to
data assumptions and adjustments that could
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
lead to unduly high or low per-minute rate
caps.
8. Staff begin by using data that providers
submitted in response to the 2023 Mandatory
Data Collection to establish upper bounds.
Staff make no adjustments to provider
reported expenses beyond the data cleaning,
processing, and corrections discussed in the
data collection appendix, and supplement
these data with estimates of the costs
incurred by facilities to provide access to
IPCS and by providers to provide TRS. As
discussed above, we find that, in light of the
Martha Wright-Reed Act’s elimination of the
requirement that ‘‘each and every’’
completed communication be fairly
compensated, it is appropriate to set our
upper and lower bounds based on industrywide average costs at each tier of facilities,
without the need to consider one standard
deviation or any other measure of deviance
from the average. Staff then make reasonable,
conservative adjustments to the reported data
and use those data to establish the lower
bounds of our zones of reasonableness.
Finally, we select rates from within each
zone of reasonableness to establish final
audio and interim video IPCS rate caps for
each facility rate tier.
9. Components of Our Upper Bounds. Our
upper bounds incorporate five distinct
components of expenses for audio and video
IPCS: (i) audio/video IPCS expenses; (ii)
audio/video IPCS safety and security
expenses; (iii) ancillary service expenses; (iv)
correctional facility expense component; and
(v) TRS allowance. Staff discuss and explain
each of these components in the upper
bounds appendix.
10. Components of Our Lower Bounds. As
indicated, staff establish our lower bounds by
making reasoned disallowances and
adjustments to reported provider cost data.
The lower bounds appendix explains the
need for these steps. After the disallowances
and adjustments, the lower bounds
incorporates the following components of
industry average costs: (i) audio/video IPCS
expenses after adjustments to certain expense
categories; (ii) audio/video IPCS safety and
security expenses after certain disallowances
and adjustments to expense categories; (iii)
ancillary service expenses after adjustments
to certain expense categories; and (iv)
unadjusted TRS allowance. The impact of the
expense adjustments on ancillary service
expenses is trivial, shaving $0.001 off the
lower bounds.
PO 00000
Frm 00133
Fmt 4701
Sfmt 4700
77375
Appendix F: Summary Statistics
1. The database, developed as described in
Appendix A, is the primary data source for
our analysis. This appendix provides
summary statistics and associated analysis
for that database. The database used in our
analyses contains data for 4,537 facilities
supplied by 12 providers, referred to
throughout as the industry. The following
discussion summarizes key aspects of audio
and video incarcerated people’s
communications services (IPCS) provision,
including industry demand, revenue, and
expenses as reported in the database.
2. As mentioned in previous sections, the
data used for this analysis comes from two
levels of data: company-wide and facilityspecific. It is important to note that the
estimates from company-wide and facilityspecific do not always perfectly match one
another. Therefore, estimates using companywide data may vary slightly from facilityspecific data.
A. Industry Fundamentals
3. Table 1 provides an overview of the size
and composition of audio and video supply
and of the nature of audio and video
expenses. In 2022, IPCS audio was the
predominate form of communication, and
IPCS audio usage outweighed IPCS video.
There were 11,266 million audio IPCS
minutes, and 558 million video IPCS
minutes. Thus, audio minutes comprised
approximately 95% of industry minutes—see
Table 1. Similarly, audio communications
comprised approximately 97% (1.82 billion/
1.878 billion) of industry communications.
This difference was less marked in terms of
facilities: 2,092 facilities had video calls, or
about half as many 2,092, was about half as
many as had audio, 4,151. This suggests that
in 2022 video had barely taken off as a
service, and it is highly likely that video
share today is much higher than in 2022, and
likely will continue to grow. It is best to first
focus on audio given the lopsided share of
audio data and, as evidenced below, the odd
results for video, which are likely attributable
to the nascent nature of video supply in
2022. Either in terms of minutes or average
daily population (ADP) the two largest IPCS
providers by far were {[REDACTED]}.
4. [REDACTED]. Video is also different
from audio in other ways. {[REDACTED]}.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
77376
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 1: Summary Statistics for Audio and Video IPCS, By Provider and Industry
Audio
Number of
Minutes
Where
ADP
(Percent of Audio IPCS and Safety &
ADP Where (Percent of
Billed and
Industry
Expenses
Security
Audio is
Audio is
Industry
Unbilled Audio
Audio
Per Audio
Expenses
Supplied
Supplied
ADP)
Minutes
Minutes)
Minute
Per Minute
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
ED]}
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
ED]}
ED]}
DJ}
ED]}
ED]}
{[REDACTED]}
DJ}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ddrumheller on DSK120RN23PROD with RULES2
ED]}
ED]}
{[REDACTED]}
D]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
ED]}
Jkt 262001
ED]}
PO 00000
D]}
Frm 00134
D]}
D]}
D]}
DJ}
D]}
D]}
DJ}
D]}
D]}
DJ}
D]}
D]}
DJ}
D]}
D]}
D]}
D]}
D]}
DJ}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
DJ}
D]}
DJ}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
Fmt 4701
Sfmt 4725
D]}
E:\FR\FM\20SER2.SGM
DJ}
20SER2
D]}
ER20SE24.002
Facilities
AudioIPCS
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Industry
4,151
1,817,786
100%
11,266,271,215
100%
$0.029
77377
$0.075
Video
Number of
Minutes
Where
(Percent of Video IPCS and Safety &
ADP
ADP Where (Percent of
Billed and
Industry
Expenses
Security
Video is
Video is
Industry
Unbilled Video
Video
Per Video
Expenses
Supplied
Supplied
ADP)
Minutes
Minutes)
Minute
Per Minute
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
ED]}
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
ED]}
ED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ED]}
ED]}
{[REDACTED]}
D]}
ddrumheller on DSK120RN23PROD with RULES2
ED]}
ED]}
{[REDACTED]}
D]}
VerDate Sep<11>2014
ED]}
17:27 Sep 19, 2024
Jkt 262001
ED]}
PO 00000
D]}
Frm 00135
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACT {[REDACT {[REDACT {[REDACTE
ED]}
D]}
D]}
D]}
D]}
{[REDACTE {[REDACTE {[REDACTE
{[REDACTED]}
Fmt 4701
Sfmt 4725
D]}
E:\FR\FM\20SER2.SGM
D]}
20SER2
D]}
ER20SE24.003
Facilities
Video IPCS
77378
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT {[REDACT {[REDACT {[REDACTE
{[REDACTE {[REDACTE {[REDACTE
ED]}
ED]}
ED]}
D]}
{[REDACTED]}
D]}
D]}
D]}
Industry
2,234
1,102,165
100%
558,129,967
100%
$0.118
$0.209
Source: Data from facility-specific Excel tabs. There are 4,537 facilities in our dataset. Of these, 4,235 facilities
have entries for both audio minutes and expenses, and, of these 4,235 facilities, 4,151 have entries for ADP. Of the
original 4,537 facilities in the dataset, 2,266 facilities have entries for both video minutes and expenses, and, of these
2,266 facilities, 2,234 have entries for ADP. Minute(s) refer to the sum of billed and unbilled minute(s).
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
time, quality differences, and providers being
at different points in their video deployment.
For example, some providers may be further
down the ‘‘learning by doing’’ cost curve,
and/or have incurred costs without yet
achieving the sales volumes they are capable
of.
7. Finally, Table 2 shows providers’ shares
of audio minutes can be quite different from
their share of audio communications,
implying that the average length of an audio
communication varies across providers. This
is directly shown in Table 2, and is also true
PO 00000
Frm 00136
Fmt 4701
Sfmt 4700
for video. Table 2 also shows that the average
video communication lasts about 18.3
minutes, more than double the average audio
communication length of 7.3 minutes. Yet,
{[REDACTED]}. Video communication
lengths are also considerably more varied
than those of audio. Audio communications
lengths vary by about nine minutes, from 4.3
to 12.9, while video communications lengths
vary by about twenty-one minutes, from 3.6
to 25.1 minutes. The industry standard
deviation across providers is 2.3 for audio
and 6.8 for video.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.004
ddrumheller on DSK120RN23PROD with RULES2
5. Table 1 also illustrates that per-minute
audio expenses vary significantly across
carriers. Focusing first on audio, while
{[REDACTED]}.
6. Per-minute video expenses vary much
more than audio. The industry standard
deviation across providers is 210.7 for audio
and 1,187.5 for video. And again there are
surprises. For example, despite being a
relatively low-cost audio provider,
{[REDACTED]}. This wide variation could
arise from accounting differences, including
choices on how to depreciate assets over
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77379
Table 2: The Ratio of Audio Minutes to Audio Communications and Video Minutes to Video
Communications
385
Audio Minutes /
Video Minutes /
Communications
Communications
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
7.3
18.3
4,244
2,287
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
D]}
{[REDACTE
Industry
Obs(#)
BILLING CODE 6712–01–C
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00137
Fmt 4701
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.005
ddrumheller on DSK120RN23PROD with RULES2
D]}
77380
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
B. Expenses, Revenues, and Margins
8. Expenses. Table 3 shows providerreported expenses, as allocated between five
categories: audio, video, safety and security
services, site commissions, and ancillary
services. Throughout Appendices D through
J, the term ‘‘site commissions’’ refers to the
sum of all forms of monetary payment, inkind payment, gift, exchange of services or
goods, fee, technology allowance, or product
that a provider or affiliate of a provider may
pay, give, donate, or otherwise provide to an
entity that operates a facility, an entity with
which the provider enters into an agreement
to provide IPCS, a governmental agency that
oversees a facility, the city, the county, or
state where a facility is located, or an agent
of any such facility. In-kind site commissions
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
amount to less than one percent of all site
commissions. Site commissions are not IPCS
costs. Ancillary services refer to the five
types of services defined in the data
collection as ‘‘Permissible Ancillary
Services,’’ which our rules allowed providers
to charge: (i) automated payment services, (ii)
live agent services, (iii) paper bill/statement
services, (iv) single-call and related services,
and (v) third-party financial transaction
services (all other ancillary services are
defined as ‘‘Other Ancillary Services’’). As
expected, {[REDACTED]}. Safety and
security expenses are the largest source of
industry expenses, accounting for more than
a third of the sum of reports for the five listed
expenses. Yet, there is a sharp difference
PO 00000
Frm 00138
Fmt 4701
Sfmt 4700
between {[REDACTED]}, a matter we will
turn to when discussing Table 4.
9. After safety and security, site
commissions account for the second largest
fraction of industry expenses—over one
fourth. (Percent of Site Commissions of All
Related Expenses = (Legally Mandated Site
Commissions + Contractually Prescribed Site
Commissions)/Total Expenses = ($29,017,010
+ $403,577,600)/$1,555,228,234 = 27.8%.) By
comparison, audio expenses account for
about one fifth of industry expenses, and
ancillary services for about one tenth. A
distant last place, video expenses only
account for less than five percent of this total,
again likely reflecting that video was a new
service in 2022.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77381
Table 3: Industry Expenses and Site Commissions, By Provider and Category
Safety &
Ancillary
Sum of Expenses
Audio
Video
Security
Site
Service
and Site
Expenses
Expenses
Expenses
Commissions
Expenses
Commissions
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
ED]}
]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
ED]}
]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
ED]}
]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
]}
ED]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
ED]}
]}
]}
}
}
{[REDACTED]} {[REDACTED]}
{[REDACT {[REDACTED {[REDACTED {[REDACTED] {[REDACTED]
ED]}
]}
}
}
$346,353,404
$71,350,523
$569,889,222
$432,594,611
{[REDACTED]} {[REDACTED]}
$135,040,474
$1,555,228,234
Source: Data from Company-Wide Information, Safety & Security Measures, and Commissions and Rev Sharing
Excel tabs.
10. Using facility-specific data from
providers, we also analyze expenses and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
revenues separately for prisons and jails, and
for different jail sizes. We categorize jails
PO 00000
Frm 00139
Fmt 4701
Sfmt 4700
based on average daily population (ADP). A
large jail is defined as a jail with an ADP
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.011
ddrumheller on DSK120RN23PROD with RULES2
Industry
]}
77382
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
equal to or greater than 1,000. A medium jail
is a jail with an ADP of or greater than 350
and less than 1,000. A small jail has an ADP
of or greater than 100 and less than 350.
Lastly, a very small jail has an ADP of less
than 100. As demonstrated in the tables
below, a large majority of facilities are jails
as opposed to prisons and, of all jails, about
half classify as very small, with ADPs of less
than 100.
11. Table 4 reports first audio expenses,
excluding safety and security expenses, per
billed and unbilled audio minute by facility
type for each provider and the industry
average, and then the same thing for video.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Focusing first on audio, it shows that audio
expenses per billed and unbilled minute tend
to be lower for prisons compared to jails for
the entire industry, with an industry average
of about $0.02 for prisons and between $0.02
and $0.09 across the different jail sizes.
However, for the three providers that serve
prisons, the difference between prisons and
jails is minimal. Similarly, smaller jails tend
to have higher per-minute expenses for audio
compared to larger jails. Industry audio
expenses per billed and unbilled minute are
about $0.02, $0.04, $0.06, and $0.09 for large,
medium, small, and very small jails,
respectively. Again, the data for video
PO 00000
Frm 00140
Fmt 4701
Sfmt 4700
contain anomalies. Video per-minute
expenses for prisons were $0.156, greater
than that for jails of all sizes except very
small jails, reversing the same comparison for
audio. And the per-minute expenses of the
three providers of prisons are very different,
with an order of magnitude range of
{[REDACTED]}. With only ten providers
reporting video expenses, industry video
expenses per billed and unbilled minute are
about $0.09, $0.09, $0.12, and $0.21 for large,
medium, small, and very small jails,
respectively. Table 4 also shows the outsized
impact of {[REDACTED]}.
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77383
Table 4: IPCS Expenses Per Billed and Unbilled Minutes, By Facility Type and Provider
Medium
Very Small
l-\ll Facilities
Prisons
Large Jails
Jails
Small Jails
Jails
($ I Min)
($ /Min)
($ /Min)
($ /Min)
($/Min)
($ /Min)
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ddrumheller on DSK120RN23PROD with RULES2
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
.
0
ED]}
{[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
Industry
0.029
0.023
0.023
0.037
0.059
0.087
Obs(#)
4,184
1,361
120
415
873
1,415
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACTED]} {{[REDA {[REDACT
-0
> DJ}
VerDate Sep<11>2014
ED]}
{[REDACT
{[REDACTED]}
ED]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
17:27 Sep 19, 2024
ED]}
Jkt 262001
PO 00000
ED]}
Frm 00141
ED]}
Fmt 4701
ED]}
Sfmt 4725
CTED]}}
E:\FR\FM\20SER2.SGM
ED]}
20SER2
ER20SE24.012
0
;a
<=
ED]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
{[REDACT
{[REDACTED]}
ED]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
77384
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
ED]}
{[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
{[REDACTED]}
ED]}
Industry
0.121
0.156
0.094
0.094
0.116
0.208
Obs(#)
2,740
968
88
343
667
674
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
{[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
EDJ}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACTED]}
ED]}
Source: Data from facility-specific Excel tabs.
12. Safety and Security Expenses. Table 5
presents per-minute audio and per-minute
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
video IPCS safety and security expenses for
facility types. It shows that {[REDACTED]}.
PO 00000
Frm 00142
Fmt 4701
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.013
ddrumheller on DSK120RN23PROD with RULES2
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
{[REDACT
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77385
Table 5: Audio and Video Safety & Security Expenses Per Billed and Unbilled Audio and Video
Minute, By Facility Type and Provider
All
Prisons
Large Jails
Jails
Small Jails
Jails
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
Industry
0.046
0.051
0.042
0.040
0.029
0.030
Obs(#)
4,159
1,330
120
414
873
1,422
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
0
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
~
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00143
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.014
ddrumheller on DSK120RN23PROD with RULES2
Very Small
Facilities
{[REDACT
:a
-<=
Medium
77386
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
Industry
0.092
0.137
0.097
0.089
0.058
0.047
Obs(#)
2,255
633
83
326
625
588
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
0
{[REDACT
~
"0
>
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
Source: Data from facility-specific Excel tabs.
{[REDACTED]}
BILLING CODE 6712–01–C
VerDate Sep<11>2014
17:27 Sep 19, 2024
13. International Audio Termination
Expenses. Staff examine the providers’
Jkt 262001
PO 00000
Frm 00144
Fmt 4701
Sfmt 4700
reported international termination expenses
to determine the feasibility of establishing a
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.015
ddrumheller on DSK120RN23PROD with RULES2
{[REDACT
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
separate rate cap to recover those expenses.
Under the Commission’s current rules, a
provider can charge a per-minute rate for
international audio communications that
does not exceed the applicable interstate rate
cap plus the average per-minute amount the
provider paid its international service
providers for communications to a particular
international destination. Under these rules,
a provider is also required to determine the
average amount paid for communications to
each international destination for each
calendar quarter and to adjust its maximum
rates based on this determination within one
month of the end of each calendar quarter.
Providers were required to report extra
payments to telecommunications carriers or
other entities for international
communications as an operating expense on
row 75 on the C1–C2. Company-Wide
Information worksheet. {[REDACTED]}
{[REDACTED]}. As these extra payments are
for termination of audio communications to
international destinations, and providers can
77387
impose a separate charge on international
minutes to recover these expenses under our
rules, staff divide {[REDACTED]}. Logically,
if none of the extra payments to
telecommunications carriers or other entities
for international communications were
allocated to video IPCS, then the portion of
the extra payments allocated to safety and
security measures would be attributed to
audio IPCS provision. Table 6 below details
this calculation.
Table 6: {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
telecommunications carriers or other entities
for interstate, international, or intrastate
communications other than extra payments
to telecommunications carriers or other
entities for international communications. In
other words, they may have reported the
extra payments on row 74 on the C1–C2.
Company-Wide Information worksheet and
row 85 on the D1. Facility Audio IPCS Costs
and D1. Facility Video IPCS Costs
worksheets. To the extent that these other
providers report these extra payments as
expenses on any other row, these expenses
are reflected in annual total expenses and
thus in the upper and lower bounds of our
audio rate caps. Consequently, the upper and
lower bounds for our audio rate caps are
likely overstated because providers can still
impose a separate charge for termination of
PO 00000
Frm 00145
Fmt 4701
Sfmt 4700
international audio communications,
consistent with the Commission’s existing
rules.
16. Revenues. Turning to the other side of
the ledger, Table 7 depicts IPCS billed
revenues, inclusive of the portion of those
revenues used to pay monetary site
commissions (revenues hereafter), by
category for each provider and the overall
industry. Table 7 shows that the
overwhelming majority of IPCS revenue is
audio revenue, roughly 77%. {[REDACTED]}
We conclude that generally safety and
security measures are not priced separately.
Our instructions specified that only revenues
derived from safety and security measures
that are priced separately were to be reported
separately.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.016
ddrumheller on DSK120RN23PROD with RULES2
14. {[REDACTED]}. In addition, nothing in
the record suggests a need to create a separate
charge for video analogous to the separate
charge for termination of international audio
communications.
15. Staff note that annual total expenses, as
developed on the Excel template, excludes
extra payments to telecommunications
carriers or other entities for international
communications. {[REDACTED]} other
providers make payments for termination of
international communications. They likely
report these as expenses on a different row
than the row designated for reporting these
extra payments in the Excel template. For
example, providers may have reported the
extra payments for international
communications not as extra payments but
instead as part of payments to
77388
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 7: IPCS Billed Revenues, By Provider and Industry
Safety & Security
IPCS Ancillary
Revenue
Revenue
(3)
(4)
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]} {[REDACTED]} {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
$5,820,502
$188,778,151
$1,336,253,130
Audio Revenue Video Revenue
(1)
Industry
(2)
$1,025,851,747
$115,802,730
Total Revenue
(1)+(2)+(3)+
(4)
Source: Using data drawn from the company-wide Excel tab. Revenue includes site commission payments passed
on to the correctional facility.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
50% again for medium jails, and finally by
about 20% for small jails, with no change for
very small jails. However, this pattern is
largely driven by {[REDACTED]}. Many of
the smaller providers’ per-minute revenues
fall for some jail size declines, and often their
per-minute revenues are quite close across
PO 00000
Frm 00146
Fmt 4701
Sfmt 4700
the jail types they serve. The latter half of
Table 8 reveals less variation across facility
types for video than for audio revenues per
billed and unbilled minutes, but
directionally the effects are similar.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.017
ddrumheller on DSK120RN23PROD with RULES2
17. The top of Table 8 shows the audio
revenues per billed and unbilled audio
minutes among the different facility types for
each provider and for the industry average.
Looking at the industry; revenues, per billed
and unbilled minutes, are lowest for prisons,
increasing by about 50% for large jails, by
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77389
Table 8: IPCS Revenues Per Billed and Unbilled Minutes, By Facility Type and Provider
All
Medium
Very Small
Facilities
Prisons
Large Jails
Jails
Small Jails
Jails
(Rev /Min)
(Rev /Min)
(Rev /Min)
(Rev /Min)
(Rev /Min)
(Rev /Min)
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
Industry
0.088
0.061
0.092
0.139
0.169
0.167
Obs(#)
4,184
1,361
120
415
873
1,415
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
-~
"O
<=
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
.,0
~
{[REDACT
ED]}
-
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00147
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.018
ddrumheller on DSK120RN23PROD with RULES2
{[REDACT
77390
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
Industry
0.196
0.158
0.140
0.206
0.238
0.176
Obs(#)
2,740
968
88
343
667
674
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
{[REDACT
ED]}
{[REDACT
Source: Data from facility-specific Excel tabs. Revenue includes site commission payments passed on to
the correctional facility.
18. Margins. Provider’s reported margins,
the difference between their reported
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
revenues and expenses, including site
commission payments, are remarkable—see
PO 00000
Frm 00148
Fmt 4701
Sfmt 4700
Table 9. Half of the 12 companies in the
database, including the largest three,
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.019
ddrumheller on DSK120RN23PROD with RULES2
ED]}
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACTED]}. And five of these companies
{[REDACTED]}. The reported losses are so
large that they result in an industry loss of
77391
about $219 million, more than 16% of
industry revenue. {[REDACTED]}
Table 9: Industry Revenues, Expenses, and Mar2ins
Calling + Safety
Calling + Safety &
Difference
& Security+
Security + IPCS
between Industry
IPCS Ancillary
Ancillary Service
Revenues and
Service Revenues
Expenses + Site
Industry
(1)
Commissions (2)
Expenses (1) - (2)
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
$1,336,253,130
$1,555,228,234
($218,975,104)
-16.4%
Percent Margin
[(1) - (2)]/(1)
Industry
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
19. A firm’s revenues from the sale of
services over the long run must cover the
expenses it incurs to provide these services,
including its cost of capital. Otherwise, a
firm will cease to operate as it will be unable
to pay its employees, suppliers, or creditors,
or compensate its owners with a normal rate
of return for use of their money. A normal
rate of return is a rate of return equal to what
the firm’s owners could expect to earn if they
invested in their next best alternative,
holding other things, most notably risk,
constant. There is no evidence that a current
IPCS provider is failing to recover enough to
justify long-run ongoing service. While recent
press reports suggest Securus may be
considering filing for bankruptcy,
{[REDACTED]}. As such, a useful benchmark
to gauge the suitability of the providers’
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
reported expenses for setting rate caps is
whether their revenues cover their expenses.
Some providers produce services other than
and in addition to IPCS. IPCS is a key
business segment for all providers and this
segment would be expected to operate as a
profit center. Thus, a narrower comparison
between IPCS revenues and expenses is a
useful benchmark for the business segment.
20. Thus, the reported losses of at least the
six companies, {[REDACTED]} are difficult to
reconcile with a reasonable expectation of
these providers’ economic profits—their
capacity to recover the least cost of their
operations, including a return on capital
commensurate with efficient risk bearing—
rather than accounting losses relevant for tax
purposes, or to investors who may have
overpaid for the company or debtors who
may have underappreciated the risks
PO 00000
Frm 00149
Fmt 4701
Sfmt 4700
associated with their loans. {[REDACTED]}
are large and sophisticated, with many years
of experience in the provision of IPCS.
Indeed, the smaller companies reporting
losses also have many years of experience in
this industry. All these companies routinely
and voluntarily bid on contracts in an
environment they understand. They know
what services correctional authorities are
interested in and what is necessary to offer
them. They have a deep knowledge of the
characteristics of their customers and the
regulatory and political environment, and
thus of what protections are needed in their
contracts. There is nothing in the record that
suggests 2022 was a year in which any of
these providers faced unusual economic
difficulties, or to suggest that these providers’
operations are not going concerns. 2022 was
unusual due to the ongoing impacts of
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.020
Source: Using data drawn from the company-wide Excel tab.
77392
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
COVID, which led correctional facilities to
request changes in contract terms, for
example, so as to provide more free calling.
However, these were voluntary, and subject
to the original terms of the existing contracts.
There is no evidence that these changes
created financial hardship for any providers.
21. It is therefore implausible that
{[REDACTED]}. Such deficits call into
question the suitability of these four
providers’ reported expenses for setting rate
caps. In sum, these figures suggest that, at a
high level, reported costs are overstated. In
either case, use of the providers’ reported
expenses without adjustment to set rate caps
or without considering other record evidence
or recognizing that this deficit is simply a
snapshot in time that does not reflect long
run expectations may produce rate caps that
are too high, thereby enabling even an
inefficient provider to earn more than a
normal rate of return.
C. Video Versus Audio IPCS Investment and
Expense Data
22. We compare key net investment and
expense categories reported industry-wide
for video IPCS, a relatively new service, with
the same categories reported for audio IPCS,
a service that has been provided for many
years. Staff observe large differences between
the video IPCS and audio IPCS net
investment and expense data across the
various categories. This analysis excludes
consideration of safety and security
investments and expenses as providers were
not required to further allocate the various
investment and expense categories for safety
and security measures between audio and
video. Rather, providers more simply
allocated annual total expenses, our measure
of the fully distributed costs of providing
IPCS, between audio and video. Table 10
below shows each of these categories of net
investment and expense and billed revenues,
depicted in absolute dollar amounts, and
billed and unbilled minutes. Investment and
expense data are from the C1–C2. CompanyWide Information worksheet. Revenue and
minutes data are from the D1. Facility
Demand and Revenue worksheet.
BILLING CODE 6712–01–P
Table 10: Video versus Audio Indust -Wide Financial Data
Audio
Video
$/Min
Totals
Net Investment in
Totals
Video versus Audio
$/Min
Ratio of
Ratio of
Video to
Video to
Audio
Audio per
Totals
Min
103,350,224
0.009
50,202,172
0.085
0.49
9.62
205,719,708
0.018
29,249,902
0.050
0.14
2.82
297,443,629
0.025
29,860,041
0.051
0.10
1.99
Total Net Investment
606,513,561
0.052
109,312,115
0.185
0.18
3.57
Depreciation and
56,432,644
0.005
20,983,000
0.036
0.37
7.37
215,336,567
0.018
35,633,412
0.060
0.17
3.28
Billed Revenues
1,025,851,747
0.088
115,802,730
0.196
0.11
2.24
Billed and Unbilled
11,687,826,443
Tangible Assets
Net Investment in
Intangible Assets
Net Investment in
Goodwill
Amortization
Expenses
Total Operating
589,888,581
0.05
Minutes
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00150
Fmt 4701
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.021
ddrumheller on DSK120RN23PROD with RULES2
Expenses
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
BILLING CODE 6712–01–C
ddrumheller on DSK120RN23PROD with RULES2
23. Table 10 shows that the dollar amount
for each of these categories is much smaller
for video relative to audio. For example, the
ratios of video to audio dollars for net
investment in tangible assets, total net
investment, depreciation and amortization
expenses, total operating expenses, billed
revenues, and billed and unbilled minutes
are respectively about 0.49, 0.18, 0.37, 0.17,
0.11, and 0.05. In short, video has yet to
achieve anywhere near the scale of
operations as audio. This is not surprising,
given that audio is an established industry,
while video is still emerging. These facts
demonstrate relative size but not relative
efficiency between video and audio
operations.
24. One current difficulty in establishing
permanent video rate caps stems from
relative cost inefficiencies reflected in the
video net investment and expense data. To
enable a comparison between the provision
of audio and video, staff must provide a
measure of efficiency and adjust for scale.
Staff first divide the absolute dollar amount
reported for each of the net investment and
expense categories by billed and unbilled
minutes separately for video and audio. A
service is provided more efficiently if it
requires fewer dollars of investments or
expenses to produce a unit of output (e.g., a
minute of audio or video). We then divide
the resulting per-minute video net
investment and expense numbers by the
analogous audio numbers to compare the
efficiency of providing video and audio. The
last column of Table 10 shows that the
resulting video to audio ratios for all of the
net investment and expense categories are
well above one, and as high as ten. As video
and audio are different services, we would
expect the video to audio per-minute ratios
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
for the various net investment and expense
categories to differ somewhat from one, even
after video matures, though not nearly to this
same extent. Overall, these results
demonstrate that provision of video is far less
efficient than that of audio. We note that the
ratio of video to audio billed revenue per
billed and unbilled minute is also set out in
the last column of Tbl. 10. This ratio is
greater than two, meaning that average
revenue per minute for video is more than
twice that average for audio.
25. Most notably, the highest ratios of
video to audio per-minute net investments
and expenses are for tangible assets net
investment (about 10) and depreciation and
amortization expenses (about 7). While video
may have greater capital requirements than
audio, we would not expect the ratios of
video to audio per minute for tangible assets
net investment and depreciation and
amortization expenses to be nearly as high as
video usage grows significantly over time.
These high ratios may reflect providers’ large
capital outlays for purchasing and installing
long-term assets necessary for the roll out
and delivery of video, as would be expected
for a new service that requires significant
investment in fixed assets during its early
phases. At the same time, limited customer
awareness of and experience with a new
service such as video may limit initial
customer demand over which the capital
outlays for these assets may be spread.
Depreciation and amortization allocate the
initial capital outlay for a long-term asset
over its useful life as a periodic expense for
accounting or tax purposes. (While
depreciation and amortization are
conceptually the same, tangible assets are
said to be depreciated over time whereas
definite-life intangible assets are said to be
amortized over time.) We can reasonably
PO 00000
Frm 00151
Fmt 4701
Sfmt 4700
77393
expect video to experience considerable
growth in the future. As this growth occurs,
we can expect video to be provided far more
efficiently and therefore at a much lower cost
per-minute than the current video investment
and expense data suggest. Consequently, we
hesitate to establish permanent cost-based
rate caps for video at this time given the
likelihood that these caps will soon be
considerably above cost.
D. Ancillary Services
26. Table 13 shows expenses, by provider
and for the industry, per billed and unbilled
audio and video minutes for each of the
ancillary services for which providers may
assess separate interstate charges under the
Commission’s rules. Per-minute expenses for
these ancillary services collectively range
from less than {[REDACTED]}, with an
industry average of $0.011. Eight providers
reported automated payment services
expenses, and these expenses account for
most of the ancillary services expenses.
Automated payment services per-minute
expenses range from {[REDACTED]}, with an
industry average of about $0.01. Industry
expenses per minute for the other ancillary
services are no higher than one tenth of a
cent. Seven providers reported live agent
expenses; of these providers, these perminute expenses are as large as
{[REDACTED]}. Only four, three, and two
providers reported expenses for third-party
financial services, paper bill/statement
services, and single-call and related services,
respectively. As Table 11 demonstrates,
providers failed to reliably or consistently
allocate their costs among the various
ancillary services.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
77394
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 11: Ancillary Expenses Per All Billed and Unbilled Audio and Video Minutes, By Provider
TPFT
Total Ancillary
APS Expenses
LA Expenses
PBS Expenses
SC Expenses
Expenses Per
Expenses Per
Per Minute
Per Minute
Per Minute
Per Minute
Minute
Minute
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
ED]}
}
}
}
}
}
}
{[REDACT {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED] {[REDACTED]
Industry*
}
}
}
}
}
}
0.010
0.001
0.00004
0.001
0.0007
0.01 I
Source: Data drawn from the Commissions and Revenue Sharing Excel tab with the exception of minutes.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00152
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.022
ddrumheller on DSK120RN23PROD with RULES2
ED]}
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77395
Notes: Excludes all providers that report zero or nothing for each cost category. Three providers,
{[REDACTED]}, reported no ancillary expenses. Expense per minute for each ancillary service and for all
ancillary services collectively set out on the bottom row are calculated by excluding the minutes reported by
providers that did not report expenses for a particular service, or in the last column, reported no expenses for any
service. For example, {[REDACTED]} reported expenses for each ancillary service, except single-call and related
services expenses. Therefore, {[REDACTED]} expenses and minutes are included in the calculation of industry
per-minute expense for each service except for single-call and related services.
BILLING CODE 6712–01–C
E. Site Commissions
27. Table 12 shows site commissions, by
provider and industry. Site commissions are
equal to the sum of legally mandated and
contractually prescribed site commissions,
and are only attributable to audio, video,
safety and security measures, and ancillary
services, not other products and services.
Over 93% ($403.6 million/$432.6 million) of
site commissions are contractually prescribed
as opposed to legally mandated. Only two
providers, {[REDACTED]}, reported legally
mandated site commissions. The total site
commissions figure understates the overall
industry cost for site commissions, as it omits
the excluded providers, whose collective
submissions comprise less than 1% of
reported billed and unbilled minutes in the
2023 Mandatory Data Collection, and total an
additional $13,433,691 in reported site
commissions, or 3% of the industry total of
$446,038,302.
BILLING CODE 6712–01–p
Contractually Prescribed
Commissions
Site Commissions
Site Commissions
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
$29,017,010
$403,577,601
$432,594,611
Industry
Notes: Data drawn from the company-wide Excel tab.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00153
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.024
Legally Mandated Site
ER20SE24.023
ddrumheller on DSK120RN23PROD with RULES2
Table 12: Site Commissions by Site Commission Type and in Total, By Provider and Industry
77396
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
28. Table 13 shows that legally mandated
and contractually prescribed site
commissions, expressed per billed and
unbilled minute, range from{[REDACTED]}
{[REDACTED]} with an industry average of
$0.036. {[REDACTED]}
Table 13: Site Commissions Per Total Audio and Video Billed and Unbilled Minutes, By Provider
and Industry
Site Commissions Per
Providers/Industry
Minute
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Industry
0.036
Source: Site Commission data from the company-wide tab and minutes, being billed and unbilled minutes, from the
facility tab.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Similar to other expenses and revenues, site
commissions per minute are typically lower
PO 00000
Frm 00154
Fmt 4701
Sfmt 4700
among prisons and higher among medium
and smaller-sized jails.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.025
ddrumheller on DSK120RN23PROD with RULES2
29. Table 14 presents site commissions per
billed and unbilled minute, by facility type
for each provider and the overall industry.
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77397
Table 14: Site Commissions Per Billed and Unbilled Audio and Video Minutes, By Facility Type
and Provider
Site
Site
Site
Commissio
Site
Commissio
Commissio
Commissio
ns Per
Commissi
ns Per
ns Per
ns Per
Minute-
Minute-
ons Per
Minute-
Minute -
Minute -
Very
All
Minute-
Large
Medium
Small
Small
Facilities
Prisons
Jails
Jails
Jails
Jails
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
Site
Commissi
ODS
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ED]}
{[REDACT
ddrumheller on DSK120RN23PROD with RULES2
ED]}
{[REDACT
ED]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Per
PO 00000
Frm 00155
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.026
Site
77398
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
{[REDAC
ED]}
TED]}
TED]}
TED]}
TED]}
TED]}
TED]}
Industry
0.045
0.023
0.045
0.082
0.083
0.074
Obs(#)
3634
1075
109
395
851
1204
Source: Data from facility-specific Excel tabs. Only facilities with site commissions greater than zero listed.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Facilities. Tables 15 and 16 provide detailed
breakdowns of provider shares, first by
PO 00000
Frm 00156
Fmt 4701
Sfmt 4700
minutes and communications, and then by
facilities and ADP.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.027
ddrumheller on DSK120RN23PROD with RULES2
F. Supplemental Data Tables
30. Detailed Tables Showing Industry
Shares for Minutes, Communications, and
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77399
Table 15: Minute and Communications and Shares oflndustry for Audio and Video, By Provider
Audio
Minutes
Provider
Count
Video
Communications
Percent
Count
Percent
Minutes
Count
Percent
Communications
Count
Percent
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
ED]}
CTED]}
}
ACTED
]}
CTED]}
DJ}
CTED]}
]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00157
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.028
ddrumheller on DSK120RN23PROD with RULES2
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
77400
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
ACTED
}
]}
CTED]}
D]}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
}
ACTED
]}
CTED]}
D]}
CTED]}
]}
{[REDACT {[REDACTED]} {[REDA {[REDACTED] {[RED {[REDACTED {[REDA {[REDACTE {[REDA
ED]}
CTED]}
ACTED
}
]}
CTED]}
D]}
CTED]}
562,743,071
100.0%
62,258,030
100.0%
2,287
2,287
2,294
2,294
]}
Total
Obs.
11,276,212,436 100.0% 1,836,047,657 100.0%
4,244
4,244
4,244
4,244
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00158
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.029
ddrumheller on DSK120RN23PROD with RULES2
Source: Data from facility-specific Excel tabs.
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77401
Table 16: Facility and ADP Counts and Share oflndustry, By Facility Type and Provider
Facilities
Provider
Count
Prisons
Percent
Count
Percent
Jails
Count
ADP
Percent
Count
Percent
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
D]}
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
{[REDACTE {[REDA {[REDAC {[REDACT {[REDACT {[REDAC {[REDACT {[REDACTED {[REDACT
Industry
CTED]}
TED]}
ED]}
ED]}
TED]}
ED]}
]}
ED]}
4,441
100%
1,542
100%
2,899
100%
2,112,042
100%
Source: Data from facility-specific Excel tabs.
31. Safety and Security Expenses—
Detailed Tables. Tables 17- through 19
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
provide detailed breakdowns of safety and
security expenses.
PO 00000
Frm 00159
Fmt 4701
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.030
ddrumheller on DSK120RN23PROD with RULES2
D]}
77402
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 17: Audio, Video and Safety and Security Expenses Per Billed and Unbilled Audio and Video
Minute Respectively, By Provider and Industry
0
:a
<=
Audio and Video
Safety & Security
Safety & Security
Expenses Per Billed and
Expenses Per Billed and
Expenses Per Billed and
Unbilled Minute
Unbilled Minute
Unbilled Minute
I {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
0.030
0.045
0.075
I {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
0.122
0.092
0.213
Industry
I
.
0
'0
ddrumheller on DSK120RN23PROD with RULES2
>
Industry
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00160
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.031
Audio, Video and
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
77403
{[REDACTED]}
Source: Data drawn from the company-wide Excel tab with the exception of minutes. Company-wide safety and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00161
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.032
ddrumheller on DSK120RN23PROD with RULES2
security expenses are separated between audio and video. {[REDACTED]}
77404
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 18: Safety & Security Expenses Per Billed and Unbilled Audio and Video Minute, By
Provider
Col 8 =
sum (Col 1
Col I
Col2
Law
CALEA Enforceme
Col3
Col4
Col 5
Col6
Col 7
Voice
Other
to Col 7)
CommunicE Communica Communica
tion
tion
tion
Security
e Measures Services
Services
Services
Services
Services
Security
& Security
($ I min)
($/ min)
($/ min)
($ I min)
($ I min)
($/ min)
($ I min)
($ I min)
Recording Monitoring Biometrics
Safety & Total Safet)
Complianc nt Support
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
DJ}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACTE {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
ED]}
Jkt 262001
ED]}
PO 00000
ED]}
Frm 00162
ED]}
Fmt 4701
ED]}
Sfmt 4725
ED]}
E:\FR\FM\20SER2.SGM
ED]}
20SER2
ED]}
ER20SE24.033
ddrumheller on DSK120RN23PROD with RULES2
D]}
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77405
{[REDACTI {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT {[REDACT
D]}
Industry
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
0.0000005
0.002
0.016
0.012
0.008
0.004
0.005
0.047
0.00001
0.002
0.010
0.013
0.009
0.004
0.005
0.047
Industry (no
Os)
Note: This table uses data provided at the company-wide level with the exception of the calculation for the sum of
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00163
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.034
ddrumheller on DSK120RN23PROD with RULES2
total audio minutes and total video minutes. {[REDACTED]}
77406
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 21: Share of Billed and Unbilled Audio and Video Minutes with Safety & Security Costs, By
Provider(% of Minutes)
Col8=
sum(Col l
Col2
Col I
Col 3
Col4
Col 5
Col 6
Col 7
to Col 7)
Comm.
Comm.
Voice
Other
TotalIPCS
Law
Provider
CALEA
Enforcemt.
Comm.
Complianct
Support
Security
Measures
Services
Services
Recording Monitoring Biometrics Safety &
Services
Services
Services
Security
Safety &
Security
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
D]}
D]}
D]}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
D]}
D]}
D]}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
DJ}
DJ}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
DJ}
DJ}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
D]}
D]}
D]}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACT£ {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
D]}
DJ}
D]}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
DJ}
D]}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
DJ}
D]}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACT£ {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
ED]}
DJ}
DJ}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
ED]}
DJ}
D]}
DJ}
ED]}
ED]}
ED]}
{[REDACT {[REDACT {[REDACT {[REDACTI {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
ED]}
VerDate Sep<11>2014
ED]}
17:27 Sep 19, 2024
Jkt 262001
ED]}
PO 00000
DJ}
Frm 00164
DJ}
Fmt 4701
Sfmt 4725
DJ}
ED]}
E:\FR\FM\20SER2.SGM
ED]}
20SER2
ED]}
ER20SE24.035
ddrumheller on DSK120RN23PROD with RULES2
ED]}
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77407
{[REDACT {[REDACT {[REDACT {[REDACTE {[REDACTE {[REDACTE {[REDACT {[REDACT {[REDACT
eon
ED]}
ED]}
D]}
D]}
D]}
ED]}
ED]}
ED]}
0Cndustry
2.3%
87.1%
88.6%
90.4%
88.6%
93.3%
87.9%
96.3%
98.9%
90.7%
90.9%
91.0%
90.9%
93.3%
90.9%
96.3%
0Cndustry
no zeroes)
Note: This table uses data provided at the facility level. {[REDACTED]}
BILLING CODE 6712–01–C
ddrumheller on DSK120RN23PROD with RULES2
Appendix G: Lasso Analysis
1. In this appendix, staff analyze
incarcerated people’s communications
services (IPCS) providers’ responses to the
2023 Mandatory Data Collection to determine
what characteristics of IPCS provision have
a meaningful association with providers’
reported per-minute expenses. The
Commission performed a similar analysis in
Appendix F of the 2021 ICS Order, Appendix
F of the 2020 ICS Order on Remand, and in
the 2020 ICS Notice of Proposed Rulemaking
(NPRM) (85 FR 67480, October 23, 2020).
Those analyses found that provider identity
and the state a facility is in to be the most
important predictors of a contract’s perminute audio costs. Staff update that analysis
here, using the 2023 Mandatory Data
Collection data and looking at both audio and
video facility-level costs. Staff consider
characteristics such as the average daily
population (ADP) of the facility, the type of
facility served (prison or jail), and the
rurality of the facility. If these variables are
associated with statistically significant
variation in provider costs, then our analysis
would support a rate-setting approach that
has audio and video rate caps that vary along
these dimensions.
2. As before, staff use the statistical method
called Lasso (least absolute shrinkage and
selection operator). This method identifies
predictors of an outcome variable—in our
case, the logarithm of either audio or video
costs per minute—by trading off goodness of
fit against the complexity of the model, as
measured by the number of predictors. Lasso
is especially useful in situations where many
variables, and interactions among those
variables, can predict an outcome of interest.
Given that we are interested in determining
the potential cost effects of many categorical
variables as well as their interactions with
one another, the overall number of potential
variables is extremely large: our baseline
Lasso specifications consider 490 variables
for audio, and 381 for video. Estimating the
effects all these variables have on costs via
more traditional methods (such as linear
regression) is infeasible. The results of our
Lasso analysis indicate that the main
predictors of provider costs per minute at the
facilities they serve, for both audio and
video, are provider identity and the state
where the facility is located. We also find
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
that whether the facility is a prison or jail is
a predictor of costs per minute, although the
effect is weaker than provider identity and
state. A wide range of other variables have
less or essentially no predictive power for
either audio or video expenses.
3. We use the upper bound processed
dataset with the facility operated by a
provider as the unit of observation for our
analysis. For both audio and video
communications, we use the logarithm of
per-minute costs as the dependent variable.
Log transformation of the dependent variable
has two benefits: (i) it can reduce the impact
of outliers; and (ii) it can reduce skewness of
the underlying per-minute cost data and
make the distribution of the dependent
variable more normal, which can improve
model fit and help to ensure that residuals
are normally distributed. Among the
variables that we are interested in are
monetary and in-kind site commission
payments by providers at facilities they
serve. Providers, however, did not allocate
site commissions between audio and video.
Therefore, for some of our models we will
rely on the logarithm of the sum of audio and
video per-minute costs as the dependent
variable. To avoid having the Lasso biased by
misreported and outlier data, we
conservatively drop facilities with perminute audio costs above $1, per-minute
video costs above $5, or for which perminute audio or video costs are reported as
negative. Standard regression analysis is
vulnerable to distortion from outliers. The
simplest regression of the dependent variable
on an independent variable fits a line by
minimizing the sum of the squared
differences between each observation and
that line. Points on the line are the model’s
‘‘prediction,’’ and can be thought of as the
expected values of the dependent variable for
the values of the independent variable.
Outlier observations are farther from the
prediction line and squaring those
differences has a disproportionate effect on
the sum of squared differences, pulling the
prediction line towards those outliers. The
same logic applies for a multivariate
regression except that the prediction line is
a ‘‘hyperplane’’ across the multidimensional
space of all the independent variables. The
Lasso model, like standard linear regression,
minimizes the sum of squared differences
and is therefore also sensitive to outliers. In
the case of the 2023 Mandatory Data
PO 00000
Frm 00165
Fmt 4701
Sfmt 4700
Collection, there are some extreme outliers,
e.g., per-minute expense reports in excess of
$1,000 for audio and $100,000 for video. We
also drop facilities for which negative
commission payments were reported. The
predictor variables that we considered in our
analysis are as follows:
• The identity of the incarcerated people’s
communications service provider;
• The state(s) in which the correctional
facilities are located;
• The type of facility (prison or jail);
• An indicator for joint contracts (i.e.,
contracts for which an IPCS service provider
subcontracts with another incarcerated
people’s communications service provider);
• An indicator for whether the facility
receives a site commission;
• Contract average daily population (ADP);
• Five indicators for whether a facility
meets one of the five following criteria: it is
a jail with average daily population ≤100; it
is a jail with average daily population
between 100 and 350; it is a jail with average
daily population between 350 and 1,000; it
is a jail with average daily population >1,000;
or it is a prison;
• Log of safety and security expenses;
• Rurality of the facilities covered by the
contract (urban if the facility is located in an
area designated by the Urban Area Census
(UACE20) as urban);
• Various combinations (i.e.,
multiplicative interactions) among the above
variables.
4. Lasso and Costs per Minute. The Lasso
results indicate significant differences in
costs per minute across different providers
and states. The baseline Lasso models, when
all variables, including multiplicative
interactions, are included, explain
approximately 62% of the variation in audio
costs across facilities, and 67% of the
variation in video costs across facilities. In
addition to provider and state variables, these
baseline models also select variables for
facility type (i.e., prison versus jail), and
whether or not a site commission was
collected. For both our audio and video
baseline models, facility type is selected by
the Lasso almost exclusively for its
interaction effect with state dummy
variables. However, the explanatory power of
variables other than provider and state is
small.
5. To establish the incremental explanatory
power of state and provider, staff consider
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.036
*{[REDACTED]}
ddrumheller on DSK120RN23PROD with RULES2
77408
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
audio and video Lasso models where only
provider and state variables are included and
compare them with models that included all
variables except for provider and state. Staff
find the provider and state variables explain
far more than what all the other variables are
able to explain. When only provider and state
variables are included, the Lasso models
explain approximately 52% of the variation
in audio costs across contracts, and 56% of
the variation in video costs. This is a
difference of about 10% as compared with
the full model. By contrast, for models that
include all variables except for provider and
state, Lasso explains just 23% of variation in
audio costs across contracts, and 20% of the
variation in video costs, a difference of about
40% as compared with the full model.
6. The differences in costs across providers
identified by the Lasso may reflect systematic
differences in underlying costs of IPCS
provision but may also point to differences
in the way providers allocated their
company-wide investment and expenses to
the facility-level. The cost variation
attributed to the state variable may reflect
state-level differences in costs arising from
different regulatory frameworks, including
state-specific price caps that may be
correlated with provider decisions to bid on
contracts (allowing only the most efficient
providers to operate in certain states), or to
underlying cost differences due to other
state-specific factors. Given concerns that the
Lasso model may be placing undue weight on
the provider and state variables due to cost
allocation approaches that are unrelated to
the underlying cost of IPCS provision, and
given that we have substantial record
evidence indicating that facility type and size
are important dimensions along which costs
of IPCS vary, it would not be appropriate to
consider the Lasso model results as
suggesting that rate caps be established by
directly taking into account the IPCS
provider or location of a facility. Rather, the
Lasso results confirm that there are certain
data deficiencies at the facility-level, likely
due to differences in cost allocation
approaches across providers as well as
instances of cost misallocation, and provide
additional support for the industry average
cost approach to rate-setting, as such an
approach is less impacted by individual
provider decisions on cost allocation and
cost-allocation anomalies that create outlier
facility cost observations.
7. While the provider and state variables
were most significant in explaining the
variation in audio and video costs in our
Lasso models, facility type was also selected
by the Lasso as an important predictor of perminute costs. Given the results from the
Lasso models, and the strong record support
for jails being more costly to service than
prisons and smaller jails being more costly to
serve than larger ones, we explored whether
a cost difference between jails and prisons,
and between jails of different sizes, existed
using a double-selection Lasso model. Unlike
regular Lasso, which selects predictors but
does not allow for standard statistical
inference (e.g., confidence intervals,
t-statistics), double-selection Lasso allows for
statistical inference to be performed on a
subset of variables of interest. In double-
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
selection Lasso, the researcher selects a
subset of predictor variables as the variables
of interest. Two Lasso models are then run.
In the first, a Lasso is run regressing the
variables of interest on all other predictor
variables. In the second, a Lasso is run
regressing the dependent variable (in our
case, the per-minute cost of service) on all
the predictor variables except for the
variables of interest. The researcher then
takes all of the predictor variables that were
selected by the two Lasso models and runs
a regression of the dependent variable on that
subset of predictor variables and the
variables of interest. This process allows for
statistical inference on the variables of
interest.
8. For audio communications, the results of
the double selection Lasso model indicated
that—all other things equal—the costs of
providing audio services are approximately
113% greater in jails than in prisons, and the
costs of providing video services were
approximately nine percent greater in jails
than in prisons. The audio result was
statistically significant at the 99% confidence
level, whereas the video result was not
significant (z-score of 0.31). The lack of
statistical significance in the difference
between video costs in jails and prisons may
be further evidence that the 2022 video data
is unreliable; for example, it could be the
result of certain providers in the data making
significant upfront capital expenditures in
video provision, without yet realizing high
video usage. When audio and video costs
were combined, the per-minute costs of
providing audio and video service were
approximately 33% higher in jails than in
prisons, with the cost difference between
jails and prisons statistically significant at
the 90% level, but not 95% confidence level
(z-score of 1.90).
9. Lastly, we test whether providers that
pay legally mandated or contractually
prescribed site commissions at their facilities
have significantly lower per-minute expenses
than providers who do not pay site
commissions. If our results showed this, it
would be consistent with there being cost
shifting between the provider and the
correctional facility (i.e., the facility is
receiving a commission in exchange for
covering some costs of IPCS provision). With
respect to audio communications, however,
we find that facilities for which providers
pay site commissions—all else equal—have
higher per-minute costs, with the result being
significant at the 99% confidence level. This
is not consistent with cost-shifting between
the provider and the incarceration authority
receiving the site commission. Instead, it may
reflect how different providers allocated their
costs and site commissions, or something
else. For video communications, we find no
statistically significant difference in costs
between facilities that do and do not collect
a site commission. Recognizing the
aforementioned issues with our per-minute
video cost data, we also consider the sum of
per-minute video and audio costs. We find
no statistically significant difference between
costs in facilities that do and do not pay site
commissions. Altogether, our doubleselection Lasso results do not support the
premise that site commissions represent cost-
PO 00000
Frm 00166
Fmt 4701
Sfmt 4700
shifting between the provider and the
correctional facility.
Appendix H: Upper Bound Analysis
1. The following appendix explains how
staff determined the upper bounds of our
zones of reasonableness for incarcerated
people’s communications services (IPCS) perminute expenses (hereafter ‘‘upper
bound(s)’’), using the providers’ reported
expenses and billed and unbilled minutes
without adjustment. The data used consist of
the database as described in Appendix A.
Staff reviewed providers’ data for compliance
with the basic parameters of the Incarcerated
People’s Communications Services 2023
Mandatory Data Collection Instructions, WC
Docket Nos. 23–62 and 12–375, at 29, https://
www.fcc.gov/files/2023-ipcs-mandatory-datacollection-instructions, including a
comparison with their financial statements,
and shared that review with providers. In
response, providers revised and resubmitted
their data, also providing a narrative to
address these compliance issues. The
expenses of the unadjusted dataset are likely
too high. These upper bounds reflect the
allocation methods that providers chose
following our instructions. Providers
allocated their reported company-wide
investment and expenses among audio IPCS,
video IPCS, safety and security measures,
automated payment services, live agent
services, paper bill/statement services,
single-call and related services, third-party
financial transaction services, other ancillary
services, and other products and services.
Providers further allocated audio IPCS, video
IPCS, and safety and security investments
and expenses among individual facilities.
The providers chose the basis for allocation,
or allocators, as necessary to allocate their
investments and expenses among the above
services and facilities. Staff calculated ten
upper bounds—five for audio IPCS and five
for video IPCS, for prisons, large jails,
medium-size jails, small jails, and very small
jails. Staff did this to control, albeit
imperfectly, for the effect of facility type and
size on expense per minute. The average perminute expense for each category measures
the central tendency of the data for similar
facilities.
2. The respective upper bounds for audio
and video services for the five facility types
are the sum of five per-minute expense
components: (i) audio IPCS or video IPCS; (ii)
audio or video IPCS safety and security
measures (hereafter ‘‘safety and security
measures’’); (iii) ancillary services; (iv)
Telecommunications Relay Services (TRS)
compliance; and (v) correctional facilities’
expenses. We discuss these in turn.
3. Audio and Video Expenses. Audio and
video IPCS, safety and security, and ancillary
services expenses per minute are calculated
in the same way as per-minute expenses in
the summary statistics section above. Audio
IPCS and video IPCS expenses per minute,
respectively, are calculated by taking the sum
of, respectively, the reported audio IPCS and
video IPCS expenses and audio IPCS and
video IPCS billed and unbilled minutes
across all providers, and dividing the
expenses by the minutes. Safety and security
expenses per minute, respectively, sum the
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
reported safety and security expenses and
audio IPCS and video IPCS billed and
unbilled minutes across all providers and
divides the expenses by the minutes.
Ancillary services expenses per minute sums
the reported ancillary services expenses and
billed and unbilled audio and video minutes
across all providers that reported ancillary
services expenses and divides the expenses
by the minutes. The ancillary services are
automated payment services, live agent
services, paper bill/statement services,
single-call and related services, and thirdparty financial transaction services. Staff
calculated safety and security expenses per
minute for all seven safety and security
measure categories combined. The seven
safety and security measures are: (i) the
Communications Assistance for Law
Enforcement Act (CALEA), 47 U.S.C. 1001 et
seq., 47 CFR 1.20000 et seq., Compliance
Measures; (ii) law enforcement support
services; (iii) communication security
services; (iv) communication recording
services; (v) communication monitoring
services; (vi) voice biometrics services; and
(vii) other safety and security measures. This
ensures our upper bounds reflect all safety
and security expenses reported by providers
without consideration as to whether they are
used and useful in the provision of audio or
video IPCS.
4. Ancillary Services. Prior to this Order,
ancillary services were billed separately, but
going forward will be recovered under our
caps. To incorporate ancillary service
expenses into the upper bounds, staff divide
the sum of ancillary expenses by the sum of
audio and video minutes for providers
reporting said expenses and add this
quotient, $0.011, to each of our ten caps. Staff
do this because ancillary service expenses are
not reported separately for audio and video.
This also is a reasonable way to allocate these
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
costs for three reasons: billing and collection
services cover both audio and video IPCS;
both sets of charges would generally appear
on the same bill; and it is not obvious billing
and collection services for audio would be
more expensive than for video or vice versa.
Indeed, commenters asserted that the costs of
ancillary services were not distinguishable
for audio versus video IPCS.
5. TRS Expenses. The 2023 Mandatory
Data Collection invited providers to estimate
the incremental expense of complying with
the TRS requirements adopted in the 2022
ICS Order, to the extent those expenses are
not reflected in their data for 2022. Those
rules require that IPCS providers must
provide access for incarcerated people with
communications disabilities to all relay
services eligible for TRS Fund support in any
correctional facility where broadband is
available and where the average daily
population incarcerated in that jurisdiction
totals 50 or more persons. They also require
that where incarcerated people’s
communication services providers are
required to provide access to all forms of
TRS, they also must allow American Sign
Language direct, or point-to-point, video
communication. The Commission clarified
and expanded the scope of the restrictions on
incarcerated people’s communications
service providers assessing charges for TRS
calls, expanded the scope of the required
Annual Reports to reflect the above changes,
and modified TRS user registration
requirements to facilitate the use of TRS by
eligible incarcerated persons. One provider,
{[REDACTED]} submitted an incremental
expense estimate, providing the only data
from which we extrapolated these costs for
the industry. The upper-bound TRS
compliance expense per minute component
divides {[REDACTED]}. The resulting figure,
rounded to $0.002, is used as an estimate for
PO 00000
Frm 00167
Fmt 4701
Sfmt 4700
77409
the industry, as no other provider submitted
an incremental TRS expense estimate. It is
added to each of the ten upper bound
calculations.
6. Correctional Facilities’ Expenses. The
2023 Mandatory Data Collection recognized
that, in some cases, the authorities that
operate prisons or jails may incur costs
attributable to providing IPCS. Specifically,
the 2023 Mandatory Data Collection directed
providers to report any verifiable, reliable,
and accurate information about the costs
incurred by facilities that the providers
served in 2022 to offer safety and security
measures or other functions regarding the
provision of IPCS. None of the providers
submitted these cost data. Hence, staff
develop the facilities component of the upper
bounds by again relying on the $0.02 expense
additive adopted as part of the interim rate
caps in the 2021 ICS Order (86 FR 40682,
July 28, 2021). Staff add this amount to each
upper bound rate cap tier for both audio and
video IPCS. Including this amount likely
overstates facilities’ IPCS costs.
7. Table 22 shows the upper bound
industry average components for prisons and
the four jail sizes, depicting audio and video
IPCS and IPCS safety and security, excepting
the ancillary services, TRS, and facility
components, and the sum of these
components plus $0.011 for ancillary
services, $0.002 for TRS, and $0.02 for
facility expenses. Columns (1A) and (2A)
summarize the industry average components
of the upper bounds of our zones of
reasonableness for audio IPCS and safety and
security expenses, separately for each rate
tier. Staff adds a flat per-minute allowance
for ancillary services ($0.011), TRS ($0.002),
and facility expenses ($0.02) to calculate the
upper bounds for audio IPCS rate caps in the
third column.
E:\FR\FM\20SER2.SGM
20SER2
77410
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 1: Upper Bound IPCS Expenses Per Billed and Unbilled Minutes, By Facility Type
($/minute)
Audio
Video
Safety &
Upper Bound
Safety &
Upper Bound
IPCS
Security
(lA) + (2A) + IPCS
Security
(lB) + (2B) +
Expenses
Expenses
$0.011 +
Expenses
$0.011 +
Expenses
Per Minute Per Minute $0.002 +
Per Minute Per Minute $0.002 +
(lA)
(2A)
$0.020
(lB)
(2B)
$0.020
Prisons
0.023
0.051
0.107
0.156
0.137
0.326
Large Jails
0.023
0.042
0.098
0.094
0.097
0.223
Medium Jails
0.037
0.040
0.110
0.094
0.089
0.216
Small Jails
0.059
0.029
0.121
0.116
0.058
0.208
Very Small Jails 0.087
0.030
0.151
0.208
0.047
0.288
Source: Data from facility-specific Excel tabs.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
providers’ per-minute expenses and the
industry average per-minute expense. The
fixed add-ons for ancillary services, TRS, and
facility expenses are excluded.
10. Table 23 suggests that the upper
bounds for audio IPCS rate caps do not
disadvantage smaller providers that appear to
operate efficiently in their provision of audio
IPCS compared to the industry average.
Setting an audio IPCS zone of reasonableness
upper bounds at the industry average implies
four carriers, {[REDACTED]}, have average
per-minute expenses that are either less than
the upper bounds or within five percent of
them for all facility types. This is also true
for {[REDACTED]}. That leaves five
providers with average per-minute expenses
that are more than five percent above the cap
for a majority, but not always for all of the
PO 00000
Frm 00168
Fmt 4701
Sfmt 4700
facility types: {[REDACTED]}. While, to some
degree, these results support the view that
larger providers have lower unit costs,
{[REDACTED]} are small providers who
report costs largely or entirely under, or close
to, the upper bounds. In fact, for small and
very small jails, {[REDACTED]}. Thus,
though {[REDACTED]} appear to benefit from
scale economies, there is no clear indication
that the rest of the industry is systematically
disadvantaged in its ability to provide audio
IPCS at rates below our upper bounds. That
being said, efficient costs are the least costs
of provision, and there is no onus on the
Commission to set rate caps that support
inefficient business models, even if a
provider is inefficient due to its scale.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.037
ddrumheller on DSK120RN23PROD with RULES2
8. Columns (1B) and (2B) show the
industry average components of the upper
bounds of our zones of reasonableness for
video IPCS and safety and security expenses.
Staff adds a flat per-minute allowance for
ancillary services ($0.011), TRS ($0.002), and
facility expenses ($0.02) to calculate the
upper bounds for video IPCS rate caps in the
final column of Table 1.
9. The upper bound results for audio IPCS
and video IPCS are driven by the two largest
providers, {[REDACTED]} which supply a
majority of IPCS minutes. As a result,
{[REDACTED]}, discussed in the summary
statistics above, likely distort our video
upper bounds. Tables 2 and 3 present the
upper bound results, for audio and video
respectively, for each individual provider to
permit comparisons across and between
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77411
Table 2: Upper Bound Audio Expenses, Per Billed and Unbilled Audio Minutes, By Provider
($/minute)
Very Small
Prisons
Large Jails
Medium Jails Small Jails
Jails
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Industry
0.107
0.098
0.110
0.121
0.151
Source: Data from facility-specific Excel tabs.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
expenses substantially raise the average,
ranging from nearly twice to more than seven
times as high as the next highest provider. It
is also not clear that reported per-minute
video expenses represent long run expenses,
because video calling is a nascent market.
Thus, providers may still be making large
expenditures to improve their platforms,
PO 00000
Frm 00169
Fmt 4701
Sfmt 4700
while supply may be constrained and
demand is still growing. These effects would
overstate per-minute video expenses relative
to a future steady state, as current expenses
are higher than those in a future steady state,
while demand is lower.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.038
ddrumheller on DSK120RN23PROD with RULES2
11. Table 24 shows that using the industry
average to determine the five upper bounds
for video IPCS expenses leaves only
{[REDACTED]} with per-minute expenses
that exceed the industry average by more
than five percent for a majority of facility
types. However, this result is largely driven
by one provider. {[REDACTED]} per-minute
77412
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 3: Upper Bound Video Expenses, Per Billed and Unbilled Video Minutes, By Provider
($/minute)
Very Small
Prisons
Large Jails
Medium Jails Small Jails
Jails
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Industry
0.326
0.223
0.216
0.208
0.288
Source: Data from facility-specific Excel tabs.
Notes: Double-underlined cells indicate a provider's upper bound per-minute video expenses exceed the
industry average by more than ten percent. No provider's upper bound per video minute expenses exceed
{[REDACTED]}
BILLING CODE 6712–01–C
ddrumheller on DSK120RN23PROD with RULES2
Appendix I: Lower Bound Analysis
1. The following appendix explains how
staff estimated the lower bounds of our zones
of reasonableness for incarcerated people’s
communications services (IPCS) per-minute
expenses (hereafter ‘‘lower bounds’’). The
first section explains a range of adjustments
made to the upper bounds, to produce our
lower bounds, while the second section
brings these together, producing ten lower
bounds, being the five for each facility type
for both audio and video. The final section
uses three independent sources to validate
our lower bounds.
A. Lower Bound Analysis and Adjustments
2. This section develops the lower bounds
for audio and video IPCS per-minute rate
caps for each rate cap tier by making the
following adjustments to the upper bounds:
bringing the WACCs reported by
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
{[REDACTED]} down to 9.75%; removing the
allowances for expenses incurred by
correctional facilities; removing categories of
safety and security expenses that are not
generally used and useful in the provision of
IPCS; adjusting the ancillary service expenses
to reflect the WACC changes; and adjusting
for anomalies in {[REDACTED]} The section
also explains our concerns with providers’
reports of goodwill, but that we decline to
make goodwill adjustments due to a lack of
data. While at least one commenter has
argued that the lower bounds are
‘‘unreasonably low,’’ we disagree. As set out
herein, we reach those bounds based on a
reasonable, logical analysis of the collected
data. In making these adjustments, staff rely
on the providers’ data reports, financials, and
Word templates.
1. WACC Analysis and Adjustments
3. The weighted average cost of capital, or
WACC, is the sum of a company’s cost of
equity, cost of preferred stock, and cost of
debt, each expressed as an annual percentage
PO 00000
Frm 00170
Fmt 4701
Sfmt 4700
rate and weighted by its proportion in the
capital structure. It represents the average
rate-of-return that debt, preferred stock, and
equity investors require to provide a
company with the capital it uses to finance
its assets and operations. Mathematically,
WACC = [(Equity/(Debt + Equity + Preferred
Stock)) * Cost of Equity] + [(Debt/(Debt +
Equity + Preferred Stock)) * Cost of Debt] +
[(Preferred Stock/(Debt + Equity + Preferred
Stock)) * Cost of Preferred Stock]. Staff
programmed the Excel template to multiply
the WACC by net capital stock to determine
the return component of the provider’s
annual total expenses. Net capital stock
means gross investment in assets, net of
accumulated depreciation and amortization,
accumulated deferred federal and state
income taxes, and customer prepayments or
deposits, plus an allowance for cash working
capital. Annual total expenses is the sum of
annual operating expenses and annual
capital expenses. Return is the allowance for
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.039
the industry average by more than five percent but less than ten percent.
ddrumheller on DSK120RN23PROD with RULES2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
recovery of the cost of capital and is therefore
a component of capital expenses.
4. The instructions directed providers to
use either a default WACC of 9.75% or an
alternative WACC. {[REDACTED]}. All other
providers used the default WACC. If the
provider claimed a WACC greater than
9.75%, the instructions for the 2023
Mandatory Data Collection required the
provider to fully document, explain, and
justify how it developed that alternative
WACC. Specifically, the instructions
required that the provider ‘‘fully document
. . . by submitting data, formulas, cost of
equity analyses[,] . . . calculations, and
worksheets, and explain and justify the
development of’’ its claimed cost of capital,
as well as its claimed cost of debt, its claimed
cost of equity, and the other components of
its claimed capital structure. The instructions
warned providers that a failure to do so may
result in reversion to the default WACC. We
note that, despite an opportunity for
comment, neither Securus nor ViaPath (nor
any other party) objected to the use of 9.75%
as the default WACC during the pleading
cycle leading to its adoption.
5. The default 9.75% WACC is equal to the
Commission’s currently authorized rate of
return for local exchange carrier services
subject to rate of return on rate base
regulation. The Commission adopted this rate
of return as part of a formal rulemaking
proceeding and it reflects rigorous analyses
of the costs of debt and equity, capital
structure, and the WACC, as the authorized
rate of return is designed to compensate these
carriers for their cost of capital. The
Commission’s determination was informed
by comments, data and other information
entered into the record by interested parties
and the analyses reflected in this prescription
underwent peer review.
6. While we accept the claimed WACC of
both Securus and ViaPath to establish the
upper bounds, we decline to do so for the
purpose of establishing the lower bounds. As
explained below, neither Securus nor
ViaPath sufficiently justifies its claimed
WACC. Given this lack of justification and
the limited information otherwise available
to the Commission to develop its own
estimate, we also decline to develop an
alternative WACC for either of these two
providers. Estimates of the true WACC can
vary over a wide range under different sets
of reasonable assumptions. A firm’s cost of
equity, in particular, must be estimated
because it reflects both current and future
investors’ constantly changing expectations
of that firm’s future profits. Cost of equity
estimates are necessarily developed from
imperfect models such as the Capital Asset
Pricing Model or Discounted Cash Flow
Model. Where a firm does not issue publicly
traded stock, as is the case for Securus and
ViaPath, one must apply these (or other)
models to a sufficiently comparable proxy
group of firms that issue publicly traded
stock. Identifying a proxy group of
comparable and publicly traded firms can be
a difficult and imprecise exercise and using
different proxies can produce significantly
different estimates. Consequently, cost of
equity estimates developed from models and
using proxy groups are often susceptible to
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
large errors and the cost of equity is often
impossible to measure precisely. Given this,
if the Commission were to attempt to
estimate Securus’s or ViaPath’s costs of
capital, the estimates would come with wide
error ranges that would encompass the 9.75%
default. We therefore find that adopting our
default WACC provides a reasonable lower
bound assumption.
7. Cost of Debt. Of the three estimates
needed to estimate the WACC (i.e., cost of
debt, cost of equity, and capital structure
estimates), the cost of debt estimate typically
is the least complicated. Yet, both Securus
and ViaPath make mistakes in how they
estimate their costs of debt.
8. {[REDACTED]}.
9. {[REDACTED]}.
10. Capital Structure. Capital structure
refers to the shares of equity, preferred stock,
and debt capital that a firm uses to finance
its operations and assets. Each capital
structure component is equal to: value of a
capital component/(value of debt + value of
preferred stock + value of equity). Each share
is used to weight its respective capital cost
to estimate the weighted average cost of
capital. Financial theory requires use of
market value weights to estimate the WACC.
Financial theory also specifies that a firm’s
target capital structure should be used to
estimate the WACC. Regulators, including
the Commission, typically use book value
weights to estimate the WACC, though under
the Commission’s represcription rules,
market value weights can be used if use of
book value weights would produce
unreasonable results. Under the
Commission’s rules for represcribing the
authorized rate of return for local exchange
carriers regulated on a rate-of-return basis,
the results of book value capital structure
calculations are to be used unless their use
would be unreasonable. In fact, the
Commission’s current authorized rate of
return for local exchange carriers regulated
on a rate-of-return basis, 9.75%, reflects the
use of market value weights.
11. {[REDACTED]}.
12. {[REDACTED]}.
13. {[REDACTED]}.
Table 1: {[REDACTED]}
14. {[REDACTED]}.
15. {[REDACTED]}.
16. {[REDACTED]}.
17. {[REDACTED]}.
18. {[REDACTED]}.
19. {[REDACTED]}.
20. {[REDACTED]}.
21. {[REDACTED]}.
22. {[REDACTED]}.
23. {[REDACTED]}.
24. {[REDACTED]}. Total beta is equal to
the standard deviation of a security’s
expected returns divided by the market’s
expected return. Alternatively, total beta
equals the CAPM beta estimate divided by
the square root of the coefficient of
determination for the regression equation
used to estimate beta. {[REDACTED]}
25. The use of total beta to develop cost of
equity estimates for a private business is not
broadly accepted. For example, Pratt and
Grabowski argue: ‘‘This interpretation of beta
as the risk measure in estimating total returns
is based on the premise that most owners of
PO 00000
Frm 00171
Fmt 4701
Sfmt 4700
77413
private businesses are completely
undiversified and, therefore, the cost of
equity capital of the private business should
include that extra amount due to the owner
being undiversified. This leads to the
unreasonable position that there are at least
two costs of capital for a business—the cost
of capital for investors who are the pool of
likely buyers who are likely to be diversified
(for whom in theory only market or beta risk
matters) and the cost of equity capital to the
current owner who is completely
undiversified (for whom both market risk and
unsystematic risk matter).’’
26. Moreover, Securus is not an
undiversified investor. Securus is a
subsidiary of Aventiv Technologies, which in
turn is owned by the private equity firm
Platinum Equity. On its website, Platinum
Equity explains that it has been in business
for more than 28 years, made more than 450
acquisitions, and manages over $48 billion in
assets. It further explains that it ‘‘generate[s]
returns by investing in companies across a
wide range of industries that need financial
and operational support.’’ Securus cannot
credibly argue that its owner, Platinum
Equity (or Platinum Equity’s investors
collectively), is an undiversified owner, and
it therefore fails to justify its company
specific risk premium adjustment.
27. {[REDACTED]}.
28. {[REDACTED]}.
29. {[REDACTED]}.
30. {[REDACTED]}.
31. {[REDACTED]}.
32. {[REDACTED]}.
33. {[REDACTED]}. While CAPM is widely
used among practitioners and is featured
prominently in most finance textbooks,
CAPM is not perfect, as no model can be. For
this reason, in addition to reasons we set out
above, we are reluctant to rely on the results
of a single model, adjusted or not. When the
Commission last prescribed the rate of return
for local exchange carriers, for example, it
relied on CAPM and the Discounted Cash
Flow Model, recognizing that neither model
is perfect. That would have been our
preferred approach here as well. However,
we do not have access to data that would
allow us to develop a Discounted Cash Flow
Model for either provider.
34. In summary, a substantial range of
Securus’s and ViaPath’s assumptions in
developing their WACCs are not fully
documented and/or appear inappropriate.
Consequently, we cannot rely on their
estimates. Given there is insufficient
evidence in the record to allow the
Commission to develop robust estimates of
our own, we revert to our default WACC of
9.75%.
35. WACC Adjustment Mechanics. Staff
replace Securus’s and ViaPath’s claimed
WACC figures with the default WACC of
9.75% on their Excel templates to adjust their
reported annual total expenses. Staff also
replace the tax-deductible interest expense
{[REDACTED]} Section 163(j) limits the
interest expense deduction to the sum of (i)
the taxpayer’s business interest income; (ii)
30% of the taxpayer’s adjusted taxable
income; and (iii) the taxpayer’s floor plan
financing interest expense for the taxable
year. Business interest income is not a cost
E:\FR\FM\20SER2.SGM
20SER2
77414
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
of providing IPCS and is not reported on the
Excel template or relevant to the
development of rate caps. Under section
163(j), floor plan financing interest expense
is interest on debt used to finance the
acquisition of motor vehicles held for sale or
lease where the debt is secured by the
acquired inventory. Floor plan financing
interest expense is not reported separately on
the Excel template and neither
{[REDACTED]} nor any other IPCS provider
is likely to incur this type of expense. Staff
add this formula even though {[REDACTED]}
approach likely understates tax-deductible
interest expense, leading to a larger income
tax allowance and larger annual total
expenses than otherwise. Under section
163(j), adjusted taxable income aligns with
earnings before (subtracting) interest expense
and taxes. Return on the Excel template is
generally a smaller number than adjusted
taxable income under section 163(j) because
return is equivalent to earnings after interest
expense and taxes with the interest expense
added back to this calculation of earnings.
The portion of return subject to taxes must
be ‘‘grossed up’’ by dividing it by one minus
the tax rate, and then added to the portion
of the return that is not subject to taxes to
calculate the pre-tax return (including
interest expense). {[REDACTED]}. Lastly,
staff reduce the safety and security expenses
these providers report at the facility level by
the same percentage as these expenses are
reduced by at the company-wide level as a
result of the WACC and tax-deductible
interest expense adjustments. Securus argues
against this adjustment by noting that by
reducing Securus’s and ViaPath’s costs of
capital, ‘‘the draft cut {[REDACTED]} for [sic]
the industries’ total safety and security
expenses.’’ We find this effect is a natural
consequence of the adjustment, given the fact
that capital expenses constitute a significant
portion of safety and security measure costs,
and do not find this a compelling reason to
avoid making said adjustment.
36. We reject the argument that the
Commission’s default 9.75% WACC ‘‘bears
no resemblance to rate of return for
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
companies like Securus that are primarily
technology and IT service providers.’’ We
recognize that IPCS is a communication
service, yet not necessarily the same as local
exchange carrier service. This distinction is
why the 2023 Mandatory Data Collection
instructions directed providers to use either
the default WACC of 9.75% or an alternative
WACC, with providers bearing the burden to
fully document, explain, and justify how
they developed any alternative WACC. While
the Commission’s 9.75% rate-of-return
prescription dates back to 2016, that
prescription was conservative. The
Commission found that an overall range for
reasonable WACC estimates for rate-ofreturn-regulated local exchange carriers is
7.12% to 9.01%, based on WACC estimates
derived from CAPM and a discounted cash
flow model. It expanded the upper end of the
rate of return zone of reasonableness beyond
these WACC estimates based on policy
considerations and adopted the rate of return
from the upper end of this zone. Specifically,
the Commission expanded the zone of
reasonableness to provide an additional
cushion for rate-of-return incumbent LECs
that may have relatively high costs of capital.
It also added a cushion to account for
regulatory lag between recognition of the
need to prescribe a different rate of return, as
capital markets change significantly over
time, and actually prescribing a new rate of
return. It therefore added about threequarters of a percentage point to the top of
the WACC range developed from the cost of
equity models, expanding the overall zone of
reasonableness for rate of return estimates to
7.12% to 9.75%, and then prescribed a
9.75% rate of return. Neither Securus nor any
other party objected to the use of 9.75% as
the default WACC during the pleading cycle
leading to its adoption.
37. As discussed elsewhere, Securus relies
on a number of aggressive and insufficiently
justified assumptions to develop its WACC
estimate. For example, CAPM assumes that
investors are able to diversify away exposure
to non-systematic risk such as companyspecific risk. Securus, however, adds a
PO 00000
Frm 00172
Fmt 4701
Sfmt 4700
company-specific risk premium
{[REDACTED]} to its CAPM cost of equity
estimate, even though its owner, Platinum
Equity (or Platinum Equity’s investors
collectively), is able to diversify away
exposure to non-systematic risk such as
company-specific risk. For these and the
other reasons discussed, we therefore find it
reasonable to use the default WACC for
Securus to develop lower bounds for our rate
caps.
2. Aggressive Assumptions on Facilities
Additive
38. Expenses Incurred by Correctional
Facilities. To the extent correctional facilities
bear some IPCS expenses and recover these
through site commissions, our rate caps
should allow for the reimbursement of the
legitimately recoverable expenses facilities
incur. In our upper bound analysis, relying
on record claims, we add $0.02 for such
expenses. We do not make this addition in
our lower bound analysis because our dataset
provides no evidence that site commissions
lower providers’ expenses.
39. If site commissions were in some
instances associated with facilities bearing
some of the expenses of IPCS provision, then
we would expect to see that providers’
expenses in facilities where site commissions
are paid would, on average, be lower than in
facilities where they are not. In fact, the
presence of site commissions tends to raise,
rather than lower, providers’ audio and video
IPCS and safety and security expenses—see
Table 2. For four of the five facility types, the
average expenses per minute rise by between
$0.021 and $0.012 per minute, only declining
by $0.006 for small jails. We therefore
disagree with those commenters that urge the
Commission to include a $0.02 additive to
account for facility costs in the lower bounds.
Commenters have not provided sufficient
data on either the costs or type of facility
costs to contradict the analysis we perform
here. Nor have they provided any data or
other information that might independently
justify a $0.02 additive, or indeed any other
additive, to the lower bounds.
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77415
Table 2: Audio and Video IPCS Expenses per Minute at Facilities where Site Commissions (SC) are
Paid or Not Paid
IPCS and Safety and Security
Large
Medium
Small
Very
Expenses per Minute
Prison
Jail
Jail
Jail
Small Jail
All
SC=O
$0.069
$0.059
$0.075
$0.104
$0.103
$0.070
SC>O
$0.081
$0.076
$0.089
$0.098
$0.124
$0.085
$0.012
$0.017
$0.014
-$0.006
$0.021
$0.015
Change between SC = 0 and SC
>O
40. To the extent that a correctional facility
incurs IPCS expenses (e.g., a broadband
connection or safety and security measure),
its corresponding provider would face fewer
expenses than otherwise. Further, one would
expect this to be reflected in higher site
commission payments, holding other things
constant. However, the payment of site
commissions is not associated with a
reduction of providers’ audio and video IPCS
and safety and security expenses. Providers’
mean per billed and unbilled minute IPCS
expenses at facilities with no site
commissions is $0.070, which is less than the
$0.085 IPCS per-minute expenses where site
commissions are paid. This difference is not
statistically significant: there is an
approximately 50% chance of the observed
difference randomly occurring if the means
were in fact identical. Based on a linear
regression of expenses per minute on an
indicator variable for when site commissions
are zero versus when site commissions are
greater than zero, the p-value for the
coefficient of the indicator variable is 0.488.
(The regression model is of the form: Expense
Per Minute = A + B * Site Commission
Dummy (0,1)). In contrast, the conventional
default for statistical significance requires a
p-value of less than 0.05, that is, less than a
one in twenty chance that the observed
difference occurred by chance. Finally, the
results of our Lasso analysis are also
consistent with the conclusion that provider
expenses are not offset by the payment of site
commissions to the correctional facilities
they serve. In fact, the Lasso model finds that
facilities at which site commissions are paid
have higher per-minute expenses than
facilities at which site commissions are not
paid.
3. Lower Bound TRS Additive
41. We add to the lower bounds of our
zones of reasonableness the same per-minute
estimate of TRS expenses, $0.002, that we
added to the upper bound zones. This
estimate, as explained above in the upper
bound analysis, is derived from
{[REDACTED]} study of the incremental
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
expense of TRS compliance. {[REDACTED]}
study reasonably adheres to our instructions
for developing the incremental expense of
TRS compliance. At the same time, no other
provider submitted an estimate of these
expenses. As there is nothing in the record
to support a lower estimate, we use the same
estimate for both the upper and the lower
bounds of our zones of reasonableness.
4. Goodwill Analysis
42. Four providers report goodwill as an
investment, and this section discusses these
investments and their implication for the
development of rate caps. In particular, we
find that we lack the necessary information
to determine the appropriate amount of
goodwill assigned to regulated services and
whether the resulting amount should be
reflected in the development of our rate caps.
We conclude that the best way forward is to
accept goodwill as reported in the
development of our upper and lower bounds,
but to take account of this uncertainty in
choosing how we set our rate caps within
those bounds.
43. The section begins by defining
goodwill. Next, it provides information on
each of the four providers’ reported goodwill,
including a description of the relative
importance of goodwill as reflected in their
overall investment and expenses. It then
discusses regulatory approaches to goodwill
and describes our concerns with these
providers’ reported goodwill. Finally, it
explains our approach to goodwill in this
proceeding.
44. Goodwill is a balance sheet item that
is recorded when one company acquires
another company, being the difference
between the purchase price and the sum of
the fair value of the assets acquired, net of
the sum of the fair value of the liabilities
assumed. Goodwill recognizes that the
present value of the expected future return of
the going concern is greater than what would
be necessary to compensate the original
owners for the value of their assets net of
their debts. Like other long-lived assets
measured at carrying value on a company’s
PO 00000
Frm 00173
Fmt 4701
Sfmt 4700
financial statements, goodwill is impaired if
the carrying value is not recoverable. The
goodwill impairment test is a test of whether
the aggregate carrying value of the assets of
a business including the value of the
goodwill is recoverable. Goodwill
impairment testing assesses whether a
business acquisition is successful and holds
management accountable for the acquisition.
For example, if after an acquisition the hoped
for synergies fail to materialize, then this
should be recognized through impairment
testing. If the impairment testing so indicates,
the carrying value of the goodwill is written
down or reduced on the balance sheet, and
the amount of the reduction is recorded as a
loss on the income statement.
45. Four IPCS providers, {[REDACTED]},
report goodwill on the Excel template.
Providers were required to report goodwill
gross investment, accumulated amortization,
net investment, and amortization expense on
rows 36, 37, 38, and 55 on the C1–C2.
Company-Wide Information worksheet and
on rows 47, 48, 49, and 66 on the D1. Facility
Audio IPCS Costs and D1. Facility Video
IPCS Costs worksheets, respectively. The
goodwill data reported on the CompanyWide Information worksheet are used for the
analysis in this section. Table 3 below shows
the dollar amount of each provider’s reported
goodwill net investment (or more simply
goodwill) and the percentage of the
accounting entity total each provider
reported for regulated services and
nonregulated services. For purposes of our
discussion of goodwill, regulated services are
audio IPCS, video IPCS, safety and security
measures, automated payment services, live
agent services, paper bill/statement services,
single-call and related services, and thirdparty financial transaction services.
Nonregulated services are other ancillary
services and other products and services.
These four providers attribute 100% of their
safety and security investments and expenses
to audio IPCS and video IPCS and thus none
to ancillary services or other products and
services on the C3. Safety & Security
Measures worksheet.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.040
ddrumheller on DSK120RN23PROD with RULES2
Notes: SC= site commissions; minutes are billed and unbilled minutes.
77416
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 3: Reported Goodwill Net Investment by Provider
Nonregulated Services
% of Accounting Entity
Provider
$
Total
$
Total
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
46. These four providers collectively report
goodwill of approximately $1.2 billion for
regulated services, about 94% of the
accounting entity total, as compared to
approximately $79 million for nonregulated
services, about six percent of that total.
47. A provider’s reported annual total
expenses increase as the amount of reported
goodwill increases. Goodwill reported on the
Excel template is a component of net capital
stock. The Excel template multiplies each
provider’s net capital stock by its claimed
WACC or the default WACC of 9.75% to
calculate return. The Excel template also
calculates the federal and state income taxes
on this return, net of tax-deductible interest
expense, using the provider’s reported
federal and state tax income tax rates. The
return and income taxes are components of
annual total expenses, and these expenses are
reflected in our rate cap calculations. A
ddrumheller on DSK120RN23PROD with RULES2
% of Accounting Entity
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
private firm under GAAP may elect to
amortize goodwill on a straight-line basis
over a period of 10 years or less.
{[REDACTED]}.
48. Net investment is the building block for
net capital stock. Net capital stock equals net
investment in assets minus accumulated
deferred federal income taxes, minus
accumulated deferred state income taxes,
minus customer prepayments or deposits,
plus cash working capital. Net capital stock
is not developed on the Excel template for
nonregulated services. To get a sense of the
relative magnitude of each of these providers’
reported goodwill, Table 4 below shows their
reported goodwill net investment, total net
investment including goodwill, and
goodwill’s share of total net investment
separately for regulated and nonregulated
services. Total net investment includes net
investment in tangible assets, capitalized
PO 00000
Frm 00174
Fmt 4701
Sfmt 4700
research and development, purchased
software, internally developed software,
trademarks, other identifiable intangible
assets, and goodwill. It excludes capitalized
site commissions.
49. The four providers collectively report
total net investment of {[REDACTED]} for
regulated services, and of this total goodwill
accounts for about {[REDACTED]}. Thus, for
these four providers, goodwill accounts for
over half the return and related income tax
allowances that are reflected in our rate caps
for the industry. In contrast, the four
providers collectively report total net
investment of approximately {[REDACTED]}
for nonregulated services, and of this total,
goodwill accounts for only about
{[REDACTED]}. There is no ‘‘net capital
stock’’ for these nonregulated services upon
which a return is ‘‘allowed’’ to be earned or
reflected in rate caps.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.041
Regulated Services
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77417
Table 4: Reported Goodwill Net Investment versus Reported Total Net Investment By Provider
Regulated Services
Nonregulated Services
Goodwill Net
Goodwill Net
Investment as
Investment as
a Percent of
a Percent of
Goodwill Net
Total Net
Total Net
Goodwill Net
Total Net
Total Net
Provider
Investment
Investment
Investment
Investment
Investment
Investment
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
50. Table 29 shows the impact of removing
goodwill on each provider’s annual total
expenses. Annual total expenses are the sum
of reported capital expenses, including a
return on net capital stock, and operating
expenses and is the key component to the
upper and lower bounds of our zones of
reasonableness. Removing goodwill from
each provider’s reported annual total
expenses reduces the four providers’
expenses collectively by approximately $141
million, or about 15%. Staff assume a 9.75%
return on net capital stock to determine this
impact. For {[REDACTED]}, the reduction to
annual total expenses reflects removal of the
remaining unamortized value of capitalized
goodwill from net capital stock and removal
of amortization expense.
Annual Total Expenses Without
Percent
Goodwill
Goodwill
Difference
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
51. Regulators often exclude goodwill from
the base on which a return is allowed, absent
a showing by the regulated firm that its rate
payers stand to benefit from the sale that
gives rise to the goodwill. Otherwise, a firm
that is sold for more than the original cost,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
fair value, or other regulator-specified
valuation of its assets would be able to earn
a return that exceeds what that same firm
was entitled to earn immediately prior to the
sale for no reason other than the exchange of
ownership for money. Methods of asset
PO 00000
Frm 00175
Fmt 4701
Sfmt 4700
valuation imposed on regulated firms vary
among regulators. The 2023 Mandatory Data
Collection simply requires that IPCS
providers report values for the components of
net capital stock consistent with GAAP. The
burden typically is on the acquiring firm to
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.042
ddrumheller on DSK120RN23PROD with RULES2
Provider
Annual Total Expenses With
ER20SE24.043
Table 5: Annual Total Expenses for Regulated Services With and Without Goodwill by Provider
77418
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
demonstrate to the satisfaction of the
regulator that the acquisition will, for
example, create efficiencies that lower the
firm’s operating expenses or lead to superior
service quality or more innovative services,
and thus benefit rate payers. Otherwise, the
regulator may exclude the goodwill arising
from the acquisition from the base upon
which the regulator allows a return to be
earned.
52. For the reasons stated above, regulators
are skeptical of allowing goodwill to be
included in net capital stock. While these
four firms assign large dollar amounts of
goodwill to regulated services relative to
nonregulated services, they do not explain
the basis for these assignments. We looked
for justification of these providers’ goodwill
claims in their financial statements and in
their Word templates. What we found only
further increased our skepticism. For
example, {[REDACTED]}.
53. We are also skeptical of {[REDACTED]}
reported goodwill. {[REDACTED]}. Finally,
we have no information that would allow us
to determine whether the four providers’
reported goodwill reflects value to the
incarcerated persons that the prior owner
was unable to deliver. Absent a
demonstration of that value, goodwill
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
typically would not be allowed to earn a
return or recovered as an expense.
54. In summary, the four providers that
report goodwill have not justified the amount
of their claimed goodwill, nor the
assignments they make to regulated and
nonregulated services. A proper assignment
of goodwill to regulated services and
nonregulated services would reflect a
comparison between the fair values of these
services to the fair value of their assets, net
of liabilities. Among other complexities,
determining the fair value of these services
would require an estimate of the present
worth of their future cash flows. Staff lack
the type of detailed and comprehensive
financial information and the insight into the
operations of these services that would be
needed to develop our own present worth
estimates and thus have no accurate and
feasible way to re-assign or make targeted
disallowances to the goodwill these
providers’ report on their Excel templates.
Further, we lack sufficient information to
estimate the goodwill recorded on the
balance sheet at time of the acquisition, to
conduct impairment tests, or to determine
the source of the goodwill, and hence to
determine whether it should be allowed to
earn a return or recovered as an expense. We
PO 00000
Frm 00176
Fmt 4701
Sfmt 4700
therefore make no reassignment of or
disallowance to the providers’ claimed
goodwill. Instead, we consider the possibility
of misassignment or overstatement of
goodwill when choosing rate caps from
within our zones of reasonableness.
5. Safety and Security Expenses
55. Safety and security expenses as
reported in the data collection are divided
into seven categories: the Communications
Assistance for Law Enforcement Act
(CALEA) compliance measures and
communication security services, law
enforcement support, communication
recording services, communication
monitoring services, voice biometric services,
and other safety and security measures. Of
the providers included in our dataset, 11
providers reported expense data and
additional information regarding their
delivery of safety and security measures. Of
those 11 providers, all reported offering some
mix of safety and security measures and
allocated their expenses by category. Table 6
shows these expenses by category and facility
type, after the WACC and tax-deductible
interest expense adjustments.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77419
Table 6: Audio and Video Safety and Security Measures Expenses by Category and Facility Type
Medium
Very Small
Prisons
Large Jails
Jails
Small Jails Jails
All
-
1,775
2,184
1,026
321
5,306
2,500,354
2,010,475
674,735
261,580
20,944,006
105,671,155
23,640,795
21,162,701
8,358,914
3,105,390
161,938,954
76,853,881
17,150,363
15,399,531
6,108,059
2,272,789
117,784,624
60,722,633
10,374,258
9,076,623
3,525,398
1,255,842
84,954,753
5,264,356
6,028,900
2,948,166
997,187
40,293,972
32,947,510
7,727,510
6,188,009
2,061,319
743,464
49,667,811
316,747,403
66,659,410
59,868,423
23,677,616 8,636,573
475,589,426
105,671,155
23,642,570
21,164,885
8,359,940
3,105,711
161,944,261
-
-
26
36
22
84
240,241
450,459
255,901
66,723
1,500,426
6,374,137
3,344,311
4,981,924
2,479,923
540,365
17,720,659
5,615,118
2,973,351
4,243,216
2,078,946
466,170
15,376,802
2,601,918
1,410,152
2,018,519
1,014,162
222,998
7,267,749
CALEA
Compliance
Law Enforcement 15,496,861
Communication
Security
Communication
Recording
Communication
-
Monitoring
"'
=
Voice Biometrics 25,055,363
Vt
,,_,
"'
~
~
Q.
~
~
:>..
·c....
=
~
Other Safety and
Security
~
00
-0
=
=
All Categories
~
CALEA+
....
=
00
:>..
0
;a
-<=
Security Services
CALEA
-
Vt
,,_,
Compliance
Law Enforcement 487,103
"'
~
~
Communication
Q.
~
~
·cc
=
~
~
ddrumheller on DSK120RN23PROD with RULES2
00
-0
Security
Communication
=
=
Recording
~
Communication
c
=
00
0
~
-0
>
VerDate Sep<11>2014
Monitoring
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00177
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.044
"'
=
77420
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Voice Biometrics 379,510
202,909
431,787
334,646
79,618
1,428,469
1,516,377
767,952
1,409,925
868,099
183,328
4,745,683
16,974,163
8,938,916
13,535,856
7,031,714
1,559,223
48,039,872
6,374,137
3,344,311
4,981,949
2,479,959
540,387
17,720,743
Other Safety and
Security
All Categories
CALEA+
Security Services
Note: Does not include jails with zero or missing ADP. Expenses reflect WACC and tax-deductible interest
expense adjustments.
ddrumheller on DSK120RN23PROD with RULES2
56. Because these expenses were
exclusively reported at the level of these
seven categories and each category contains
more than one safety and security measure,
it is not possible to isolate the expenses
incurred to provide each individual safety
and security measure within each category,
much less the portion of the expenses within
each category that are used and useful in the
provision of IPCS. The instructions for the
2023 Mandatory Data Collection required
providers to allocate safety and security
expenses among the seven categories at the
facility level, and gave providers the option
to further allocate these expenses among
individual services within each category,
notwithstanding NCIC’s claim to the
contrary. Providers, including NCIC,
declined to allocate costs among individual
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
services, precluding the Commission from
identifying those expenses on a more
granular basis. While our upper bounds
include all expenses reported for each of the
seven categories, the lower bounds include
only the expenses reported for the two of
these categories that consist of safety and
security measures that we find are generally
used and useful in the provision of IPCS:
CALEA compliance measures and
communication security services. Providers’
narrative responses also indicate that the
suite of safety and security measures they
provide are often offered as a default package
at the time of contract, however some
providers also offer optional add-on services.
The fact that these services are optional
belies the claim that they are necessary for
the provision of IPCS. For example,
PO 00000
Frm 00178
Fmt 4701
Sfmt 4700
{[REDACTED]}. Together, CALEA
compliance measures and communication
security services capture 34.1% of reported
audio and 36.9% of reported video safety and
security measure expenses after the WACC
and tax-deductible interest expense
adjustments.
57. Table 7 compares per-minute audio and
video IPCS safety and security expenses after
the WACC and tax-deductible interest
expense adjustments, with and without the
category adjustment. Across the industry, the
adjustment for the lower bounds decreases
audio safety and security expenses by $0.028
per billed audio minute and video safety and
security expenses by $0.054 per billed video
minute. The percent decrease from the
unadjusted to adjusted total is similar across
all facility types within audio and video.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.045
BILLING CODE 6712–01–C
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77421
Table 7: Safety and Security Expenses per Total Minute
Audio Safety and Security Expenses Per
Video Safety and Security Expenses Per
Total Minute
Total Minute
No
After
Percent
No
After
Percent
Adjustment
Adjustment
Decrease
Adjustment
Adjustment
Decrease
Prisons
0.0469
0.0157
66.6%
0.1276
0.0479
62.4%
Large Jails
0.0389
0.0138
64.5%
0.0901
0.0337
62.6%
Medium Jails
0.0371
0.0131
64.6%
0.0822
0.0302
63.2%
Small Jails
0.0267
0.0094
64.7%
0.0543
0.0191
64.7%
Jails
0.0285
0.0103
64.0%
0.0442
0.0153
65.3%
Total
0.0422
0.0144
65.9%
0.0855
0.0315
63.1%
Very Small
Note: Does not include jails with zero or missing ADP. The safety and security adjustment was made after the
6. Ancillary Services Cost Analysis
58. Ancillary services are billing and
collection services for both audio and video
IPCS, and consequently are not reported
separately. The reported expenses for these
services are included in the upper bounds of
our zones of reasonableness for audio and
video IPCS by dividing them by the sum of
audio and video minutes and adding this
quotient to the separate audio and video
caps. This upper bound adjustment adds a
flat per-minute allowance, $0.011, for
ancillary services, for all five size-type
facilities. This is computed as industry
ancillary services expenses, $125.2 million,
divided by the sum of the audio and video
IPCS minutes of the providers that reported
ancillary services expenses, 11,585.9 million
(a smaller number than the industry total
number of minutes).
59. The lower bounds reflect reductions in
ancillary services expenses for
{[REDACTED]} due to restatements
(lowering) of their WACCs, with an
accompanying adjustment to {[REDACTED]}
reported tax-deductible interest expense. The
result is an industry ancillary service
expense of $0.010 per minute. Industry
ancillary services expense for the five
services, $125.2 million, is reduced by
WACC and interest expense adjustments for
{[REDACTED]}. The minutes for providers
who report these expenses are 11,585.9
million. Like the $0.011 ancillary expense
added to the upper bounds, this lower figure
is added to the lower bounds as a flat perminute allowance for all five size-type
facilities.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
7. Video Expense Adjustment(s)
60. {[REDACTED]} Video IPCS
Adjustment. {[REDACTED]} reports
extremely high costs for the provision of
video IPCS. Their video IPCS per-minute
expenses are a substantial outlier vis-a-vis
their closest competitors and the industry as
a whole, and their resulting reported perminute video IPCS expenses significantly
skew the industry average. They are three
times higher than the industry average and
about {[REDACTED]}. Staff did not adjust
{[REDACTED]} per-minute expenses in
establishing the upper bounds of our zones
of reasonableness but find it appropriate to
adjust these expenses in establishing the
lower bounds. While staff cannot fully
determine why {[REDACTED]} reported
expenses are so different to everyone else’s,
they are not indicative of efficient operations.
For example, it is likely {[REDACTED]}
future demand will rise to at least
proportionately match that of
{[REDACTED]}, and that may result in
spreading {[REDACTED]} capital
expenditures over significantly more video
minutes.
61. Staff make a conservative adjustment to
{[REDACTED]} video IPCS expenses to align
them more closely with the rest of the
industry by recalculating their expenses
based on the industry average costs per
minute. More specifically, we calculate the
weighted average video IPCS cost per minute
of all providers, excluding {[REDACTED]}.
This estimate is multiplied by
{[REDACTED]} total billed and unbilled
video IPCS minutes to estimate
PO 00000
Frm 00179
Fmt 4701
Sfmt 4700
{[REDACTED]} video expenses as if they
were equivalent to the rest of the industry.
{[REDACTED]} adjusted expenses are then
divided by their original expenses and
subtracted from one to calculate the percent
reduction to {[REDACTED]} video expenses.
With an industry cost per minute for video
IPCS of 0.076 when {[REDACTED]} is
excluded, the reduction to {[REDACTED]}
expenses is 78.5%. We apply this reduction
to video IPCS expenses separately to each of
{[REDACTED]} facility tiers and divide by
total minutes for each tier to arrive at perminute estimates. This approach is
conservative as a more appropriate
adjustment of {[REDACTED]} video expenses
would weigh more heavily towards
{[REDACTED]} video expenses, given their
comparable sizes and market positions. Such
a reduction would bring {[REDACTED]}
video per-minute costs even lower, as
{[REDACTED]} is a relatively low-cost
provider of video IPCS.
62. Table 8 shows the unadjusted and
adjusted video IPCS expenses for
{[REDACTED]} as well as the industry
average, which includes {[REDACTED]}, for
each facility type. The adjusted video IPCS
expense per minute for {[REDACTED]}
across all facilities does not equal that of the
industry average because the reduction
applied to the video expenses for
{[REDACTED]} is calculated using all
observations while the industry average
expense per minute estimates presented in
Tbl. 8 must exclude facilities that do not
report ADP so that facilities can be grouped
by tier. All other adjustments made to the
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.046
ddrumheller on DSK120RN23PROD with RULES2
WACC and interest expense adjustments.
77422
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
lower bounds are applied to both scenarios
presented in the table. When compared to the
industry average, which includes
{[REDACTED]}, {[REDACTED]} cost per
minute across each facility type is roughly
three or more times higher, with the
exception of small jails, which are still twice
that of the industry average. Once the
adjustment is made to {[REDACTED]} video
IPCS expenses, {[REDACTED]} video cost per
minute for each facility type is much more
comparable to the industry average for each
corresponding facility type. However, when
including safety and security we find that
{[REDACTED]} total IPCS video expenses are
still substantially above the industry average,
both overall and for each corresponding
facility type. Despite what is likely a similar
overinvestment in video safety and security
relative to competitors, we do not adjust
{[REDACTED]} safety and security expenses
for video IPCS provision.
BILLING CODE 6712–01–P
Table 8: Non-Adjusted* and Adjusted** Video IPCS and Safety & Security Costs Related to Video
IPCS Per Billed and Unbilled Video Minute, For {[REDACTED]} and Industry
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
DJ}
]}
DJ}
DJ}
}
}
DJ}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
DJ}
}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
DJ}
}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
DJ}
}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
}
DJ}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
}
DJ}
]}
{[REDACTE {[REDACTED {[REDACTE {[REDACTE {[REDACTED] {[REDACTED] {[REDACTE {[REDACTED
{[REDACTED]} DJ}
]}
DJ}
DJ}
}
}
DJ}
]}
{[REDACTED]}
63. {[REDACTED]} Tablet Deployment. We
examine {[REDACTED]} deployment of
tablets relative to its competitors to
determine whether {[REDACTED]} has over-
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
invested in tablets, and whether tablet
deployment costs have an outsized impact on
{[REDACTED]} video IPCS expenses. Table 9
shows tablet deployment per ADP across
PO 00000
Frm 00180
Fmt 4701
Sfmt 4700
providers and facility tiers. {[REDACTED]}
deployed the most tablets per ADP for each
jail tier, and has the same per-ADP
deployment as {[REDACTED]} in prisons.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.047
ddrumheller on DSK120RN23PROD with RULES2
Source: Data from facility-specific Excel tabs.
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
For medium jails, {[REDACTED]} tablets
exceed the incarcerated person population by
21%. In total, as seen further down in Table
10 below, {[REDACTED]} has deployed
77423
nearly twice as many tablets as
{[REDACTED]}.
Table 9: Tablets per ADP
Provider
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED])
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Large Jail
Medium Jail
Small Jail
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED])
Dl)
{[REDA
{[REDACTE
CTED]}
D]}
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED]}
D]}
{[REDA
{[REDACTE
CTED]}
DJ}
{[REDA
{[REDACTE
CTED]}
D]}
{[REDA
{[REDACTE
CTED]}
D]}
{[REDACTED]}
ED]}
0.33
0.42
0.59
0.48
Very Small Jail
{[REDACT
{[REDACTED]}
ED]}
{[REDA
{[REDACTED]}
{[REDACT
{[REDACTED]}
ED]}
ED]}
{[REDACTED]}
ED]}
{[REDACTED]}
ED])
{[REDACTED]}
ED]}
{[REDACTED]}
ED]}
{[REDACTED]}
ED]}
{[REDACTED]}
ED]}
{[REDACTED]}
ED]}
CTED]}
{[REDA
{[REDACTED]}
{[REDACT
{[REDACTED]}
CTED]}
{[REDA
{[REDACT
{[REDACTED]}
CTED]}
{[REDA
{[REDACT
{[REDACTED]}
CTED])
{[REDA
{[REDACT
{[REDACTED]}
CTED]}
{[REDA
{[REDACT
{[REDACTED]}
CTED]}
{[REDA
{[REDACT
{[REDACTED])
CTED]}
{[REDA
{[REDACT
{[REDACTED]}
CTED]}
{[REDA
{[REDACT
{[REDACTED]}
Total
CTED]}
{[REDA
{[REDACTED]}
{[REDACT
CTED]}
{[REDA
{[REDACTED]}
CTED]}
Minute
Weighted
Average
0.38
0.38
Source: Tab DI. Facility Demand and Revenue.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00181
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.048
ddrumheller on DSK120RN23PROD with RULES2
{[REDACTED])
Prison
77424
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
64. {[REDACTED]} reports a $400 million
gross investment in tablets. {[REDACTED]}
tablet deployment should be reflected in
higher investment in tangible assets in the
2023 Mandatory Data Collection data. Table
10 shows industry net tangible asset
attribution between regulated and
nonregulated business segments. While
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
{[REDACTED]} has a significant investment
in net tangible assets, possibly due to its
investment in tablets, it attributes the lowest
percentage of net tangible assets to regulated
services among all providers {[REDACTED]}.
As such, despite {[REDACTED]} tablet
deployment being out of line with
{[REDACTED]} and the rest of the industry,
PO 00000
Frm 00182
Fmt 4701
Sfmt 4700
the large majority of {[REDACTED]} tangible
asset net investment is not reflected in its net
capital stock for regulated IPCS services. As
such, we refrain from making any
adjustments with respect to {[REDACTED]}
video investments or expenses on the basis
of tablet deployment.
E:\FR\FM\20SER2.SGM
20SER2
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77425
Provider
Tablets
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
{[REDACTED]
{[REDAC
}
TED]}
Net Tangible Regulated
Net Tangible
Percentage
Nonregulated
Regulated
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]}
{[REDACTED]}
}
Source: Tab D 1. Facility Demand and Revenue; Tab C 1-C2. Company-Wide Information.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00183
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.049
ddrumheller on DSK120RN23PROD with RULES2
Table 10: Attribution of Net Tangible Assets
77426
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
B. Audio and Video IPCS Lower Bounds
65. Incorporating the adjustments
discussed above, staff have calculated ten
lower bounds—five for audio IPCS and five
for video IPCS, in each case for prisons, large
jails, medium-size jails, small jails, and very
small jails. As with the upper bounds, our
rate-setting approach controls for the effect of
facility type and size on expense per minute.
66. The respective lower bounds for audio
and video services for the five facility types
are the sum of four per-minute expense
components: (i) audio IPCS or video IPCS; (ii)
audio or video IPCS safety and security
measures; (iii) ancillary services; and (iv) the
TRS additive.
67. Table 11 summarizes the industry
average components of the lower bounds of
our zones of reasonableness for audio and
video IPCS expenses, separately for audio
and video, and for each rate tier. Column (1)
shows the industry average for per-minute
audio IPCS expenses by facility type, column
(2) shows the industry average for per-minute
safety and security expenses by facility type,
and column (3) shows the final lower bound
estimates for audio IPCS, including the
ancillary service and TRS additives. Columns
(4), (5), and (6) report the corresponding
estimates for video IPCS expenses per
minute.
Table 11: Lower Bound Audio and Video IPCS and !PCS-Related Expenses Per Billed and
Unbilled Audio and Video Minutes, By Facility Type ($/minute)
Audio
Video
Safety &
Safety &
IPCS Per
Security Per
Lower Bound IPCS Per
Security Per
Lower Bound
Minute
Minute
(1) + (2) +
Minute
Minute
(3) + (4) +
(1)
(2)
$0.01 + $0.002
(3)
(4)
$0.01 + $0.002
All Facilities 0.028
0.014
0.054
0.073
0.032
0.117
Prisons
0.021
0.016
0.049
0.062
0.048
0.122
Large Jails
0.022
0.014
0.047
0.042
0.034
0.087
Jails
0.035
0.013
0.061
0.060
0.030
0.102
Small Jails
0.058
0.009
0.080
0.094
0.019
0.126
0.086
0.010
0.109
0.187
0.Dl5
0.214
Medium
Very Small
Jails
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
C. Validation of Lower Bounds
68. This section uses three different
sources to validate our lower bounds. The
first examines evidence submitted by the
Brattle Group as to reasonable per-minute
audio and video expenses and find that to be
consistent with, if somewhat lower, than our
lower bounds for audio. The second shows
that large fractions of facilities in all
likelihood would be viable at rates that are
less than our lower bounds, validating that
our lower bounds are not set too low. Staff
demonstrate this for many facilities—
presumably those with the most efficient
operations after controlling for facility type.
The third compares counties in the region of
Dallas and Denton in Texas and finds that
per-minute audio rates of {[REDACTED]}.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Because we set each of our rate caps
somewhat above the respective lower
bounds, but in each case closer to the lower
bounds than the upper bounds, these sources
also offer support for the rate caps that we
adopt.
1. Brattle Analysis
69. In reviewing the record, we find the
Brattle Group’s model carrier analysis
provides external validation for our lower
bounds. The Brattle Group’s analysis
estimates per-minute costs for audio and
video calls in small, medium, and large
facilities, drawing on market data and data
from the 2023 Mandatory Data Collection.
The initial model was filed on July 12, 2023,
and a revised model was filed on February
9, 2024. Comments were filed on the Brattle
model carrier analysis.
PO 00000
Frm 00184
Fmt 4701
Sfmt 4700
70. The Commission finds the model
carrier approach useful to evaluate the
analysis of reported industry investments
and expenses undertaken by staff to establish
the lower bounds of our zones of
reasonableness. Brattle’s model carrier
analysis aggregates estimates of the costs of
the various components that comprise IPCS,
including a markup on expenses to cover
overhead. Its aim is to estimate IPCS costs
based on publicly available prices that are
constrained by market forces capturing
industry standards for efficiency, cost, and
performance. As explained below, we find
that, by and large, Brattle has produced a
credible and transparent model of industry
costs.
71. The advantages of Brattle’s model
carrier approach include its transparency and
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.050
Source: Data from facility-specific Excel tabs.
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
dimensions, notably the distinction between
prisons and jails, and across jail sizes. The
Brattle Group address this difficulty by using
wholesale prices, which already include
markups for overheads, and then apply
further markups for overheads to the sum of
these component estimates. Arguably,
economies of scope and scale in IPCS supply
may be missed by such an approach,
resulting in cost overestimation. The Brattle
Group seek to capture these differences by
choosing component cost models that, in
their analysis, likely overstate costs.
that market forces ‘‘audit’’ the relied-upon
price data, in contrast to the inability of the
Commission and other stakeholders to audit
providers’ expense reports. The
disadvantages are that there are aspects of
IPCS for which there are limited market data,
notably many safety and security measures
(which the Brattle Group does not model),
that it is not clear how to add up piece parts
from different wholesale markets to ensure
the sum of the parts is a good estimate of the
whole, and that it may be difficult for a
model carrier approach to capture cost
variation along relevant cost-causative
77427
72. Brattle filed an initial model carrier
approach, and then in the light of comments,
a revised approach. We focus on the latter.
Brattle created its model carrier by
identifying five modules of costs, populating
the modules with data taken from, where
available, publicly available prices, the
sources for which they document in their
report; the Commission’s data collection from
IPCS providers; and other market estimates.
The five cost modules are described in Table
12.
Table 12: Model Carrier - Five Cost Modules
Module
Audio
Video
Telecom
Voice over Internet Protocol
Video call
(VoIP) call
Broadband cost (leased line)
Broadband cost (leased line)
Security
Phone handset
Kiosk
Enclosures, etc.
Enclosure, etc.
Installation
Installation
None additional, for purposes of
None additional, for purposes of
the model
the model
{[REDACTED]} based on
Overhead
available industry data
Allowable margin
available industry data
{[REDACTED]} based on
ddrumheller on DSK120RN23PROD with RULES2
industry benchmarks
73. Brattle’s revised model carrier analysis
makes several adjustments to the Telecom
and Facilities cost modules in response to
critiques in the record. These adjustments
include the following four responsive
adjustments. First, Brattle made an upward
revision in VoIP call cost by eliminating zerocost providers from the set used to calculate
an average price. This revision responded to
Mr. Wood’s critique that the model picked
the lowest prices. FTI argues even this high
rate is too low, but offers no alternative.
Second, Brattle made an upward adjustment
to the price of a video call with a rate from
Microsoft Azure at $0.0004 per minute. This
revision responded to Mr. Wood’s critique
that the model picked the lowest prices. FTI
argues even this higher rate is too low but
offers no alternative. Third, Brattle made an
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
{[REDACTED]} based on
{[REDACTED]} based on
industry benchmarks
upward adjustment to the number of
necessary T–1 lines based on high-definition
video call quality for 60 minutes. Fourth,
Brattle shortened the useful life of equipment
and relied on a wider array of equipment
pricing to respond to Mr. Wood’s critique
that providers make tradeoffs between
maintenance and replacement of assets.
74. The model carrier analysis assumes all
video calls are made over kiosks, which
Brattle explains are more expensive than
tablets. Brattle does not use tablets because
tablets can be used for nonregulated services
like books and movies, which creates a cost
allocation issue. FTI’s comments argue that
in fact tablets are widely used, sometimes in
conjunction with kiosks. This may be so, but
may reflect a transition from kiosks to tablets,
with such duplication being inherently
PO 00000
Frm 00185
Fmt 4701
Sfmt 4700
inefficient. Without record evidence, staff do
not consider it appropriate to add both kiosk
and tablet costs together for the purposes of
the model carrier model. Further, even a
partial transition from kiosks to tablets would
imply that Brattle’s revised model may
overestimate the number of kiosks but
underestimate the cost of tablets, with the net
impact on recoverable expenses arguably
being an over, rather than an underestimate.
75. In its revised model carrier analysis,
Brattle also lowers the video to audio
minutes ratio from 1:2 to 1:4, which raises
video per-minute costs. The more video
minutes in the model, the lower the perminute cost would be, because a large
fraction of costs are fixed. Video IPCS is still
developing, and the Commission’s data
collection does not provide a robust basis for
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.051
Facilities
77428
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
establishing a ratio based on long-run relative
demand for audio vs. video IPCS. In
developing our lower bounds, the
Commission implicitly assumes an audio to
video ratio as given by the industry average,
excluding Securus. {[REDACTED]} If, as is
likely, the ratio of video to audio calls were
to increase substantially, then our per video
minute lower bounds would be much too
high. Outside of the IPCS context, video calls
are increasingly popular, and it is likely we
will see a similar trajectory for the provision
of video IPCS going forward. For example,
Juniper Research predicts a continued
decline in revenues from voice service for
mobile network operators, despite
investments in 5G and growing subscriber
numbers, because the quality of over-the-top
services like video conferencing applications
are improving. To the degree that happens,
the Brattle model and our own projections
would overstate long-run video expenses. It
is uncertainty about long run video expenses
that leads us to set interim, rather than
permanent, rate caps for video IPCS.
76. Site commissions are not included the
model carrier, something Wood criticizes.
However, the exclusion of site commissions
as an expense is consistent with the used and
useful analysis in our Order. Consequently,
excluding those costs from the data analysis
accords with the legal determinations we
make.
77. Table 13 shows costs for audio and
video calls when applying the model carrier
for small, medium, and large facilities in
Brattle’s revised model. {[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Audio
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Video
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
78. The Model Carrier Analysis Is Largely
Consistent with Our Lower Bounds for Audio
IPCS. Brattle Group’s revised model carrier
analysis makes several reasoned adjustments
in response to record criticism of its original
submission, resulting in the per-minute
estimates in Table 13 above. For audio, these
estimates generally align with the lower
bound audio IPCS component of expenses
that staff derived through an examination of
industry average costs based on provider
2023 Mandatory Data Collection data ($0.021
per minute for prisons and $0.022 for large
jails). While the model’s estimated video
IPCS expenses, excluding safety and security,
are about {[REDACTED]} than those
established in our lower bounds, this
disparity can be, at least in part, attributed
to the market for video being less established
than audio, as reflected by {[REDACTED]}.
79. Staff acknowledge that the model
carrier is not a substitute for a fully
distributed cost analysis of provider
investments and expenses because it is
unable to capture all sources of cost variation
in the provision of IPCS, most notably cost
differences between facilities of different
types and sizes, and because a model that
aggregates piece-parts of service provision to
create an efficient provider by definition does
not reflect the real world investment,
operating, and other decisions of IPCS
providers. However, staff are encouraged that
the benchmark audio IPCS rates estimated by
the revised model align closely with the
lower bounds we have established, which
helps to validate both our lower bound
estimates and the rate caps that we ultimately
adopt.
2. Reported Facilities Earning Per-Minute
Revenues Below Our Lower Bounds
80. Comparing Per-Minute Audio Revenues
with Our Lower Bounds. This section
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
examines the facilities in which the perminute audio revenue, less site commissions,
that is, the per-minute revenues providers
keep at a given facility, is less than our lower
bounds for that facility type. We do not
perform a similar analysis for video because
the video data is unreliable and likely reflects
a nascent market with significant up-front
expenses and low demand. This means that
both per-minute video revenues and perminute video expenses (relied upon to
establish the lower bounds) are distorted, and
a comparison of the two would not yield
meaningful results in terms of validating our
interim video lower bounds. {[REDACTED]}
These facilities demonstrate that our lower
bounds may be too high (and so provide
further validation for setting our rate caps
closer to the lower bounds). Such facilities
are prima facie profitable at prices that
approximate their per-minute audio revenue
rates, otherwise providers would be seeking
to exit these contracts, thus showing their
per-minute audio costs, net of site
commissions, to be below our lower bounds.
This result applies most strongly for prisons
and large jails, where nearly two thirds and
nearly one half of facilities, respectively,
have per-minute audio revenues net of site
commissions that lie below their respective
lower bounds. For medium, small and very
small jails this share is between more than
a fifth and more than a third of facilities. We
also find that the share of providers with perminute audio revenues less site commissions
that are less than our lower bounds is not
significantly impacted by whether the
provider is in a rural or urban area.
81. In undertaking the analysis, staff’s first
step is to calculate, for each facility, the sum
of IPCS audio, safety and security and
ancillary service revenues net of site
commissions and divide this amount by the
PO 00000
Frm 00186
Fmt 4701
Sfmt 4700
sum of the facility’s billed and unbilled
minutes. Safety and security revenues are
allocated to facilities using safety and
security expenses, as the two are likely
correlated. {[REDACTED]}. Site commissions
at the facility level are allocated between
audio video using revenue weights, since site
commissions are in many cases proportional
to revenues. To make an apples-to-apples
comparison between the resulting revenue
per minute for a facility and its
corresponding lower bound, staff subtract
from the lower bound the $0.002 allowance
for TRS costs and add back in the safety and
security expenses removed from the lower
bounds. The safety and security expenses
added back in are: law enforcement support,
communication recording services,
communication monitoring services, voice
biometric services, and other safety and
security measures. CALEA compliance
measures and communication security
services are included in the lower bounds.
The TRS allowance is subtracted because in
2022 TRS was largely not provided, and so
TRS costs did not need to be recovered. Staff
add back in the safety and security expenses
that were removed to create the lower
bounds, because revenue reported in 2022
was for services that included these safety
and security expenses. The last row of Table
14 shows the net impact of these two
adjustments on the lower bound. Thus, staff
compare the revenue per-minute calculation
for each facility with the lower bound
appropriate to that facility, thereby
identifying facilities for which the perminute revenue is less than the lower bound.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.052
ddrumheller on DSK120RN23PROD with RULES2
Table 13: Model Carrier Cost per Minute
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77429
Table 14: Number and Industry Share of Facilities For Which Per-Minute Audio IPCS Revenues,
Net of Site Commissions, Is Less Than Its Adjusted Lower Bound, By Provider and Facility Type
ddrumheller on DSK120RN23PROD with RULES2
Very
All
of All
Facilities
Facilities
Large
Medium
Small
Small
All
with
with
Provider
Prison
Jail
Jail
Jail
Jail
Facilities
Audio
Audio
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00187
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.053
Percent
77430
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
1,330
120
414
873
1,413
4,150
65.4%
49.2%
37.4%
22.9%
31.6%
41.7%
$0.046
$0.045
$0.058
$0.077
$0.106
$0.075
$0.068
$0.080
$0.092
$0.122
Industry
with
Audio
Share of
Industry
(%)
Lower
bound
($)
Adjusted
Lower
Bound
($)
Notes: Lower bounds are adjusted by removing the TRS addon of $0.002, and by adding in the safety and security
for audio revenues, audio minutes and ADP.
82. Table 15 shows the facilities depicted
in Table 14 categorized by whether they are
located in an urban area, as classified by the
Census (locations that we could not geocode
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
were unassigned). It suggests that geography
does not have a material impact on whether
facilities have per-minute revenues less than
their lower bounds as calculated. The last
PO 00000
Frm 00188
Fmt 4701
Sfmt 4700
row shows that non-urban facilities are 75%
less common than urban facilities. This ratio
is also true for facilities that could be
identified as urban or rural with the per-
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.054
ddrumheller on DSK120RN23PROD with RULES2
costs removed in constructing the lower bounds. The facilities included in these counts reported positive numbers
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ddrumheller on DSK120RN23PROD with RULES2
minute revenues as described being less than
the adjusted lower bounds, suggesting
geography has no impact on the likelihood
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
that a facility’s per-minute rates being lower
than the lower bounds as calculated here.
PO 00000
Frm 00189
Fmt 4701
Sfmt 4700
E:\FR\FM\20SER2.SGM
20SER2
77431
77432
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 15: Facilities for which Per-Minute Audio IPCS Revenues, Net of Site Commissions, Is Less
Non-
Unassigne
Percent
Percent
Percent
Non-
Unassigne
Provider
Urban
Urban
d
Total
Urban
Urban
d
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00190
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.055
ddrumheller on DSK120RN23PROD with RULES2
Than their Adjusted Lower Bound, By Whether Categorized as Urban
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
{[REDACTE
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
DJ}
621
480
629
1,730
35.9%
27.7%
36.4%
1,083
764
573
2,420
44.8%
31.6%
23.7%
1,704
1,244
1,202
4,150
41.1%
30.0%
29.0%
77433
All<
Adjusted
Lower
Bound
All~
Adjusted
Lower
Bound
Industry
with Audio
Notes: Lower bounds are adjusted by removing the TRS addon of$0.002, and by adding in the safety and security
costs removed in constructing the lower bounds. A facility is unassigned if it had an address that could not be
geocoded. Rows with percent sum horizontally to 100 percent.
83. In summary, our lower bounds do not
appear too low. Nearly 42% of facilities
operate at imputed per-minute rates, after
netting of site commissions, that lie below
our caps, yet there are no signs that these
contracts are not viable. Thus, it is likely perminute costs for at least the vast bulk of these
contracts are less than our lower bounds.
3. Low-Priced Contracts Analysis
84. A Comparison Across 13 Contiguous
Texas Counties. This section shows two
things. First, that our lower bounds may be
excessive for the region of Dallas-Fort Worth
and surrounding counties, which provide a
broad range of conditions, from urban to
rural. And staff have no reason to think there
is something special about this region.
Second, that despite there being no obvious
reasons why costs would vary significantly
across comparable counties within this
region, the per-minute revenues kept by
providers, that is, per-minute revenues net of
site commissions, vary widely. This suggests
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
in most instances where one sees high perminute revenues, net of site commissions,
these do not reflect costs.
85. {[REDACTED]} We then reviewed the
publicly available contracts we were able to
find to better determine if these low prices
were driven by unusual factors (aside from
having limited site commissions).
{[REDACTED]} Consequently, staff examined
the cluster of 13 counties contiguous to
Dallas, Tarrant (Fort Worth), and Denton in
Texas—Figure 1, {[REDACTED]}. The twin
cities of Dallas and Fort Worth (Tarrant) are
natural comparators. Collin and Denton are
also natural comparators. They are neighbors
of similar geographic size, each lies above a
major urban agglomeration, and has a
population of about one million people.
Collin had a population of 1,064,465, and
Denton of 906,422. Ellis, Hunt, Grayson,
Johnson, Parker are all of geographically
similar sizes with populations ranging from
about 100,000 to about 200,000. Their
respective 2020 Census population estimates
PO 00000
Frm 00191
Fmt 4701
Sfmt 4700
were: Ellis: 192,455; Grayson: 135,543; Hunt:
99,956; Johnson: 179,927; Kaufman: 145,310;
and Parker: 148,222. Rockwall’s population
is 107,819, very similar to Hunt’s, but
Rockwall is geographically much smaller
than all the counties considered here. That
leaves Cooke and Wise, which are of similar
geographic size to all the other counties,
except Rockwall. Cooke and Wise have the
two smallest populations, respectively of
41,668 and 8,632.
Figure 1: The Counties of, and Surrounding,
Dallas-Fort Worth and Denton, Texas, Sorted
According to Their Reported IPCS Audio
Rates
{[ REDACTED ]}
Source: Rates are as found in the providers’
2022 Annual Reports (covering 2021).
86. Of the 13 counties just outlined, staff
were able to identify all but {[REDACTED]}
in the 2023 Mandatory Data Collection—see
Table 16. {[REDACTED]}
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.056
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
77434
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
Table 16: Audio Revenues Per Minute, Net of Site Commissions, for the Texas Counties
Surrounding Dallas and Denton, Texas (from 2023 Mandatory Data Collection)
County
Site Commissions
Revenues Less Site Commissions
Revenues (Including Site
Per Minute
Per Minute
Commissions) Per Minute
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Dallas
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Denton
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Ellis
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Grayson
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Hunt
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Kaufman
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Parker
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Rockwall
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Tarrant
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Wise
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Collin
{[REDACTED]}
Cooke
Notes: IPCS site commissions, which are reported for audio and video together, are allocated to audio using IPCS
revenue shares. Staff were unable to fmd Johnson County in the 2023 Mandatory Data Collection. Source: 2023
Mandatory Data Collection.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
substantially above the implied costs for the
counties with low prices.
89. Staff first checked providers’ 2023
Annual Reports for 2022 for consistency with
their 2023 Mandatory Data Collection
reports. Each county’s IPCS audio rates are
PO 00000
Frm 00192
Fmt 4701
Sfmt 4700
listed in Table 17, along with whether the
county receives any site commissions. This
data was largely consistent with the reports
in the 2023 Mandatory Data Collection.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.057
ddrumheller on DSK120RN23PROD with RULES2
87. {[REDACTED]}
88. Given the disparity in reported perminute revenues, net of site commissions,
staff sought further information on each of
these counties. Staff could identify no factors
that would justify cost differences
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77435
Table 17: Per-Minute Audio Rates, and Whether a Site Commission is Paid, for the Counties
Surrounding Dallas and Denton, Texas (from Annual Reports)
County
Provider
Audio Rate ($)
Site Commission Paid?
Cooke
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Collin
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Ellis
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Dallas
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Denton
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Grayson
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Hunt
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Johnson
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Kaufman
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Parker
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Rockwall
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Tarrant (Fort Worth)
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Wise
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
90. Summary of Contract Analysis.
Commission staff then analyzed the five
contracts they were able to find for these 13
counties, those of Dallas, Denton, Grayson,
Tarrant and Wise. Comparing the twin cities
of Dallas and Fort Worth (Tarrant) shows that
Securus’s per minute revenues, net of site
commissions, were about $0.015 per audio
minute in Dallas, much less than in Tarrant,
which were $0.133 per audio minute, for no
reasons staff could identify. Thus, staff
concludes the costs of supplying populated
suburban counties like Dallas and Tarrant are
around or less than $0.016 per minute. This
is well below our lower bound.
91. {[REDACTED]}
92. Staff examination of the Grayson
contract showed it only provides fairly basic
features. {[REDACTED]} In turn, this suggests
that our rate caps should be set closer to our
lower bounds.
93. Dallas and Tarrant Contracts. The
Dallas contract shows nothing that would
suggest it is for facilities with unusually low
costs. {[REDACTED]} the Dallas contract was
with Securus, involved no site commissions,
and included free community tablets and
included hosted video visitation services.
Per-minute domestic audio and video
visitation rates were respectively $0.0119 and
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
$0.13, with the only other charges being
$0.24 to send an email, and $5 per month for
a personal tablet and charges for games,
video and audio content.
94. Given their proximity, and extent of
interaction, Dallas and Tarrant likely face
similar cost conditions. {[REDACTED]} They
showed audio rates were set on to $0.16 per
minute on November 16, 2021, with two
sources of site commissions: Tarrant received
$0.02 per minute, and $59,420 per month,
which previously came from per-minute site
commissions. Staff could not calculate
Tarrant’s effective per-minute site
commission from the contract. In
comparison, Securus received $0.0119 per
IPCS minute in the Dallas contract. There is
nothing in the contracts to suggest that IPCS
provision in Tarrant is more expensive than
IPCS provision in Dallas.
95. Denton contract. Staff next compared
the ‘‘sister’’ counties Denton and Collin.
{[REDACTED]} Staff only had the Denton
contract to examine. It specifies call prices of
$0.02 per minute with a 95% site
commission payment. {[REDACTED]}
96. Grayson and Wise Contracts. The only
other contracts staff were able to find were
for the relatively small and rural Grayson and
Wise Counties. Both contracts are with
PO 00000
Frm 00193
Fmt 4701
Sfmt 4700
Correct. In Grayson, Correct sets the
following per-minute rates: interstate prepaid
and debit, $0.21, interstate collect, $0.25,
international, $1.00, intrastate, $0.30, and
video visitation $0.50. The contract’s
domestic rates are consistent with the 2022
annual report Correct made to the
Commission for calendar year 2001. There is
a $3.00 credit card transaction fee, a $1 for
debit calling moving fee, a $5.95 live operator
fee, a $0.50 message or email fee, and $0.99
per hour for tablet use, though prisoners are
allowed 15 minutes of free tablet use every
four hours. Correct installs and maintains
equipment, including kiosks and tablets, and
undertakes certain services, such as
contraband and remote mail scanning. Under
the contract, Correct pays an 82% site
commission on all but interstate calls and
10% on video visitation, suggesting Correct
collects $0.21 per minute on interstate calls,
and $0.06 (= (1¥0.82) * $0.30) on intrastate
calls. {[REDACTED]}
97. Wise County contracted with Correct
effective October 1, 2018, to provide audio
IPCS setting the following rates: interstate
prepaid, $0.21, interstate collect, $0.25,
international, $0.50, intrastate, $0.50, kiosk
transactions, $3.00, and live operator
transactions, $5.95. {[REDACTED]} Under
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.058
Source: Rates are from 2023 Reports (covering 2022).
77436
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
the contract, Correct was to provide what
appear to be relatively basic services: the
equipment and platform required for IPCS
and voicemail services. Wise County was
also to receive 75% of calling revenue ‘‘with
the exception of interstate calls with regard
to the FCC rule,’’ and 100% of voicemail
revenues. Staff understand the exception to
be the same as for Grayson, that no
commission is paid on interstate calls. The
contract was amended three times, numbered
one through three, and still appears to be in
place. One of those amendments is relevant
here. In that, Correct agrees to increase the
services it requires, in particular to provide
100 tablets, two correctional grade kiosks,
chargers and similar and certain services
such as electronic messaging, law library,
and medical scheduling. There was also a
memorandum of understanding which states
that due to an ‘‘excessive increase in cost of
business’’ Correct will now ‘‘impose a five
percent reduction in the number of minutes
on which the commission is calculated.’’
98. {[REDACTED]}
Appendix J: Rate Cap Validation
1. Selection of Rate Caps from Within
Zones of Reasonableness. We establish our
final audio IPCS and our interim video IPCS
rate caps from within our zones of
reasonableness. Table 1 presents the rate caps
for audio and video IPCS.
Table 1: Audio and Video Rate Caps ($/Min)
Very Small
Prisons
Large Jails
Medium Jails
Small Jails
Jails
Audio
0.06
0.06
0.07
0.09
0.12
Video
0.16
0.11
0.12
0.14
0.25
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
the TRS addon of $0.002 from our rate cap
and adds back those safety and security
expenses which were removed from the
lower bounds. We do not perform a similar
analysis for video because the video data is
comparatively unreliable and likely reflects a
nascent market with significant up-front
expenses and low demand. We agree that
‘‘[v]ideo calling is a relatively new service
compared to audio calling’’ and that
providers ‘‘will gradually enhance their
efficiency in providing this service over
time.’’ In sum, a comparison of per-minute
video revenues and per-minute video
expenses using data from the 2023
Mandatory Data Collection, which are for
calendar year 2022, would not meaningfully
validate our interim video rate caps. About
PO 00000
Frm 00194
Fmt 4701
Sfmt 4700
half of facilities meet this condition, as
shown in Table 2. It is likely that our audio
caps will have little impact on these
facilities, for those facilities which collect
revenues per minute which lie below our
caps will not need to adjust their pricing,
things otherwise constant. This result applies
most strongly for prisons and large jails,
where about three quarters and more than
half of facilities, respectively, collected perminute audio revenues below their respective
rate caps. Shares of medium, small, and very
small jails facilities with per-minute
revenues below the rate caps are about 42%,
29%, and 39% respectively.
BILLING CODE 6712–01–P
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.059
ddrumheller on DSK120RN23PROD with RULES2
2. Validity Check on the Audio Rate Caps.
This appendix counts the facilities where the
per-minute audio revenue, less site
commissions, is less than our rate cap for that
facility type. On the revenue side, for each
facility, we calculate the sum of IPCS audio,
safety and security, and ancillary service
revenues, net of site commissions, and divide
this amount by the sum of the facility’s billed
and unbilled minutes. Safety and security
revenues are allocated to facilities using
safety and security expenses, as the two are
likely correlated. {[REDACTED]} Site
commissions at the facility are allocated
between audio and video using revenue
weights, since site commissions are in many
cases proportional to revenues. To ensure
apples-to-apples comparisons, staff subtracts
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77437
Table 2: Number and Industry Share of Facilities for Which Per-Minute Audio IPCS Revenues,
Net of Site Commissions, is Less Than their Adjusted Rate Caps, By Provider and Facility Type
Facilities
All
Percent
Very
Below
Facilities
Below
Large
Medium
Small
Small
Adjusted
with
Adjusted
Provider
Prison
Jail
Jail
Jail
Jail
Cap
Audio
Cap
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Frm 00195
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.060
ddrumheller on DSK120RN23PROD with RULES2
All
77438
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
{[REDACT
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
ED]}
Total
976
66
172
251
553
2,018
4,150
48.6%
1330
120
414
873
1,413
4,150
73.4%
55.0%
41.5%
28.8%
39.1%
48.6%
$0.060
$0.060
$0.070
$0.090
$0.120
$0.089
$0.083
$0.092
$0.105
$0.136
Industry
with
Audio
Share of
Industry
(%)
Rate Cap
($)
Adjusted
Rate Cap
Notes: Rate caps are adjusted by removing the TRS addon of $0.002, and by adding in the safety and security costs
removed in constructing the lower bounds. The facilities included in these counts reported positive numbers for
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
3. A large fraction of facilities of all types
demonstrate profitability at rates consistent
with our rate caps. While certain providers
claim otherwise and argue that our rate caps
will prevent many providers from recovering
costs, we reject these claims as explained
herein. Many facilities appear to have perminute revenues net of site commissions that
exceed plausible estimates of costs. For
example, 1,294, or over 30% of facilities,
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
report per-minute audio revenue, less site
commissions, that exceed our highest upper
bound, $0.152, which is for very small jails.
Of these, 627, or 15% of, facilities have
reported per-minute audio revenues, net of
site commissions, that exceed $0.21, our
highest interim cap, but there are no credible
claims that per-minute costs come close to
this level. In fact, the highest per-minute
average cost for audio, including safety and
security costs, any provider reported in the
PO 00000
Frm 00196
Fmt 4701
Sfmt 4700
current collection, was {[REDACTED]}. Our
upper bound analysis suggests it is unlikely
that these per-minute revenues are costreflective. Per-minute expenses, net of site
commissions, also vary widely within the
same facility tier. Given there were facilities
where providers’ per-minute revenues less
site commissions exceeded our rate caps, this
suggests that their revenues per-minute either
exceed costs per-minute, or some providers’
costs are inefficiently high.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.061
audio revenues, audio minutes, and ADP.
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
4. In an efficient market for the same
service, all providers’ per-minute revenues
(net of site commissions) would be similar,
as would providers’ per-minute expenses net
of site commissions. After controlling for
facility type, we do not see this similarity.
There is no suggestion in the record that we
are missing key sources of cost variation that
could explain the substantial differences we
observe. In fact, our Lasso analysis shows
providers’ identities are more correlated with
costs than any other variable, reinforcing the
conclusion that reported per-minute
revenues do not reflect efficient costs. The
Lasso analysis shows that provider identity
and state are primarily correlated with perminute expenses. Facility type and whether
or not a site commission is collected also
matter, but far less than provider identity and
state. Consequently, our caps will put market
pressure on providers with inefficient perminute costs. Because so many facilities,
after controlling for facility type, have perminute revenues below our rate caps, we find
it likely that efficient per-minute costs are
below our caps as well. Thus, our caps
incentivize firms with particularly inefficient
costs to reduce their costs through increased
efficiencies.
5. Comparing revenues under our rate caps
to reported expenses shows that a range of
providers, both big and small, are expected
to recover their costs, again supporting our
finding that our rate caps will allow efficient
providers to meet demand for IPCS.
Inefficient firms may well face market
pressure as a result, but we are not persuaded
by such claims. Table 3 shows the revenues
a provider would receive if their reported
respective audio minutes and video minutes
for each facility were multiplied by the
respective audio and video rate caps. It also
shows the sum of audio IPCS, video IPCS,
and CALEA and Communication Security
expenses. The difference between these
understates the expected margin since call
volumes would rise with lower prices, but,
due to economies of scale, costs would rise
77439
less quickly. We likewise reiterate that we
believe reported costs are inflated,
particularly given that total industry reported
costs exceed total industry reported revenues
by such a wide margin. Of the 4,441
facilities, 3,202 have revenues at the rate caps
that match or exceed their costs, accounting
for 72% of facilities. Eight of the twelve
providers in our database have implied
revenues under the caps that exceed their
reported costs. The eight providers are
{[REDACTED]} This is also true for revenues
calculated as the product of reported minutes
and the lower of our rate caps and existing
prices. We do not find that the other four
providers would not recover their costs, only
that they would not recover revenues as
calculated here. We therefore disagree that
many providers would not be ‘‘fairly
compensated.’’ These providers,
{[REDACTED]}, cover about 85% of all
facilities. {[REDACTED]}
BILLING CODE 6712–01–P
Table 3: Revenues at Rate Caps and Expenses, by Provider
Audio and Video IPCS
Percent of
Facilities
Facilities
Facilities
with Capped
Potential
Capped
Capped
Revenue>=
Revenue at
Revenue>=
Revenue>=
Expenses
Caps
Expenses
Expenses
Expenses
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
ddrumheller on DSK120RN23PROD with RULES2
{[REDACTED]}
}
{[REDACTED]
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
17:27 Sep 19, 2024
{[REDACTED]}
{[REDACTED]
{[REDACTED]}
VerDate Sep<11>2014
Provider
{[REDACTED]}
{[REDACTED]
}
Jkt 262001
PO 00000
Frm 00197
Fmt 4701
Sfmt 4725
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.062
Provider
where
77440
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
{[REDACTED]}
{[REDACTED]
}
{[REDACTED]}
{[REDACTED]
{[REDACTED]
}
}
Total
4,441
{[REDACTED]}
{[REDACTED]
}
3,202
820,764,940
593,111,871
72%
Notes: Excludes jails where ADP is missing or zero. Capped revenue is calculated on the facility-level by
multiplying the relevant rate cap by the total number minutes. Audio, video, and safety and security Categories I
and III (CALEA and Communication Security) expense are included as expenses.
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
Table 4, all eight of the providers discussed
above serve very small jails. {[REDACTED]}
Thus, it is implausible that our caps will
prevent supply in small jails. Even if we take
all providers’ reported costs at face value,
which we do not, we would not be setting
just and reasonable rates if we allowed any
provider to recover its reported costs-ofservice where these exceed those of an
efficient provider. As articulated therein, we
PO 00000
Frm 00198
Fmt 4701
Sfmt 4700
find the reasons that reported costs are
overstated to be compelling, and disagree
that such a finding is ‘‘erroneous[ ].’’ Equally,
we must ensure providers are fairly
compensated. To that end, we have chosen
to set rate caps that likely exceed efficient
costs, even if they are lower than some
providers’ reported costs.
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.063
ddrumheller on DSK120RN23PROD with RULES2
Contrary to some claims, which argue that
our rate caps impact smaller providers and
thus smaller facilities, provider size is no
predictor of the choice to serve very small
jails. We disagree with such claims. As we
explain, the eight providers which already
have revenues less site commissions beneath
our caps serve an overwhelming number of
small and very small facilities, as well as
medium and large facilities. As illustrated in
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77441
Table 4: Facility Counts for Providers and Industry, by Facility Type
Very Small
Prisons
Large Jails
Medium Jails
Small Jails
Jails
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
HomeWAV
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
IC Solutions
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
NCIC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Pay Tel
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Prodigy
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Securus
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Smart
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
TKC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
ViaPath
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Industry
1542
124
904
1438
ATN
{[REDACTED]}
CPC
City Tele-
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
7. We reject claims that our actions could
harm competition. Competition should not
be mistaken for the number of competitors.
Competition delivers lower prices, adjusted
for quality, and competition may sometimes
drive out inefficient competitors.
Competition also leads inefficient
competitors to become more efficient. Setting
rate caps to enable inefficient competitors to
survive would not be pro-competitive, and
would not result in just and reasonable
prices. It would also allow providers to be
overcompensated, rather than to receive fair
compensation. Nor would an inefficient
provider’s exit from the market indicate a
reduction of competition as some
commenters allege. This commenter would
do well to mind the age-old antitrust maxim:
the law protects competition, not
competitors. We agree with those
commenters that observe that ‘‘the
Commission is not obligated to set rates to
cover an inefficient business model.’’
8. We also disagree with claims that
inflation and concomitant regulatory
obligations are ‘‘plausible explanations’’ for
why industry reported costs are exceeding
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
433
IPCS revenues. Commercial contracts
commonly include clauses addressing
inflation and changes of law, and here,
contract renegotiation seems common; in any
year, a material fraction of contracts are won,
renewed and renegotiated. Without any
evidence in the record, we decline to assume
that half of providers, including Securus,
would broadly renew unviable contracts,
place bids at non-viable prices, or would not
seek to renegotiate contracts in the face of
unanticipated inflation. Neither Securus nor
any other party has shown that IPCS
expenses have grown sufficiently fast since
2022, after accounting for industry
productivity, to render 2022 expenses too
low for the purpose of setting our rate caps.
In fact, over the past decade,
telecommunications industry inflation has
been significantly lower than broader
measures of inflation. The
Telecommunications PPI over the last ten
years averaged 0.7% annually, as opposed to
2.6% average annual increases in the GDP
deflator over the same period. Likewise, we
are unconvinced that regulation compliance
costs made IPCS unviable in 2022. In 2022,
roughly half of all audio call minutes were
PO 00000
Frm 00199
Fmt 4701
Sfmt 4700
for intrastate calls, which were not subject to
Commission pricing regulation at that time.
Further, our 2022 rate caps were set
substantially above our current upper
bounds, which take providers’ 2022 reported
costs at face value, so they too cannot have
held rates below costs. Nor are we convinced
that regulation at the state level adequately
explains the disparity between industry-wide
costs and revenues. For example, Securus
points to Pay Tel’s exit from California, but
IPCS continued to be supplied at the
correctional facility in question, just by a
different, and presumably more efficient
provider. In sum, we do not find it credible
that inflation could have caused the apparent
losses providers reported in 2022, nor is it
the Commission’s responsibility to cure
contracts that fail to anticipate common
exigencies.
9. We are likewise unpersuaded that the
difference between industry contract
revenues and IPCS expenses is explained by
providers use of profits from other non-IPCS
services to cross-subsidize the price of IPCS.
The record presents no substantive evidence
of cross-subsidization, or of its extent, let
alone establish that the practice was
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.064
Coin
77442
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
widespread and led to material reductions of
IPCS revenues below costs. Crosssubsidization, while potentially making an
otherwise unprofitable business segment
profitable for the overall contract, can also
obscure inefficiencies within the regulated
business and misalign incentives. For
example, providers may be disincentivized to
reduce costs and efficiently provide IPCS if
they only use it to generate other business
within the same contract. In Securus’ own
words, ‘‘regulated rates must enable
companies to earn a positive return
specifically from the service being
regulated.’’ Given the distortionary effects of
cross-subsidization, we find the most direct
way to assess viability of IPCS provision at
a facility is to compare IPCS revenues with
IPCS costs.
10. In validating our caps, we do not place
significant weight on analysis of facility-level
per-minute audio expenses as that would be
misleading for at least the following reasons:
different providers allocate costs differently,
no provider’s cost allocations are likely to be
particularly accurate at the level of the
facility, and the likelihood of reporting errors
at the facility. There are also corner cases, for
example, where costs are incurred at the start
of a contract, but few or no minutes are
supplied. Tables 5 and 6 illustrate the
difficulties with facility-level data. These
tables show provider-reported per-minute
expenses vary widely within a single
provider’s data, often over implausible
ranges. However, because providers allocate
all their costs down to their facilities, a focus
at the level of the provider avoids cost
allocation problems. Similarly, viewing an
aggregation of facilities, including at the level
of the provider, or across providers, tends to
smooth out reporting errors and corner cases.
This is not the case when considering a
provider’s higher cost facilities, since, by
definition, one is choosing the facilities to
which more costs were allocated and
ignoring those to which fewer costs were
allocated. Thus, Pay Tel’s argument that one
third of its facilities will be loss-making
under our rate caps requires belief that its
cost allocations accurately reflect underlying
costs. That seems improbable for at least
some of its facilities given its per-minute cost
estimates for very small jails range from
{[REDACTED]}. If it is true that Pay Tel
overall could not operate profitably under
our rate caps, we find that to be because Pay
Tel’s costs exceed efficient costs. We reject,
for the same reasons, a similar claim made
by Securus. Securus argues that a substantial
number of facilities will be ‘‘underwater at
the lower bound cost level given the
proposed rate caps,’’ and that certain
‘‘providers’ lower bound per minute costs
exceed the rate cap[s].’’ We find this analysis
implausible, unsupported, and, given the fact
that Securus did not submit the calculations
in the record, we are unable to analyze or
otherwise replicate their results. As an initial
matter, Securus fails to separately identify
audio and video profitability, leaving the
differences between these services obscure.
Further, we find Securus’s analysis
misleading. By ‘‘excluding {[REDACTED]}’’
from the analysis, Securus removes the
substantial majority of facilities and cost data
from its analysis, and uses a sample size of
less than 20% of the industry to support its
conclusions. Such a limited picture is
particularly inappropriate for developing rate
caps based on industry average costs, an
approach which is expressly permitted by the
statute. For example, given that our upper
bounds reflect all costs as submitted, we find
it unlikely that certain providers have ‘‘lower
bound costs [that] exceed rate caps by
{[REDACTED]}’’ as Securus claims, because
costs which lie {[REDACTED]} above the rate
caps would also lie above the upper bounds
for all jail size tiers.
BILLING CODE 6712–01–P
Table 5: Minimum Per-Minute Audio Expense, Inclusive of CALEA and Communication Security
ddrumheller on DSK120RN23PROD with RULES2
Provider
VerDate Sep<11>2014
Prisons
Large Jails
Medium Jails
Small Jails
Very Small Jails
ATN
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
CPC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
City Tele-Coin
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
HomeWAV
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
IC Solutions
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
NCIC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Pay Tel
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Prodigy
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Securus
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Smart
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
TKC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
ViaPath
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Frm 00200
Sfmt 4725
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Fmt 4701
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.065
Expenses, at a Facility by Facility Type
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 / Rules and Regulations
77443
Table 6: Maximum Per-Minute Audio Expense, Inclusive of CALEA and Communication Security
Expenses, at a Facility by Facility Type
Provider
Prisons
Large Jails
Medium Jails
Small Jails
Very Small Jails
ATN
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
CPC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
City Tele-Coin
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
HomeWAV
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
ICSolutions
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
NCIC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Pay Tel
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Prodigy
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Securus
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Smart
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
TKC
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
ViaPath
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
{[REDACTED]}
Frm 00201
Sfmt 9990
[FR Doc. 2024–19037 Filed 9–18–24; 8:45 am]
VerDate Sep<11>2014
17:27 Sep 19, 2024
Jkt 262001
PO 00000
Fmt 4701
E:\FR\FM\20SER2.SGM
20SER2
ER20SE24.066
ddrumheller on DSK120RN23PROD with RULES2
BILLING CODE 6712–01–C
Agencies
[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Rules and Regulations]
[Pages 77244-77443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-19037]
[[Page 77243]]
Vol. 89
Friday,
No. 183
September 20, 2024
Part II
Federal Communications Commission
-----------------------------------------------------------------------
47 CFR Parts 14 and 64
Incarcerated People's Communication Services; Implementation of the
Martha Wright-Reed Act; Rates for Interstate Inmate Calling Services;
Final Rule
Federal Register / Vol. 89, No. 183 / Friday, September 20, 2024 /
Rules and Regulations
[[Page 77244]]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 14, 64
[WC Docket Nos. 12-375, 23-62; FCC 24-75; FR ID 237400]
Incarcerated People's Communication Services; Implementation of
the Martha Wright-Reed Act; Rates for Interstate Inmate Calling
Services
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts rules addressing all intrastate, interstate, and
international audio and video incarcerated people's communication
services (IPCS), including video visitation services. The reforms
include adopting permanent rate caps for audio IPCS and interim rate
caps for video; prohibiting IPCS providers from making site commission
payments associated with IPCS and preempting state and local laws and
regulations requiring such commissions; prohibiting IPCS providers from
imposing any separate ancillary service charges on IPCS consumers;
strengthening the Commission's requirements for access to IPCS by
incarcerated people with disabilities; permitting IPCS providers to
offer optional alternate pricing plans that comply with the rate caps;
strengthening existing consumer disclosure and inactive account
requirements; revising the existing annual reporting and certification
requirements; facilitating enforcement of the new IPCS rules; and
delegating authority to the Commission's Wireline Competition Bureau
(WCB), Consumer and Governmental Affairs Bureau (CGB), and Office of
Economics and Analytics (OEA).
DATES:
Effective date: This rule is effective November 19, 2024, except
for amendatory instruction 7 (Sec. Sec. 64.611(l)(2), (3), (5), (6));
amendatory instruction 15 (Sec. 64.6040(f)); amendatory instruction 17
(Sec. 64.6060); amendatory instruction 20 (Sec. 64.6090); amendatory
instruction 22 (Sec. 64.6110); amendatory instruction 23 (Sec.
64.6120); amendatory instruction 25 (Sec. 64.6130(d) through (f), and
(h) through (k)); amendatory instruction 27 (Sec. 64.6140(c), (d),
(e)(2) through (4), (f)(2), and (f)(4)), which are delayed
indefinitely. The Federal Communications Commission will publish a
document in the Federal Register announcing the effective date of these
provisions.
Delegation of authority: The delegations of authority to WCB, CGB,
and OEA are effective on November 19, 2024.
ADDRESSES: Federal Communications Commission, 45 L Street NE,
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 [email protected], or
call the Consumer and Governmental Affairs Bureau at (202) 418-0530
(voice) or (202) 418-0432 (TTY).
FOR FURTHER INFORMATION CONTACT: Stephen Meil, Pricing Policy Division
of the Wireline Competition Bureau, at (202) 418-7233 or via email at
[email protected], regarding the portions of this document relating
to matters other than communications services for incarcerated people
with disabilities, and Michael Scott, Disability Rights Office of the
Consumer and Governmental Affairs Bureau, at (202) 418-1264 or via
email at [email protected], regarding the portions of this document
relating to communications services for incarcerated people with
disabilities.
SUPPLEMENTARY INFORMATION: This is a summary of the Federal
Communications Commission's (Commission's) Report and Order, document
FCC 24-75, adopted on July 18, 2024 and released on July 22, 2024, in
WC Docket Nos. 12-375 and 23-62. This summary is based on the public
redacted version of the document, the full text of which can be
obtained from the Commission's Electronic Document Management System
(EDOCS) website at www.fcc.gov/edocs or via the Commission's Electronic
Comment Filing System (ECFS) website at www.fcc.gov/ecfs, or is
available at the following internet address: https://docs.fcc.gov/public/attachments/FCC-24-75A1.pdf.
Synopsis
I. Introduction
1. Today we take the most significant steps thus far to fulfill the
dream of Martha Wright-Reed, who advocated tirelessly to ensure that
incarcerated people would be able to communicate with family and loved
ones at just and reasonable rates. While this document implements the
requirements of the Martha Wright-Reed Just and Reasonable
Communications Act of 2022 (Martha Wright-Reed Act or Act), this
proceeding began over twenty years ago when a determined grandmother
petitioned the Federal Communications Commission to take action against
the egregiously high telephone rates and charges that were impeding
incarcerated people's ability to stay connected with their families and
friends. Martha Wright-Reed championed the idea of easing the financial
burdens imposed on incarcerated people and their families simply to
make a phone call. As a blind elderly woman, who could neither write
letters nor travel such long distances for in-person visits, she often
spent hundreds of dollars a month in long distance phone calls to stay
in touch with her incarcerated grandson. In her honor, and in the face
of years of litigation frustrating the Commission's reform efforts in
this area, Congress passed the Martha Wright-Reed Act, significantly
expanding the Commission's jurisdiction over incarcerated people's
communications services (IPCS) and directing the Commission to
``establish a compensation plan to . . . ensure just and reasonable
charges for telephone and advanced communications services in
correctional and detention facilities.''
2. In this item, we exercise the authority granted the Commission
by Congress and adopt comprehensive reforms that will significantly
reduce the financial burdens incarcerated people face to communicate
with their loved ones. We first reduce existing rate caps for all
incarcerated people's audio communication services, by implementing a
methodology specifically permitted by Congress in the Act, and
establish, for the first time, interim rate caps for incarcerated
people's video communications services. We also materially reduce the
prices consumers pay for IPCS by limiting the costs that can be
recovered through IPCS rates to only costs that the Commission finds
are used and useful in the provision of IPCS. We also permit states to
maintain rates lower than the Commission's rate caps. We next end IPCS
providers' long-standing practice of making site commission payments to
carceral facilities, the costs of which were passed through to
consumers via higher IPCS rates. We further strengthen the requirements
for access to IPCS by incarcerated people with disabilities, and adopt
stronger consumer protection rules. We also permit providers, for the
first time, to offer optional alternate pricing plans, subject to
conditions to protect and benefit IPCS consumers.
A. Executive Summary
3. The Report and Order implements the expanded authority granted
to the Commission by the Martha Wright-Reed Act to establish a
compensation plan that ensures both just and reasonable rates and
charges for incarcerated
[[Page 77245]]
people's audio and video communications services and fair compensation
for incarcerated people's communications service providers. The Report
and Order fundamentally reforms the regulation of IPCS in all
correctional facilities, regardless of the technology used to deliver
these services, and significantly lowers the IPCS rates that
incarcerated people and their loved ones will pay. These comprehensive
reforms:
Utilize the expanded authority Congress granted the
Commission, in conjunction with the FCC's preexisting statutory
authority, to adopt just and reasonable IPCS rates and charges for all
intrastate, interstate, and international audio and video IPCS,
including video visitation services;
Lower existing per-minute rate caps for audio IPCS and
establish initial interim per-minute rate caps for video IPCS, based on
industry-wide cost data submitted by IPCS providers, while permitting
states to maintain IPCS rates lower than the Commission's rate caps;
Lower the overall prices consumers pay for IPCS and
simplify the pricing structure by incorporating the costs of ancillary
services in the rate caps and prohibiting providers from imposing any
separate ancillary service charges on IPCS consumers;
Prohibit IPCS providers from making site commission
payments for IPCS and preempt state and local laws and regulations
requiring such commissions;
Limit the costs associated with safety and security
measures that can be recovered in the per-minute rates to only those
costs that the Commission finds are used and useful in the provision of
IPCS;
Allow, subject to conditions, IPCS providers to offer
alternate pricing plans for IPCS that comply with the rate caps we
establish;
Revise and strengthen accessibility requirements for IPCS
for incarcerated people with disabilities;
Revise and strengthen existing consumer disclosure and
inactive account requirements; and
Revise the existing annual reporting and certification
requirements.
4. We adopt the following rate caps:
Table One--New Rate Caps by Tier
----------------------------------------------------------------------------------------------------------------
Audio (permanent) (per minute) Video (interim) (per minute)
Tier (ADP) ---------------------------------------------------------------
Current caps New caps Current caps New caps
----------------------------------------------------------------------------------------------------------------
Prisons (any ADP)............................... * $0.14 $0.06 N/A $0.16
Large Jails (1,000+)............................ * 0.16 0.06 N/A 0.11
Med. Jails (350 to 999)......................... 0.21 0.07 N/A 0.12
Small Jails (100 to 349)........................ 0.21 0.09 N/A 0.14
Very Small Jails (0 to 99)...................... 0.21 0.12 N/A 0.25
----------------------------------------------------------------------------------------------------------------
* Current cap figures that include a $0.02 additive for facility costs, which equates to the allowance made for
facility-incurred IPCS costs reflected in contractually-prescribed site commissions, the closest available
comparison.
II. Background
A. The Martha Wright-Reed Just and Reasonable Communications Act of
2022
5. The Martha Wright-Reed Just and Reasonable Communications Act of
2022 (Martha Wright-Reed Act or Act), was enacted on January 5, 2023.
It represents the culmination of a years-long effort to comprehensively
address unreasonably high rates and charges that incarcerated people
and their families pay for communications services. The Act expands and
clarifies the scope of the Commission's authority over IPCS under
section 276 of the Communications Act of 1934, as amended
(Communications Act) by modifying section 276 to require the Commission
to ensure that the rates and charges for incarcerated people's
intrastate and interstate communications services be just and
reasonable. It also modifies the requirement in section 276(b)(1)(A)
that providers be fairly compensated by eliminating the requirement
that compensation occur on a ``per call'' basis and for ``each and
every [call].'' Thus, with the new amendments, section 276(b)(1)(A)
directs the Commission to establish a compensation plan to ``ensure
that all payphone service providers are fairly compensated and all
rates and charges are just and reasonable for completed intrastate and
interstate communications using their payphone or other calling
device.'' The Act further augments the Commission's jurisdiction by
modifying the Communications Act to expand the definition of payphone
service in correctional institutions to encompass advanced
communications services, including ``any audio or video communications
service used by inmates . . . regardless of technology used.''
6. The Martha Wright-Reed Act also amends section 2(b) of the
Communications Act to reinforce that the Commission's jurisdiction
extends to intrastate, as well as interstate and international,
communications services used by incarcerated people. The Communications
Act generally allocates regulatory authority over intrastate,
interstate, and international communications services between the
Commission and the states. It grants authority to the Commission to
ensure that ``[a]ll charges, practices, classifications, and
regulations for and in connection with'' interstate or international
common carrier communications services are ``just and reasonable,'' and
directs the Commission to ``prescribe such rules and regulations as may
be necessary in the public interest to carry out'' this mandate.
7. Section 2(b) of the Communications Act generally preserves
states' jurisdiction over ``charges, classifications, practices,
services, facilities, or regulations for or in connection with
intrastate communication service.'' The Commission is thus ``generally
forbidden'' from regulating ``intrastate communication service, which
remains the province of the states.'' Stated differently, section 2(b)
``erects a presumption against the Commission's assertion of regulatory
authority over intrastate communications.'' But Congress can enact
statutory provisions that overcome this presumption, including by
expressly excluding provisions of the Communications Act from section
2(b). Section 276 of the Communications Act always has been
[[Page 77246]]
clear that the Commission has authority to establish compensation plans
for ``intrastate and interstate'' payphone calls, and the Martha
Wright-Reed Act also specifically modified section 2(b) to include
section 276, as amended, in an explicit exception. This amendment makes
abundantly clear that the Commission's authority under section 276
encompasses intrastate IPCS.
8. In direct response to the D.C. Circuit's decision in GTL v. FCC,
the Act expressly allows the Commission to ``use industry-wide average
costs,'' as well as the ``average costs of service of a communications
service provider'' in setting just and reasonable rates and charges. In
implementing the Act, the Commission is required to consider the
``costs associated with any safety and security measures necessary to
provide'' telephone service and advanced communications services.
Finally, the statute directs the Commission to promulgate regulations
necessary to implement the statutory provisions not earlier than 18
months and not later than 24 months after its January 5, 2023 enactment
date.
B. Early Reform Efforts
9. Prior to the enactment of the Martha Wright-Reed Act, the
Commission had previously taken a number of steps to reform
communications services for incarcerated people. In 2012, the
Commission initiated its inmate calling services (ICS) rulemaking
principally in response to petitions filed by Martha Wright and her
fellow petitioners seeking relief from ``excessive'' inmate calling
services rates. In the 2013 ICS Order, the Commission found that rates
for calling services for incarcerated people greatly exceeded the
reasonable costs of providing those services and adopted interim
interstate rate caps of $0.21 per minute for debit and prepaid calls,
and $0.25 per minute for collect calls. The Commission also launched
its First Mandatory Data Collection to obtain industry cost data to
help develop permanent rate caps. In 2014, the Commission sought
comment on establishing permanent rate caps for both interstate and
intrastate calls and on reforming charges for services ancillary to the
provision of inmate calling services.
10. In 2015, the Commission adopted a comprehensive regulatory
framework for interstate and intrastate inmate calling services that
included permanent rate caps for interstate and intrastate inmate
calling services calls, and imposed limits on ancillary service
charges. Specifically, the 2015 ICS Order set tiered rate caps for
interstate calls based on the type and size of correctional facilities
and calculated these caps using industry-wide average costs as reported
in the First Mandatory Data Collection. The Commission excluded all
site commission payments from industry costs, having found such
payments were not reasonably related to the provision of inmate calling
services. The Commission also extended the interim interstate rate caps
it had adopted in 2013 to intrastate calls, pending the effectiveness
of the new rate caps, and sought comment on rate regulation of
international inmate calling services calls. Finally, the 2015 ICS
Order established a Second Mandatory Data Collection to guide further
reforms, and began an annual filing obligation to collect information
on providers' interstate, intrastate, and international rates, as well
as their ancillary service charges, among other information.
11. While an appeal of the 2015 ICS Order was still pending, the
Commission reconsidered the full exclusion of site commission payments
from its permanent rate cap calculations. The Commission's 2016 ICS
Reconsideration Order increased the permanent rate caps adopted in the
2015 ICS Order to account for claims that certain correctional facility
costs reflected in site commission payments are directly and reasonably
related to the provision of inmate calling services.
C. The GTL v. FCC Decision
12. The permanent rate caps adopted in the 2015 ICS Order were
vacated by the D.C. Circuit in GTL v. FCC in 2017 on three principal
grounds. First, the panel majority held that the Commission lacked the
statutory authority to cap intrastate calling services rates because
the Commission's authority over intrastate calls under section 276 of
the Communications Act did not authorize it to impose intrastate rate
caps, and the Commission's authority under section 201(b) of the
Communications Act did not extend to intrastate rates. Second, the D.C.
Circuit concluded that the Commission had erred by categorically
excluding site commissions from inmate calling services providers'
costs used to set rate caps. Because some site commissions were
``mandated by state statute,'' while others were ``required by state
correctional institutions,'' the court concluded that some portion of
site commissions might be legitimately included in provider costs, and
remanded to the Commission to determine what portion of site
commissions were directly related to the provision of inmate calling
services. Third, the court found that the Commission's use of a
weighted average per-minute cost in setting rate caps, on the existing
record as analyzed in the 2015 ICS Order, was arbitrary and capricious,
in part because this approach, as the Commission had applied it,
rendered calls with above-average costs unprofitable and thus did ``not
fulfill the mandate of [section] 276 that `each and every' '' call be
fairly compensated.
13. The D.C. Circuit also remanded the Commission's ancillary
service charge caps, finding that--on the available record--the
Commission ``had no authority to impose ancillary fee caps with respect
to intrastate calls.'' Although the court found ancillary service
charge caps on interstate calls ``justified,'' it could not ``discern
from the record whether ancillary fees [could] be segregated between
interstate and intrastate calls,'' and remanded the issue for the
Commission to determine whether it could segregate ancillary service
fee caps between interstate calls and intrastate calls. The court also
vacated the video visitation annual reporting requirements adopted in
the 2015 ICS Order as ``beyond the statutory authority of the
Commission.''
14. In a related case decided later that year, the D.C. Circuit
``summarily vacated'' the 2016 ICS Reconsideration Order ``insofar as
it purports to set rate caps on inmate calling service'' because the
revised rate caps in that order were ``premised on the same legal
framework and mathematical methodology'' rejected by the court in GTL
v. FCC. As a result of the D.C. Circuit's decisions in GTL and Securus
Techs. v. FCC, the interim rate caps that the Commission adopted in
2013 ($0.21 per minute for debit/prepaid calls and $0.25 per minute for
collect calls) remained in effect for interstate inmate calling
services calls.
D. More Recent Reform Efforts
15. Following the D.C. Circuit's remand in GTL v. FCC, the
Commission took additional actions to address unreasonable rates and
charges for communications services for incarcerated people. In
February 2020, the Wireline Competition Bureau (Bureau or WCB) issued a
document seeking to refresh the record on issues related to ancillary
service charges to respond to the D.C. Circuit's remand. The Bureau
sought comment on whether ancillary service charges may be ``segregated
between interstate and intrastate calls and, if so, how.'' It also
sought comment on the definition of jurisdictionally mixed services and
how the Commission should proceed if any
[[Page 77247]]
permitted ancillary service is deemed jurisdictionally mixed.
16. In August 2020, the Commission adopted the 2020 ICS Order on
Remand (85 FR 67450 (Oct. 23, 2020)), in which it found that ancillary
service charges generally are jurisdictionally mixed and cannot be
practicably segregated between the interstate and intrastate
jurisdictions, except in a limited number of cases. The Commission
therefore concluded that inmate calling services providers are
generally prohibited from imposing ancillary service charges other than
those permitted by the Commission's rules, and from imposing charges in
excess of the Commission's ancillary service fee caps. In an
accompanying document, the Commission proposed reform of the inmate
calling services rates then within its jurisdiction based on its
analysis of industry data collected in the Second Mandatory Data
Collection, as well as information collected in the 2020 Annual
Reports.
17. In May 2021, the Commission adopted the 2021 ICS Order, which,
among other actions, set new interim interstate rate caps for prisons
and larger jails, reformed the treatment of site commissions, and
capped international calling rates. The Commission first eliminated
separate rate caps for all collect calls and retained the existing
$0.21 per minute interstate rate cap for debit and prepaid calls for
correctional facilities with average daily populations below 1,000. The
Commission then lowered the interstate interim rate caps from $0.21 per
minute for debit and prepaid calls to $0.12 per minute for prisons and
$0.14 per minute for jails with average daily populations of 1,000 or
more incarcerated people. It allowed site commission payments mandated
by federal, state, or local law, to be passed through to consumers,
without any markup, and capped other site commission payments that
result from contractual obligations or negotiations with providers to
no more than $0.02 per minute for prisons and jails with average daily
populations of 1,000 or more. The Commission adopted a modified waiver
process that permits providers to seek waivers of the rate and
ancillary services fee caps on a facility-by-facility or contract-by-
contract basis. The Commission also delegated authority to WCB and the
Office of Economics and Analytics (OEA) to conduct a Third Mandatory
Data Collection to collect uniform cost data to use in setting
permanent rate and ancillary services fee caps that more closely
reflect inmate service providers' costs of providing service.
18. In 2021, the Commission sought comment on, among other matters,
the provision of communications services to incarcerated people with
disabilities, and the methodology to be employed in setting permanent
interstate and international rate caps. It also sought comment on
general reform of the treatment of site commission payments in
connection with interstate and international calls, and additional
reforms to the Commission's ancillary service charges rules.
19. In September 2022, the Commission issued the 2022 ICS Order,
which adopted requirements to improve access to communications services
for incarcerated people with disabilities and to reduce certain charges
and curtail abusive practices related to ICS. The Commission required
inmate calling services providers to provide access to substantially
all relay services eligible for Telecommunications Relay Services (TRS)
Fund support in any correctional facility where broadband is available
and where the average daily population incarcerated in that
jurisdiction (i.e., in that city, county, state, or the United States)
totals 50 or more persons. It also required that where inmate calling
services providers are required to provide access to substantially all
forms of TRS, they also must provide access to American Sign Language
(ASL) direct, or point-to-point, video communication. Additionally, the
Commission lowered its caps on certain provider charges and barred
certain abusive practices to lessen the financial burden on
incarcerated people and their loved ones when using calling services.
20. The Commission also issued 2022 seeking stakeholder input and
evidence relating to additional reforms concerning incarcerated people
with disabilities. It sought further comment on reforms concerning
providers' rates, charges, and practices in connection with interstate
and international calling services, including further refining the
Commission's rules concerning the treatment of balances in inactive
accounts, expanding the breadth and scope of the Commission's consumer
disclosure requirements, using the Commission's data collections to
establish just and reasonable permanent caps on interstate and
international rates and associated ancillary service charges, and
allowing providers to offer pilot programs for alternative pricing
structures.
E. Implementation of Martha Wright-Reed Act
21. Following the enactment of the Martha Wright-Reed Act in
January 2023, the Commission issued 2023 and 2023 IPCS Order in March
2023 to begin the process of implementing that Act. In 2023, the
Commission sought comment on how it should interpret the Martha Wright-
Reed Act's provisions expanding the Commission's authority over
communications services for incarcerated people, including the Act's
requirement that rates and charges for incarcerated people's
communications services be just and reasonable, the Act's expansion of
the Commission's authority to include advanced communications services,
including video services, the expansion of the Commission's
jurisdiction to include intrastate communications services, and other
aspects of the Act. It also sought comment on how the Martha Wright-
Reed Act affects the Commission's ability to ensure that IPCS services
and associated equipment are accessible to and usable by people with
disabilities. Finally, 2023 incorporated unresolved issues previously
raised in WC Docket No. 12-375 into the current dual-captioned
proceeding.
22. In the 2023 IPCS Order, the Commission reaffirmed its prior
delegation of data collection authority to WCB and OEA, and directed
them to update and restructure their most recent data collection as
appropriate in light of the requirements of the new statute. In July
2023, WCB and OEA exercised this delegated authority and adopted the
2023 Mandatory Data Collection Order (88 FR 27850, May 3, 2023) to
collect information on the additional services and providers subject to
the Commission's newly expanded authority and address the Act's other
provisions where necessary.
III. Discussion
A. Unique Marketplace for Incarcerated People's Communications Services
23. The history of this proceeding makes crystal clear that the
IPCS marketplace ``is not a well functioning market with competitive
forces that would drive prices towards costs.'' Once a provider
successfully competes for a contract to serve a facility, it has a
monopoly over the provision of IPCS at that facility. Incarcerated
people play no role in the process of selecting IPCS providers or the
services they offer and have no choice but to pay the rates and charges
imposed if they wish to call their family or other loved ones.
Consumers have no means of switching to another provider and no means
of redress even if the IPCS provider ``raises rates, imposes additional
fees, adopts unreasonable terms and conditions for use of the service,
or offers inferior
[[Page 77248]]
service.'' As a result, there are no competitive forces to constrain
providers from imposing rates and charges that far exceed the costs
required to provide the services. This absence of competitive
alternatives to discipline IPCS rates justifies rate regulation
independent of the problematic role that site commissions historically
have played. We thus reject arguments that the elimination of site
commission payments calls into question the need for rate regulations.
In stating its preference for relying on competition and market forces
to discipline prices, the Commission has acknowledged ``there is little
dispute that the [IPCS] market is a prime example of market failure.''
This market failure persists today. Indeed, one provider aptly
summarizes the IPCS market dynamics today as follows:
Fundamentally, due to the inherent structure of the [IPCS]
marketplace, [IPCS] providers' rational economic incentive is to
entice confinement facilities to award the provider a service
contract as the facility, and confinement facilities' rational
economic incentive is to award contracts to [IPCS] providers who
provide the greatest payments (monetary or otherwise) to the
facility. Notably absent from the foregoing calculus are the [IPCS]
consumers themselves, despite the fact that they are the ones who
ultimately pay for [IPCS] service.
24. Despite Commission actions over the years to constrain rates
and charges in the audio IPCS marketplace, the monopolistic nature of
the marketplace has not changed, and remains ``characterized by
increasing rates, with no competitive pressures to reduce rates.'' The
``unusual market dynamics'' of the IPCS marketplace and the ``inability
of market forces to constrain IPCS rates'' are also evident in a still
nascent portion of the marketplace--video IPCS, making clear that
``some form of regulatory constraint . . . is needed to ensure that end
user rates are just and reasonable.'' The bipartisan Martha Wright-Reed
Act is a directive that the Commission provide such regulatory
constraint on the IPCS marketplace through ensuring ``just and
reasonable charges for telephone and advanced communications services
in correctional and detention facilities.''
25. Some commenters argue that the IPCS marketplace is competitive
because contracts are awarded based on a bidding process, an argument
that appears challenging to square with Congress's enactment of the
Martha Wright-Reed Act. Independently, the Commission has not been
persuaded by such arguments in the past, and we find no further
evidence in the record that might warrant a departure from this
conclusion. Instead, we continue to find that ``because correctional
officials typically allow only one provider to serve any given facility
. . . there are no competitive constraints on a provider's rates once
it has entered into a contract to serve a particular facility.''
Indeed, the Commission has found that providers' cost data reflect this
lack of competition in the industry. And the Commission has explained
how factors such as site commissions ` ``distort[ ] the [IPCS]
marketplace' by creating incentives for the facilities to select
providers that pay the highest site commissions, even if those
providers do not offer the best service or lowest rates.'' Thus, even
if there is ``competition'' in the bidding market as some providers
assert, it is not the type of competition the Commission recognizes as
having an ability to ``exert downward pressure on rates for
consumers.''
B. Impact on Consumers and Society
26. The Commission has long recognized--and worked to combat--the
negative consequences that unreasonable communications rates and
charges have on incarcerated people, their families and loved ones, and
society at large. The record in this proceeding provides overwhelming
evidence of the substantial burden excessive communications rates have
on the ability of incarcerated people to stay connected and maintain
the vital, human bonds that sustain families and friends when a loved
one is incarcerated. In fact, ``[t]he high costs of keeping in contact
drive more than 1 in 3 families, who are already financially burdened,
into debt for phone calls and visits with their loved ones.'' As the
Prison Policy Initiative explains, ``[t]he cost of everyday
communication is arguably the worst price-gouging that people behind
bars and their loved ones face.'' Color of Change highlights these
burdens through the story of Maria Marshall, who, ``after spending $120
in just two weeks to maintain contact with both her teenage son and her
ex-husband behind bars, was forced to make the difficult choice between
the two, as she struggled to pay exorbitant phone rates and could only
afford one of their accounts.'' Brian Howard, a formerly incarcerated
person, speaks for all too many in stating, ``though we have committed
a crime and became incarcerated, we incarcerate our family as well.''
27. The Commission held several public listening sessions to learn
firsthand from individuals directly impacted by unreasonable IPCS rates
and charges. In these sessions, witnesses testified to the high cost of
communications as being the primary barrier to keeping families
connected--despite the well documented benefits of ``maintaining
communication with loved ones during incarceration.'' Universally,
testimony from formerly incarcerated individuals stresses the burden
that unreasonable communications rates and charges have had on their
ability to communicate with their families. For example, Colette Payne,
both formerly incarcerated and having an incarcerated son, relates how,
because of the cost of phone calls, ``I wasn't always able to speak
with my own children during my incarceration.'' Kim Thomas, a formerly
incarcerated person, explains the anguish of mothers ``who gave birth
while incarcerated and did not get to see their child for 18 months,
physically or in any other way.'' Other formerly incarcerated people
emphasize how the high cost of communications prevents mothers from
regularly speaking to their children. One grandmother, whose daughter
is incarcerated, details how her four young grandchildren are only able
to speak to their mother every ``week and a half and two weeks if
that'' because communications are so expensive. Jada Cochran, who gave
birth in prison and whose mother raised her four young children while
she was incarcerated, cried as she lamented that her mother could not
afford many calls, despite the fact they were her ``lifeline to my
family, to my children.'' Brione Smith, a teenager whose father is
incarcerated, describes being devastated when she could not reach her
father after her best friend and grandfather died within a few weeks of
each other.
28. Participants at the Commission's listening sessions explain how
the unreasonably high communications rates at times force incarcerated
people and their families to choose between basic necessities, such as
between food, and communications. For example, Deon Nowell reports at
the Chicago listening session how some incarcerated people had to beg
for food to reserve enough money to call their families. Ana Navarro
describes how families must choose between communication or rent, food,
or school supplies. Kim Thomas, a formerly incarcerated person,
explains how incarcerated people earn ``about 15 cents an hour. . . .
So if you calculate that out, it's not very much money, and you choose
to make a phone call or buy soap.'' Incarcerated people with
disabilities that impact their ability to communicate continually
experience barriers to access because ``prison
[[Page 77249]]
administrators fail to understand their communication needs.''
29. The benefits of communications between incarcerated people and
their families are wide-ranging and well-documented. For decades,
studies have linked regular contact with family with lowering rates of
recidivism and increasing likelihood of successful reentry into society
after release. During the listening sessions, the formerly incarcerated
emphasized how communication with family decreases recidivism and
sustains hope. Children who have regular communications with an
incarcerated parent have ``better relationships with that parent.''
Without these connections, incarcerated people tend to lose contact
with the outside world and can lose hope of reengaging with society and
their loved ones. Others suggest that unlawful activities within
correctional facilities would likely decrease if communications
services were affordable and accessible. Rosalind Akins, whose grandson
was formerly incarcerated, describes how ``[p]eople become induced
mentally ill because they can't communicate.'' Deon Nowell explains
that lower communications rates will ``help [the incarcerated people]
make the right decision. That's why it's called rehabilitation. Help
[the incarcerated people] to make the right decision, especially when
it deals with the costs of communications.''
30. The Martha Wright-Reed Act charges us with evaluating and
breaking down the financial barriers to communications between
incarcerated people and their families, consequently lessening the
burden of having to choose between buying food and communicating with
their family members, and helping facilitate a successful transition to
a life outside of correctional facilities. The Act gives us the tools
we need to meet these objectives. We anticipate that by lessening the
financial burdens of staying connected, the reforms we adopt today will
promote increased communication--allowing the preservation of essential
family ties, keeping vital family connections alive by enabling
incarcerated people to parent their children and connect with their
spouses, and helping families stay intact.
C. Interpreting the Martha Wright-Reed Act and the Commission's
Authority Thereunder
1. Purpose and Scope of the Martha Wright-Reed Act
31. In the Martha Wright-Reed Act, Congress gave the Commission a
clear mandate to fix a ``broken system,'' one in which the rates and
charges that incarcerated people pay to communicate with those they
love far exceed the amounts other Americans pay. The 2023 IPCS Notice
of Proposed Rulemaking (NPRM) (88 FR 20804, April 7, 2023) sought
comment on the proper interpretation of the scope and purpose of the
Martha Wright-Reed Act's amendments. We conclude that the Martha
Wright-Reed Act, taken as whole, fundamentally validates the
Commission's broad exercise of authority over IPCS. The record reflects
widespread agreement that the Martha Wright-Reed Act ``confers plenary
authority on the Commission'' to regulate a wide range of
communications services, including telephone and certain advanced
communications services, provided to incarcerated people regardless of
the technology or device used or a communication's status as interstate
or intrastate. More specifically, as certain commenters observe, the
Martha Wright-Reed Act's amendments to section 276 of the
Communications Act provide the Commission with authority over all IPCS
rates and charges, complemented by the Commission's section 201(b) of
the Communications Act authority over interstate and international
IPCS. The Commission has previously interpreted ``interstate,'' as used
in section 276 of the Communications Act, to include international
calling services. Consistent with our historical understanding of our
statutory authority--including in the IPCS context in the near-term
lead-up to the enactment of the Martha Wright-Reed Act--we adopt that
interpretation today, a step that no commenter opposes. Independently,
insofar as our rules treat international IPCS calls the same as
domestic IPCS calls, the record does not persuade us that it would be
practicable to make the sort of real-time jurisdictional determinations
that would enable our rules to distinguish international calls from
domestic calls in those scenarios, in any event. Congress's directives
guide our implementation of the Commission's responsibilities as
described in further detail below.
32. IPCS providers, state and local officials, and public interest
advocates broadly agree that this expanded authority over
communications services provided to incarcerated people includes not
just audio services, but also certain advanced communications services
that were previously outside the Commission's ratemaking authority. No
commenter challenges this overall interpretation of the purpose and
scope of the Martha Wright-Reed Act or suggests a more limited view of
the Commission's authority. We find no basis for disagreeing with this
consensus view, and thus, we exercise the full degree of our authority
in this regard to adopt a compensation plan ensuring just and
reasonable rates and charges, as well as fair compensation for
providers of incarcerated people's audio and video communications
services. We analyze below the specific amendments to section 276 of
the Communications Act included in the Martha Wright-Reed Act that
collectively expand our jurisdiction over IPCS and interpret each
amendment, consistent with the overarching goal of the Act--just and
reasonable rates for IPCS consumers and fair compensation for IPCS
providers.
2. Addition of ``Other Calling Device[s]''
33. At the outset of our analysis, we address the fact that the
Martha Wright-Reed Act extends the Commission's authority over IPCS to
include not just communications using traditional payphones, but also
communications using ``other calling device[s].'' As amended, section
276(b)(1)(A) of the Communications Act directs the Commission to
establish a compensation plan so all payphone service providers are
fairly compensated for communications ``using their payphone or other
calling device.'' Based on the record and consistent with the
Commission's proposal in 2023, we interpret the term ``other calling
device[s]'' in the Martha Wright-Reed Act broadly to encompass all
devices that incarcerated people either use presently or may use in the
future to engage in covered communications with individuals not
confined within their correctional institutions. Our interpretation is
further confirmed by Congress's expansion of our authority over
advanced communications services in section 3(1)(E) of the
Communications Act, to include ``any audio or video communications
service used by inmates . . . regardless of technology used.''
34. There is support in the record for this expansive
interpretation. As the Public Interest Parties explain, ``Congress
chose to use expansive language covering `any technology used' to grant
the Commission authority as broadly as possible, intending to cover any
and all technologies that an incarcerated person may use to communicate
[by audio or video] today or in the future.'' The breadth of Congress's
language and the ``absence of additional qualifying language'' limiting
the scope of the term ``other calling
[[Page 77250]]
device[s]'' persuades us that a broad reading of this term is intended.
Under this reading, the Commission's authority extends to ``all types
of calling devices'' that incarcerated people may now or in the future
use to communicate by audio or video with those not confined in the
incarcerated person's correctional institution. Furthermore, the
Commission has long understood section 276(b)(1)(A) of the
Communications Act to set requirements governing TRS communications
using TRS devices in correctional facilities. Given that backdrop,
coupled with the fact that TRS is designed to ensure service
functionally equivalent to telephone service, we conclude that
``payphone[s]'' and ``other calling devices'' under section
276(b)(1)(A) include devices that people with disabilities use for
purposes of ``communications'' regardless of whether the devices convey
those communications using audio and/or video, or also (or instead)
text, braille, or another communications medium.
35. To be clear, as proposed in 2023, the interpretation of ``other
calling device[s]'' we adopt today encompasses all wireline and
wireless phones, computers, tablets, and other communications equipment
capable of sending or receiving audio or video communications described
in section 276(d) of the Communications Act, regardless of transmission
format. And, ``[c]onsistent with the Commission's mandate to provide
Telecommunications Relay Service (`TRS') for incarcerated people with
disabilities,'' this statutory phrase also includes all wireline and
wireless equipment, whether audio, video, text, other communications
medium, or some combination thereof that incarcerated people with
disabilities presently use to communicate, through any payphone
service, with the non-incarcerated, including but not limited to
videophones, captioned telephones, and peripheral devices for
accessibility, such as braille display readers, screen readers, and
TTYs.
36. Finally, as proposed in 2023, our interpretation of ``other
calling device[s]'' includes other potential devices, not yet in use,
to the extent incarcerated people, including those with disabilities,
use them for covered communications in the future. Such a future-
oriented interpretation is necessary to ensure that IPCS rates and
charges remain just and reasonable, and that providers continue to be
fairly compensated, as IPCS technology evolves. It also will, to the
extent possible, keep IPCS providers from shifting ``exploitative
practices to spaces left unregulated'' by our actions today.
3. The Requirement To Establish a Compensation Plan
37. The Martha Wright-Reed Act preserved the requirement in section
276(b) of the Communications Act that the Commission ``establish a
compensation plan'' as a principal means of achieving the statutory
goals with regard to IPCS. As amended, section 276(b)(1)(A) requires
that this compensation plan ensure that ``all payphone service
providers are fairly compensated'' for completed communications and
that ``all rates and charges [for those communications] are just and
reasonable.'' The statute further requires the Commission to implement
this statutory directive by rule. We now turn to the legal framework
envisioned by the statute for establishing a compensation plan that
will realize these statutory goals.
a. Addition of the ``Just and Reasonable'' Requirement to Section
276(b)(1)(A)
38. We adopt the Commission's proposal that the term ``just and
reasonable,'' added to section 276(b)(1)(A) of the Communications Act
by the Martha Wright-Reed Act, be interpreted as having the same
meaning as the term ``just and reasonable'' in section 201(b) of the
Communications Act. Prior to the Martha Wright-Reed Act, section
276(b)(1)(A) contained no ``just and reasonable'' requirement. Instead,
that section required the Commission to evaluate payphone rates on a
per-call basis and to ensure that providers were fairly compensated for
each and every completed call. Congress, however, modified this
approach in the Act by removing the ``per call'' and ``each and every''
completed call language from section 276(b)(1)(A), which instead now
requires that all payphone service providers be fairly compensated, and
that all rates and charges imposed by those providers be ``just and
reasonable.'' Not only is there strong support in the record for the
conclusion that ``just and reasonable'' for the purposes of revised
section 276(b)(1)(A) has the same meaning as ``just and reasonable'' in
section 201(b), but the rules of statutory construction and judicial
precedent buttress this finding.
39. By way of example, the Public Interest Parties explain, and we
agree, that ``[t]racking the Section 201(b) meaning is the most sound
reading of the statute and of congressional intent,'' consistent with
the understanding ``that Congress was aware of the Section 201(b)
standard--and the Commission's decades of relevant precedent
interpreting it--when it chose to add the identical term to Section
276.'' The Supreme Court likewise explained in FCC v. AT&T that
``identical words and phrases within the same statute should normally
be given the same meaning.'' Both of these tenets have particular force
here. The identical terms ``just and reasonable'' appear in section
201(b) and have now been added to section 276(b)(1)(A), both sections
of Title II of the Communications Act, to describe the required end
result of our ratemaking. The Martha Wright-Reed Act also was enacted
against the regulatory backdrop of--and in response to--the GTL v. FCC
decision, where the D.C. Circuit found that the Commission unreasonably
relied on the ``just and reasonable'' standard of section 201(b) when
implementing the differently-worded language of section 276. Further,
in the wake of GTL v. FCC, the Commission continued to regulate rates
and practices for interstate and international IPCS services under its
section 201(b) ``just and reasonable'' authority, informed by the
obligation to ensure ``fair'' compensation under section 276(b)(1)(B).
40. Nothing in the text of the Martha Wright-Reed Act leads us to
believe that Congress intended to alter that general regulatory
approach in our implementation of section 276(b)(1)(A) in the case of
services we previously have regulated under section 201(b). Instead,
that regulatory backdrop reinforces our conclusion that ``just and
reasonable'' is best interpreted in a manner that harmonizes the
application of that standard in sections 201(b) and 276(b)(1)(A). The
record also provides no reason to interpret ``just and reasonable''
differently in the two sections of the Communications Act. We thus find
that ``just and reasonable'' has the same meaning in both statutory
provisions and regardless of the services to which the phrase is
applied.
41. The Used and Useful Framework. As Congress has imported section
201(b)'s ``just and reasonable'' standard into section 276(b)(1)(A), we
next find that the standard the Commission has used to determine just
and reasonable rates under 201(b) should also apply to our ratemaking
under section 276(b)(1)(A). Historically, the ``used and useful''
framework has ``both informed the Commission's regulatory cost
accounting and ratemaking rules and operated to protect the interests
of ratepayers and carriers.'' The record supports our conclusion that
this framework provides the most appropriate mechanism for ensuring
just and reasonable rates and charges for
[[Page 77251]]
IPCS, and therefore applies to all IPCS over which we now have
authority.
42. Accordingly, we rely on ``the `used and useful' doctrine and
its associated prudent expenditure standard'' to assess the costs that
should either be included or excluded from our rate cap calculations to
ensure just and reasonable rates and charges for IPCS. Under this
framework, the determination of just and reasonable rates focuses on
affording regulated entities an opportunity to recover their
``prudently incurred investments and expenses that are `used and
useful' in the provision of the regulated service for which rates are
being set.'' The used and useful framework permits regulated entities
to earn a reasonable return on their resources dedicated to public use
but it does not allow them to include a markup for profit beyond that.
This ``used and useful'' framework, which ``is rooted in American legal
theory and particularly in the constitutional limitations on the taking
of private property for public use,'' balances the ``equitable
principle that public utilities must be compensated for the use of
their property in providing service to the public'' with the
``[e]qually central . . . equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them.'' In this Order, we use the term ``used
and useful framework'' to refer collectively to the ``used and useful''
standard and the ``prudent expenditure'' standard. In applying these
principles, ``the Commission considers whether the investment or
expense `promotes customer benefits, or is primarily for the benefit of
the carrier.' '' There are several elements of the Commission's used
and useful analysis. First, the Commission considers the need to
compensate providers ``for the use of their property and expenses
incurred in providing the regulated service.'' Second, the Commission
looks to the ``equitable principle that ratepayers should not be forced
to pay a return except on investments that can be shown to benefit
them.'' In this regard, the Commission considers ``whether the expense
was necessary to the provision of'' the services subject to the ``just
and reasonable''. And third, the Commission considers ``whether a
carrier's investments and expenses were prudent (rather than
excessive).'' As the Commission has explained, ``[t]he used and useful
and prudent investment standards allow into the rate base portions of
plant that directly benefit the ratepayer, and exclude any imprudent,
fraudulent, or extravagant outlays.''
43. As one commenter suggests, the used and useful framework allows
us to recognize all IPCS costs that benefit IPCS users, including any
such costs incurred by correctional facilities, as costs that should be
recovered though IPCS rates and charges. Conversely, that framework
allows us to exclude from that recovery any costs that do not benefit
IPCS users, either because they were imprudent or because they were for
non-IPCS products or services, regardless of whether the provider or
the facility incurred them. In short, the used and useful framework
functions as an ``equitable principle'' that prevents ratepayers from
having to pay for costs that are ``primarily for the benefit of the
carrier,'' while allowing regulated entities to be compensated for
providing service.
44. Some commenters express concerns over our reliance on the used
and useful framework in the IPCS context, describing the framework as
being ``a vestige of rate-of-return regulation.'' To the contrary, we
find that the framework remains the most practical and effective method
for determining the costs providers and facilities reasonably incur in
providing IPCS. As historically applied by the Commission, the used and
useful framework limits the costs recoverable through regulated rates
and charges to ``prudently incurred investments and expenses that are
`used and useful' in the provision of the regulated service.'' Contrary
to Pay Tel's and Securus's representations, our application of the used
and useful standard is not ``novel'' or otherwise inappropriate as
applied in the Report and Order. The used and useful standard is ``a
standard regulatory agencies have been using for decades'' to
``determine whether a regulated company's expenses are justified.
Nothing about the Commission's approach here is novel. Instead, it
reflects the familiar ratemaking exercise the Commission routinely
undertakes to determine those capital costs and expenses that may be
recovered through regulated rates. To the extent Pay Tel's argument is
premised on the notion that the used and useful standard ``is nowhere
specified in the Martha Wright-Reed Act or in Section 276,'' we explain
above that as Congress has imported section 201(b)'s ``just and
reasonable'' standard into section 276(b)(1)(A), the used and useful
framework that the Commission's has used to determine just and
reasonable rates under section 201(b) provides the most appropriate
mechanism for determining just and reasonable rates under section
276(b)(1)(A). And, in any event, section 201(b) is similarly silent on
the applicability of the used and useful standard. Further, we do not,
as Pay Tel suggests, rely on the used and useful framework ``to the
exclusion of `fair compensation.' '' As we explain below, the text of
section 276(b)(1)(A), as amended by the Martha Wright-Reed Act,
requires the Commission to implement both provisions in tandem, which
we do in setting rate caps using a zone of reasonableness approach. We
disagree with those commenters who argue that competition in the IPCS
market makes application of the used and useful standard unnecessary.
That argument conflates the bidding market (i.e., the market in which
IPCS providers compete against each other to win contracts with
correctional facilities) with the retail market (i.e., the market in
which IPCS consumers pay rates and charges for the communications
services that we must ensure are just and reasonable). Indeed, the
Commission has previously determined that ``even if there is
competition in the bidding market . . . it is not the type of
competition the Commission recognizes as having an ability to exert
downward pressure on rates for consumers.'' Pay Tel and ViaPath contend
that ``IPCS providers [should be] free to best determine how to manage
their investments and expenses.'' Allowing providers such complete
flexibility would run contrary to the plain text in the Martha Wright-
Reed Act and congressional directive to the Commission. Moreover, this
type of behavior has thus far resulted in unreasonable IPCS rates and
charges for consumers, underscoring the need for us to apply the used
and useful (or a similar) framework to prevent the inclusion of
imprudent and non-IPCS costs in IPCS rates and charges.
45. We also find unpersuasive arguments that we should allow all
prudently incurred ``operating expenses'' to be recovered through IPCS
rates and charges even if those expenses are not used and useful in the
provision of IPCS and related ancillary services. The National
Sheriffs' Association, in particular, expresses concern that the costs
of some expenditures that correctional officials find prudent,
including expenditures for certain safety and security measures, will
be excluded from our ratemaking calculus. It claims that relying on the
used and useful standard is inconsistent with section 4 of Martha
Wright-Reed Act, which specifies that ``[n]othing in the Act shall be
construed to . . . prohibit the
[[Page 77252]]
implementation of any safety and security measures'' related to IPCS
``at a State or local prison, jail, or detention facility.''
46. The National Sheriffs' Association's reasoning, however, does
not fully comport with the language of the Martha Wright-Reed Act
addressing safety and security measures. Section 3(b)(2) of that Act
requires that we ``consider costs associated with any safety and
security measures necessary to provide'' IPCS in promulgating
implementing rules and in ``determining just and reasonable rates'' for
IPCS. But neither section 3(b)(2) nor any other provision of the Martha
Wright-Reed Act concludes or requires that every safety and security
measure that a correctional institution chooses to implement in
connection with IPCS is ``necessary to provide'' IPCS, or mandate that
we require consumers to pay for all those measures through IPCS rates.
47. Rather, when read in conjunction with section 3(b)(2) and the
other provisions of the Martha Wright-Reed Act, section 4 simply makes
clear that, in directing the Commission to develop a compensation plan
to ensure just and reasonable IPCS rates and charges, Congress did not
intend to intrude on the ability of correctional institutions to
``adopt policies that, in their judgment, are needed to preserve safety
and security.'' Our actions in this Order make no such intrusion. We do
not prohibit any correctional institution from implementing any safety
and security measure that it deems appropriate or desirable. We do,
however, ensure that IPCS consumers do not bear the costs of those
safety and security measures that are not necessary to provide IPCS
regardless of how desirable these measures may be to correctional
institutions. Section 4 does not preclude such an outcome.
48. The Commission has relied on the used and useful framework to
ensure just and reasonable rates for decades. Our decision to apply
that framework in determining which costs should be recoverable from
consumers through IPCS rates and charges is fully consistent with the
Communications Act, as amended by the Martha Wright-Reed Act, as well
as with Commission precedent, including Commission regulation of IPCS
rates that formed the regulatory backdrop to the enactment of the
Martha Wright-Reed Act. The used and useful framework, including its
prudent expenditure component, embodies core ratemaking principles that
the Commission has long used to separate the costs that captive
ratepayers should pay for regulated services from those that are either
properly attributable to other products or services or excessive. In
applying that framework, along with the ``necessary'' standard that
section 3(b)(2) of the Martha Wright-Reed Act specifies for the costs
of safety and security measures and the other standards set forth in
that Act, we discharge our statutory duties, consistent with record
support, without intruding into matters outside our authority.
b. Effect on Other Laws
49. Section 4 of the Martha Wright-Reed Act provides additional
direction regarding the effect of the Act on existing laws. Section 4
consists of two clauses that are meant to guide the interpretation of
the remainder of the Act. The first clause of section 4 of the Act
specifies that ``[n]othing in this Act shall be construed to modify or
affect any Federal, State or local law to require telephone service or
advanced communications services at a State or local prison, jail, or
detention facility.'' We interpret ``this Act,'' as used in section 4
of the Martha Wright-Reed Act, as referring the Martha Wright-Reed Act,
rather than the Communications Act. All parties commenting on the
meaning of section 4 accept this interpretation. In 2023, the
Commission sought comment on the meaning of this statutory language.
The Commission asked whether ``the language of this clause simply
mean[s] that the Martha Wright-Reed Act does not create any new
obligation for state or local facilities to provide any form of
incarcerated people's calling services.'' The National Sheriffs'
Association supports this interpretation, adding that the language of
the Martha Wright-Reed Act would not support ``any new requirement to
make IPCS available.'' The United Church of Christ and Public Knowledge
likewise agree that ``this provision demonstrates that the Act does not
affirmatively require any additional service offerings'' at
correctional institutions. No commenter disputes this interpretation of
the first clause of section 4. We conclude that this clause means that
the Martha Wright-Reed Act neither expressly nor by implication
modifies any federal, state or local law in a manner that would require
the provision of any new or additional incarcerated people's
communications services at any state or local correctional institution.
50. The second clause of section 4 specifies that nothing in the
Martha Wright-Reed Act ``shall be construed to . . . prohibit the
implementation of any safety and security measures related to''
telephone service or advanced communications services at a State or
local prison, jail, or detention facility. In 2023, the Commission
sought comment on how to interpret this clause and asked, in
particular, whether the clause means that the Martha Wright-Reed Act,
with its focus on ``just and reasonable ratemaking'' was ``not intended
to interfere with any correctional official's decision on whether to
implement any type of safety or security measure that the official
desires in conjunction with audio or video communications services.''
Two commenters support this interpretation of the second clause of
section 4. In contrast, the United Church of Christ and Public
Knowledge contend more narrowly that ``this provision demonstrates that
the Act does not . . . prohibit safety and security measures.''
51. While the Commission's initial request for comment seems to
suggest the more expansive reading of the second clause of section 4
that the National Sheriffs' Association supports, we now conclude that
a narrower reading of that clause will more closely reflect the limited
scope of the statutory language. We find that the National Sheriffs'
Association's interpretation is overbroad and would expand the reach of
the second clause beyond its intended scope. When read in conjunction
with the other provisions of the Martha Wright-Reed Act, the second
clause of section 4 of that Act simply makes clear that, in directing
the Commission to develop a compensation plan to ensure just and
reasonable IPCS rates and charges, Congress did not intend to prohibit
correctional institutions from implementing policies that, in their
judgment, are needed to preserve safety and security. Consistent with
that interpretation and the specific language of section 4, we
interpret the second clause of section 4 as precluding us from
construing any provision of that Act as making such a prohibition
regarding the implementation of any safety and security measures at any
federal, state, or local correctional institution.
51. The National Sheriffs' Association expresses concern that the
costs of some expenditures for certain safety and security measures
will be excluded from our ratemaking calculus. The National Sheriffs'
Association relies on its broader interpretation of section 4 to assert
that the Commission must not ``interfere with the operation of jails by
eliminating their ability to recover [safety and security] costs''
through IPCS rates. Although the National Sheriffs' Association admits
that excluding certain safety and security costs from IPCS rates ``is
not a prohibition per se,'' it claims that, in
[[Page 77253]]
practice, disallowing any costs associated with safety and security
measures that law enforcement officials have approved effectively
prohibits the measures from being implemented.
53. The National Sheriffs' Association's reasoning, however, does
not comport with the broader statutory context of the Martha Wright-
Reed Act addressing safety and security measures. In particular,
section 3(b)(2) of that Act requires that we ``consider costs
associated with any safety and security measures necessary to provide''
IPCS in promulgating implementing rules and in ``determining just and
reasonable rates'' for IPCS. The best interpretation of the Martha
Wright-Reed Act will ensure a meaningful role for both section 3(b)(2)
and section 4.
54. If section 3(b)(2), of its own force, required the Commission
to allow recovery of all costs identified by providers or correctional
facilities as safety and security costs in regulated rates, as some
commenters suggest, then there would seem to be little to no possible
risk that such safety and security measures could be ``prohibited''
because they would, instead, be affirmatively funded by IPCS
ratepayers. That would leave section 4 with little or no risk to
address in that regard, and thus the relevant language of section 4
would be of substantially diminished significance. We reject Securus'
suggestion that failure to find all safety and security measures
``necessary'' and recoverable would violate the Administrative
Procedure Act (APA). As revealed by our consideration of the relevant
issues and the record before us on safety and security issues below, we
fully ensure that we have ``acted within a zone of reasonableness and,
in particular, ha[ve] reasonably considered the relevant issues and
reasonably explained the decision.'' We recognize that section 3(b)(2)
is focused on ``costs associated with any safety and security measures
necessary to provide'' IPCS, Martha Wright-Reed Act Sec. 3(b)(2)
(emphasis added), while section 4 is focused on ``safety and security
measures related to'' IPCS. Martha Wright-Reed Act Sec. 4 (emphasis
added). Despite the potential that ``necessary'' in section 3(b)(2) is
a narrower standard than ``related to'' in section 4, it is not clear
how much practical significance that would have if, as some commenters
contend, the Commission is required to simply defer to providers' and/
or correctional facilities' on what safety and security costs must be
recoverable in IPCS rates. But even under a stricter standard, we are
persuaded that mandatory recovery through IPCS rates of all ``costs
associated with any safety and security measures necessary to provide''
IPCS would leave the relevant proviso of section 4 of substantially
diminished significance.
55. Conversely, if section 4 were read to require recovery of the
full array of safety and security costs--deferring to the correctional
facilities' decision to approve the use of particular measures when
doing so--there would seem to be little meaningful left for the
Commission to ``consider'' in that regard under section 3(b)(2).
Matters such as identifying the magnitude of such costs and how they
should be allocated already would be necessitated by the ``just and
reasonable'' requirement in section 276(b)(1)(A) of the Communications
Act, as amended by the Martha Wright-Reed Act, if section 4 were
interpreted to require such recovery. That, in turn, would leave
section 3(b)(2) of substantially diminished significance.
56. Our interpretation of those provisions, by contrast, preserves
a meaningful role for each, particularly when understood in light of
the relevant regulatory backdrop. In the years leading up to the
enactment of the Martha Wright-Reed Act, one of the most-debated issues
was the recovery through IPCS rates of payments providers made to
correctional facilities, ostensibly--at least in some instances--
associated with safety and security measures. Some parties argued for a
categorical prohibition on any such recovery, while other parties
advocated for full recovery through IPCS rates of virtually any such
asserted costs or payments. For its part, the Commission sought to
navigate these competing claims by seeking to use the best available
evidence to assess whether there were costs--such as safety and
security costs--with a sufficient nexus to IPCS to potentially warrant
recovery of those costs in IPCS rates; using the best available data to
seek to quantify those costs; and continuing to evaluate additional
tools it might use to address the continued concerns about such cost
recovery, including possible preemption. Our reading of section 3(b)(2)
reflects an approach to safety and security costs analogous to the
middle path the Commission historically has sought to take. By
requiring that such costs be ``considered''--but only that they be
``considered''--the Martha Wright-Reed Act makes clear that it is not
putting a thumb on the scale of either extreme position by
categorically precluding or categorically allowing recovery of claimed
safety and security costs through regulated IPCS rates. At the same
time, section 4 of the Martha Wright-Reed Act makes clear that the
Commission cannot use that Act as a basis to go so far as outright
``prohibit[ing] the implementation of any safety and security measures
related to'' IPCS--such as by preempting even the implementation of
such measures--while not foreclosing the possibility that correctional
facilities ultimately must look elsewhere besides IPCS provider
payments passed through in IPCS rates to fund some (or many) of those
measures.
57. Our actions in this Order do not prohibit any correctional
institution from implementing any safety and security measure that it
deems appropriate or desirable. We do, however, ensure that IPCS
consumers do not bear the costs of those safety and security measures
that are not used and useful or necessary to provide IPCS regardless of
how desirable these measures may be to correctional institutions.
Section 4 does not preclude such an outcome.
58. In addition, without conceding the factual merits of the
National Sheriffs' Association's claim regarding our ability to exclude
costs of safety and security measures that are neither used and useful
nor necessary from our ratemaking analysis, as a statutory matter we
observe that in other contexts where Congress wanted to prevent not
only the prohibition of certain conduct, but even things that
effectively prohibit such conduct, it has done so explicitly.
Particularly because our interpretation best reconciles sections
3(b)(2) and 4 of the Martha Wright-Reed Act, we are not persuaded to
infer a de facto prohibition--a prohibition in fact--from the language
of section 4 as the National Sheriffs' Association suggests. With
respect to the factual merits of the National Sheriffs' Association
claims, we have provided for the recovery generally of used and useful
costs, including costs for necessary safety and security measures,
through the rate caps we adopt today. We find our actions adequately
address concerns about a de facto prohibition of safety and security
measures in this context.
c. Implementation of the ``Fairly Compensated'' Standard in Section
276(b)(1)(A)
59. We now turn to the requirement that we establish a compensation
plan to ensure IPCS providers are fairly compensated. We conclude that,
in addition to ensuring ``just and reasonable'' rates and charges, our
compensation plan for IPCS must accord meaning to the ``fairly
compensated'' clause in section 276(b)(1)(A) and its relationship to
the
[[Page 77254]]
``just and reasonable'' rates and charges mandate.
60. Meaning of the Fair Compensation Standard. We conclude that our
compensation plan for IPCS must give full effect to both the ``just and
reasonable'' and the ``fairly compensated'' clauses in section
276(b)(1)(A). In 2023, the Commission sought comment on how it should
balance the interests of both consumers and industry in giving effect
to both clauses. As proposed in 2023, we determine that giving effect
to both standards requires a balanced approach that ``emphas[izes]
consumers' (particularly incarcerated people's) and providers' right to
just and reasonable rates and charges for each audio and video
communications service now encompassed within the statutory definition
of `payphone service,' '' as well as ensuring that such rates ensure
that ``all payphone providers are fairly compensated.'' We thus reject
Securus's claim that the Order ``simply collapses the fair compensation
standard into the just and reasonable standard.'' As we explain, our
rate-making methodology and statutory interpretation of the Martha
Wright-Reed Act ensure that both standards are given full effect.
61. We view these clauses as imposing two interdependent statutory
mandates, each of which we must seek to fully implement. As discussed
below, as a general matter a range of possible outcomes potentially can
be found ``just and reasonable'' and a range of possible outcomes
potentially can be found to ``fairly compensate'' IPCS providers.
Because of that, we anticipate being able to find areas of overlap in
those two ranges that will satisfy both statutory mandates. We find
this expectation particularly reasonable given that the ``just and
reasonable'' precedent under section 201(b)--which we carry into our
application of section 276(b)(1)(A)--already involves a balancing that
accounts for the service provider's interests.
62. With respect to the ``just and reasonable'' mandate, as
discussed above, that directive leads us to balance the ``equitable
principle that public utilities must be compensated for the use of
their property in providing service to the public'' with the
``[e]qually central . . . equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them,'' drawing on Commission precedent under
section 201(b). In determining rates that are ``just and reasonable''
we look to whether costs to be recovered were prudently incurred and
used and useful in the provision of the services at issue. That
framework does not inevitably lead to a single ``just and reasonable''
rate, however, but allows for a range of rates with the agency
potentially able to find any rate with that zone to be ``just and
reasonable.''
63. There also is a body of precedent regarding the interpretation
of the ``fairly compensated'' mandate historically present in section
276(b)(1)(A)--but our approach here must account for certain ways in
which the Martha Wright-Reed Act altered the operative statutory
approach, necessitating related departures from that historical
precedent. Under that precedent, regulated rate levels historically
were viewed as in accordance with the ``fairly compensated'' standard
if they ``allow providers to generate sufficient revenue from each
interstate and international call--including any ancillary service fees
attributable to that call--(1) to recover the direct costs of that
call; and (2) to make a reasonable contribution to the provider's
indirect costs related to inmate calling services.'' As the Commission
recognized in the 2002 Pay Telephone Order--and recognized again in the
2021 ICS Order--the ``lion's share of payphone costs are those that are
`shared' or `common' to all services,'' and there are ``no logical or
economic rules that assign these common costs to `each and every call.'
'' As a result, ``a wide range of compensation amounts may be
considered `fair.' '' Securus argues that we have departed from the
2002 Pay Telephone Order's fair compensation determination based on
overall profitability to determine fair compensation evaluating
``profitability on a call-by-call basis.'' We disagree. Further,
Securus has not explained the difference between these two views of
profitability, and has not articulated why a provider would not be
profitable overall if it were profitable on a call-by-call basis.
64. The Continued Role of the Fair Compensation Standard. Prior to
the enactment of the Martha Wright-Reed Act, section 276(b)(1)(A) of
the Communications Act required that the Commission ``establish a per
call compensation plan'' ensuring that service providers be ``fairly
compensated for each and every completed'' call. The Martha Wright-Reed
Act eliminated the ``per call'' and ``each and every'' call
requirements and added a new dimension to section 276 by requiring that
our compensation plan for IPCS ``ensure that . . . all rates and
charges'' for incarcerated people's communications services ``are just
and reasonable.'' We disagree with UCC's argument that it would be
``arbitrary and capricious'' to require fair compensation for
providers. This is contrary to the explicit statutory text of section
276(b)(1)(A) that requires fair compensation. In 2023, the Commission
sought comment on how the Martha Wright-Reed Act's amendments to
section 276(b)(1)(A) affect the ``fairly compensated'' requirement in
that section. In particular, the Commission sought comment on
Congress's intent in striking the ``per call'' and ``each and every
[call]'' language from section 276(b)(1)(A) and the effect of its
removal on the ``fairly compensated'' requirement, particularly in
light of the Martha Wright-Reed Act's new requirement that all IPCS
rates and charges be just and reasonable.
65. The record persuades us that in striking the ``per call'' and
``each and every [call]'' language, Congress modified but did not
eliminate the requirement that providers be fairly compensated for
completed intrastate and interstate communications. Instead, as Pay Tel
explains, the fair compensation requirement ``was left as an
independent requirement by the Martha Wright-Reed Act, reflecting a
purposeful decision by Congress to retain the requirement as an
essential component of [IPCS] reform.'' We agree that we should not
``effectively read the requirement out of the statute or diminish its
importance.'' Instead, we address the fair compensation and just and
reasonable standards as interdependent standards as we implement the
requirements of section 276(b)(1)(A).
66. At the same time, we reject suggestions that the ``just and
reasonable'' mandate could be treated as subsidiary to the ``fairly
compensated'' mandate. We therefore reject any argument that IPCS rates
or ancillary services charges ``must be higher than they otherwise
would be under a `just and reasonable' '' analysis in order ``to
achieve `fairness.' '' The text of section 276(b)(1)(A) as amended by
the Martha Wright-Reed Act requires the Commission to implement both
provisions in tandem. And because the two mandates potentially can be
satisfied through a range of outcomes, the record here does not
persuade us that we will be forced into a situation where one mandate
must yield for the other mandate to be met.
67. Interpreting the Fair Compensation Standard in Light of the
Martha Wright-Reed Act. While we conclude that our compensation plan
for IPCS must accord meaning to the ``fairly compensated'' clause in
section 276(b)(1)(A), we also conclude that the
[[Page 77255]]
Martha Wright-Reed Act alters our interpretation and application of
that clause in certain key ways. For one, deletion of the ``per call''
and ``each and every [call]'' language from section 276(b)(1)(A)
fundamentally changes the requirements of that clause. Consistent with
the Commission's preliminary interpretation in 2023, we find that these
statutory amendments signal ``Congress's intent to restrict the
application of the `fairly compensated' requirement with respect to
[IPCS] by no longer requiring the Commission to ensure that its
compensation plan allows for `fair' compensation for `each and every'
completed call.'' Thus, while we must ensure that providers receive
fair compensation for completed intrastate and interstate
communications, we are not obliged to establish a per-call based
compensation plan, as section 276(b)(1)(A) previously required.
68. The Martha Wright-Reed Act also affects how we implement
section 276(b)(1)(A)'s directive that our compensation plan for IPCS
``ensure that all payphone service providers are fairly compensated''
for completed communications, consistent with the Act's amendments to
section 276(b)(1)(A). Section 3(b)(1) of the Martha Wright-Reed Act
grants us explicit authority to use ``industry-wide average costs.''
Use of industry-wide average costs, of necessity, evaluates provider
compensation on a more aggregated--rather than provider-by-provider--
basis. Section 3(b)(1) expressly permits the use of such data in
``determining just and reasonable rates'' as one permissible example,
alongside more general authority to use industry-wide average costs
``[i]n implementing this Act and the amendments made by this Act,'' and
``promulgating regulations under'' the Martha Wright-Reed Act's
amendments to the Communications Act. Nothing in the Martha Wright-Reed
Act compels the Commission to use ``the average costs of service of a
communications service provider'' in determining just and reasonable
rates. Martha Wright-Reed Act Sec. 3(b)(1). We thus reject Securus's
argument that the Commission somehow ``ignored'' the possibility of
using such costs in setting its rate caps. Based on that language we
interpret Congress as authorizing us to rely on industry-wide average
costs in implementing the ``fairly compensated'' mandate--and its
interplay with the ``just and reasonable'' mandate--as amended and
codified in section 276(b)(1)(A) by the Martha Wright-Reed Act. We
consequently interpret Congress' permission to use industry-wide
average costs to mean that rate caps based on costs evaluated on an
aggregated basis generally will satisfy the requirement that all
payphone service providers be fairly compensated. The record supports
this interpretation. Consistent with the Martha Wright-Reed Act, and
its amendments to section 276(b)(1)(A), we therefore adopt rate caps
based on industry-wide average cost data submitted by IPCS providers in
response to the Commission's 2023 Mandatory Data Collection, as
described below.
69. We also observe that these provisions of the Martha Wright-Reed
Act respond directly to the D.C. Circuit's holding in GTL v. FCC that
setting rate caps based on industry-wide average costs was ``patently
unreasonable'' because ``calls with above-average costs'' would not be
fairly compensated on a per call basis. The elimination by Congress of
the ``per call'' and ``each and every [call]'' language from section
276(b)(1)(A) leads to the interpretation that compensation need not be
evaluated on a per-call basis. In addition, our reading of section
3(b)(1) of the Martha Wright-Reed Act persuades us that fair
compensation need not be evaluated on a provider-by-provider basis--
still subject, of course, to Constitutional limits on rate regulation
as applied to individual providers.
70. At the same time, the flexibility in evaluating costs described
in section 3(b)(1) of the Martha Wright-Reed Act is tempered by certain
requirements to consider particular costs or cost characteristics under
section 3(b)(2) of that Act. Section 3(b)(2) provides that the
Commission ``shall consider costs associated with any safety and
security measures necessary to provide a service.'' Under that
provision, the Commission also must consider cost differences
associated with ``small, medium, or large facilities or other
characteristics.'' Consistent with that provision, we therefore also
evaluate such costs considerations in the rate caps we adopt, as
described below.
71. Consistent with the Commission's analysis in the 2021 ICS
Order, we find that a provider will be fairly compensated within the
meaning of section 276(b)(1)(A), as amended by the Martha Wright-Reed
Act, if the rates and charges we find just and reasonable afford it an
opportunity to be fairly compensated at the level of the contract,
regardless of the contributions that any particular communication or
service makes toward the provider's shared and common costs, ensuring
efficient providers have an opportunity to obtain fair compensation
when bidding on contracts. We decline to set rate caps that ensure cost
recovery for providers with unusually high costs because to let unusual
cases determine rates generally would result in unjust and unreasonable
rates. Instead, if such providers exist, they can seek a waiver. In
that Order, the Commission found that compensation could be fair, when
measured on a per-call basis, even if ``each and every completed call''
did not ``make the same contribution to a provider's indirect costs''
(i.e., costs shared among, or common to, groups of calls) and even if
the provider did not ``recover the total `cost' it claims in connection
with each and every separate inmate calling services call.'' Instead,
the Commission recognized that ``the lion's share'' of inmate calling
services costs were shared or common costs and that there were a range
of economically sound methods of assigning these costs to individual
calls. Under this approach, a provider will be fairly compensated if
the rates and fees it is permitted to charge will afford it an
opportunity to recover industry-average costs associated with prudent
investments used and useful in providing IPCS and associated ancillary
services at the facilities the provider serves.
d. Rates and Charges
72. We interpret the statutory language ``rates and charges'' to
encompass the amounts imposed on consumers by IPCS providers as the
Commission proposed in 2023. Section 276(b)(1)(A), as amended by the
Act, requires that ``all rates and charges'' imposed by providers for
the eligible communications are just and reasonable. The 2023 IPCS NPRM
proposed to interpret ``rates'' to include ``the amounts paid by
consumers of incarcerated people's communications services for calls or
other audio or video communications covered by the statute or [the
Commission's] rules.'' And 2023 proposed to interpret ``charges'' to
include ``all other amounts assessed on consumers of incarcerated
people's communications services'' including ``ancillary service
charges, authorized fees, mandatory taxes and fees, and any other
charges a provider may seek to impose on consumers.'' The record
supports these interpretations. We are persuaded that the statutory
language ``rates and charges'' encompasses the amounts imposed on IPCS
consumers, as we proposed in 2023, whether ``rates'' and ``charges''
are interpreted individually or if ``rates and charges'' is understood
as an all-encompassing category.
[[Page 77256]]
73. The regulation of ``rates and charges'' lies at the core of the
Martha Wright-Reed Act, and the amendments to section 276. Prior to the
enactment of the Martha Wright-Reed Act, the Commission's rules
commonly used the term ``rates'' when referring to the amounts
consumers paid for inmate calling services calls, while at other times
referring to such amounts as ``charges.'' The Commission's rules also
at times use the term ``rates'' in connection with ancillary service
charges. Nonetheless, on balance we conclude that under our rules in
place at the time of the enactment of the Martha Wright-Reed Act, the
term ``rates'' should be understood as referring to the amounts paid by
consumers of incarcerated people's communications services for calls,
supporting our adoption of the interpretation of that term proposed in
2023. Our interpretation also comports with the broad ordinary meaning
of the term ``rate.''
74. We also conclude that ``charge[s]'' properly are interpreted as
including ancillary services charges, mandatory taxes, mandatory fees,
and authorized fees. The Commission's rules at the time of the Martha
Wright-Reed Act's enactment defined ``Ancillary Service Charge'' as
``any charge Consumers may be assessed for, or in connection with, the
interstate or international use of Inmate Calling Services that are not
included in the per-minute charges assessed for such individual
calls.'' Although the ancillary service charges that were permitted to
be assessed under the Commission's rules were limited to five discrete
categories, Congress notably did not use the term ``ancillary service
charges'' in the Martha Wright-Reed Act, instead using the more generic
term ``charges.'' Consequently, we do not find it appropriate to focus
narrowly on the scope of ancillary service charges specifically
permitted to be assessed under the Commission's rules. Rather,
consistent with Congress's use of the broader term ``charges,'' we look
to the distinction drawn between per-minute rates and any other
``charge[s] Consumers may be assessed for, or in connection with, the
interstate or international use of Inmate Calling Services.'' That
encompasses not only ancillary service charges permitted under the
Commission's rules, but the other amounts identified in 2023 such as
mandatory taxes, mandatory fees, and authorized fees. This
interpretation likewise comports with the broad ordinary meaning of the
term ``charge.''
75. As an alternative basis for our decision, we conclude that
``rates and charges'' can be interpreted collectively as reflecting a
``belt and suspenders'' approach to the Commission's regulatory
authority under section 276(b)(1)(A) that encompasses the full array of
amounts assessed on IPCS customers discussed above. The statutory
context and regulatory history are consistent with that understanding.
For example, leading up to the enactment of the Martha Wright-Reed Act,
the Commission relied on authority under section 201(b)--which refers
to ``charges'' but includes no express reference to ``rates''--to adopt
rules governing ``rates and charges'' for IPCS. Treating ``rates and
charges'' as a doublet that emphasizes that meaning of these
overlapping terms also harmonizes section 3(b) of the Martha Wright-
Reed Act--which addresses the Commission's consideration of certain
cost information when, among other things, ``determining just and
reasonable rates''--with the fact that the Act amended section
276(b)(1)(A) to include a mandate that the Commission ensure that
``rates and charges are just and reasonable'' for IPCS. This
understanding of ``rates and charges'' also is understandable given the
Commission's own sometimes inconsistent usage of ``rates'' and
``charges'' in its IPCS rules in effect at the time of enactment of the
Martha Wright-Reed Act. Given that statutory context and regulatory
history, ``rates and charges'' need not necessarily be understood as
embodying two distinct concepts, but rather as ensuring that Congress
collectively encompassed the full range of amounts assessed on IPCS
customers over which it wanted the Commission to have authority.
Further, this interpretation of ``rates and charges'' reflects the
substantial overlap in the ordinary meaning of those terms.
76. Notably, section 276(b)(1)(A) also specifies that ``all rates
and charges'' be just and reasonable. By specifying that ``all,'' as
opposed to some smaller subset of ``rates and charges,'' are to be just
and reasonable, Congress obviously intended to grant us broad
regulatory oversight of ``rates and charges.'' We find that the
requirement that ``all'' rates and charges be just and reasonable
applies both to the rates providers impose and the rates consumers
ultimately pay. Thus, the totality of the rates and charges a provider
assesses on or collects from consumers must be just and reasonable. We
find support for this in the record and judicial precedent.
77. Thus, we disagree with ViaPath that we should interpret ``rates
and charges'' as excluding mandatory taxes, mandatory fees, and
authorized fees. ViaPath contends that our ``current IPCS rules
acknowledge'' that ``authorized fees and mandatory taxes and fees are
separate and apart from ancillary service charges.'' As we explain
above, the Martha Wright-Reed Act uses a broader term than ``ancillary
service charges,'' and we conclude it best effectuates Congress' choice
for our interpretation to sweep more broadly than the specific
categories of ancillary service charges permitted under our existing
rules. Nor are we persuaded by ViaPath's efforts to rely on rules and
precedent from the operator services context. We find the statutory and
regulatory considerations that we have described here to be much more
pertinent to understanding Congress's actions against that precise
legal backdrop than precedent and rules cited by ViaPath that were
adopted in a context that we find at most tangentially related to our
regulation of IPCS as relevant here.
78. To exclude any tax or fee that a provider might impose on IPCS
consumers from the term ``all rates and charges'' would risk opening
the door to assessments that could undercut the requirement of section
26(b)(1)(A) that amounts IPCS providers impose--and that IPCS customers
pay--be just and reasonable. Indeed, the Commission recognized as much
in the 2015 ICS Order (80 FR 79135, December 18, 2015) when it
repeatedly referred to mandatory taxes, mandatory fees, and authorized
fees as charges and banned all inmate calling services ``fees or
charges beyond mandatory taxes and fees, and authorized fees that the
carrier has the discretion to pass through to consumers without any
mark up.'' The Commission concluded that this ban would help ensure
just and reasonable rates for inmate calling services. The record at
that time demonstrated that providers had been marking up taxes and
regulatory fees before passing them on to consumers and that those
inflated fees had contributed to unreasonable inmate calling services
rates and charges. Given the history of inflated ICS charges, there can
be no assurance of a just and reasonable end result for IPCS if the
definition of rates and charges were limited in the manner ViaPath
proposes, which would allow providers to impose additional charges on
consumers or to mark up their authorized fees, mandatory taxes, or
mandatory fees before recovering them from consumers. Indeed, a recent
class action lawsuit alleges that an IPCS provider charges consumers
inflated fees under the guise of taxes. The rules we adopt today do not
alter the circumstances in which providers may pass authorized fees,
mandatory taxes,
[[Page 77257]]
and mandatory fees through to consumers. We therefore conclude that the
statute requires us to consider the totality of the rates and charges a
provider assesses or collects from consumers to ensure that all IPCS
rates and charges are just and reasonable.
e. Authority To Regulate IPCS Providers' Practices
79. In 2023, the Commission sought comment on whether section
276(b)(1)(A)'s mandate that we ``establish a compensation plan to
ensure that . . . all rates and charges'' for incarcerated people's
communications services be ``just and reasonable'' extends to ensuring
that the providers' practices, classifications, and regulations for or
in connection with those services are just and reasonable. The
Commission also asked for comment on the extent of its section
276(b)(1)(A) authority, if any, to address providers' practices,
classifications, and regulations, as well as any limitations on that
authority. Based on the record, we conclude that the Martha Wright-Reed
Act provides us with limited authority to regulate IPCS providers'
practices, classifications, and regulations (collectively,
``practices'') as a necessary part of our obligation to establish a
compensation plan to ensure fair IPCS compensation to providers and
just and reasonable rates and charges for IPCS consumers and providers
under section 276(b)(1)(A). In addition, section 201(b)'s grant of
authority over practices for or in connection with interstate and
international common carrier incarcerated people's communications
services enables us to act in certain circumstances, as well. We
address these two sources of authority below.
80. Section 276(b)(1)(A) Compensation Plan Requirement. We conclude
that the section 276 requirement that the Commission ``establish a
compensation plan'' to achieve the goals of fair compensation for
providers and just and reasonable rates and charges for consumers and
providers, requires more of the Commission than the simple act of
setting rates and charges. When implementing section 276(b)(1)(A)
historically, the Commission has not limited itself just to the
regulation of rate levels when seeking to effectuate the ``fairly
compensated'' requirement that preceded the Martha Wright-Reed Act. By
adding the ``just and reasonable'' mandate, while leaving the directive
to establish a ``compensation plan'' unaltered, we understand Congress
to intend that the Commission undertake an integrated set of actions
designed to work in concert to achieve the statute's central goals of
fair compensation and just and reasonable rates and charges.
81. Long prior to the enactment of the Martha Wright-Reed Act, the
Commission implemented section 276(b)(1)(A)'s mandate to establish a
compensation plan to ensure payphone providers are fairly compensated
by addressing the practical details associated with charging for, and
receiving payment for, payphone services. In its implementation of
section 276(b)(1)(A) over time, the Commission adopted various
requirements in particular payphone contexts apart from simply rate
setting. Such requirements have included, among other things: (1)
requiring the transmission of information to enable tracking of calls
from payphones; (2) allocating responsibility for paying compensation
for payphone calls; and (3) defining the permissible arrangements
between payphone providers and the carriers paying them compensation
for payphone calls. A unifying premise of these requirements is that
their inclusion in a compensation plan enabled the Commission to
advance the fair compensation mandate in section 276(b)(1)(A).
82. In light of the Martha Wright-Reed Act's addition of the ``just
and reasonable'' mandate in section 276(b)(1)(A), we find that the
statute's direction to establish a compensation plan likewise
necessarily carries with it the authority to prescribe regulations to
govern providers' practices to the extent that those practices
implicate the Commission's ability to ensure that rates and charges are
just and reasonable. In this way, the ``compensation plan''
requirement--which the Martha Wright-Reed Act left unaltered--gives the
Commission authority in the case of the ``just and reasonable'' mandate
that is comparable to what it historically has possessed when crafting
compensation plans to account for the ``fairly compensated'' mandate.
As the Public Interest Parties indicate, the responsibility to
establish a comprehensive plan ensuring just and reasonable rates and
charges ``necessarily encompasses a corresponding responsibility to
ensure that IPCS providers do not evade [the Commission's rate and fee]
caps through their other practices, classifications, and regulations.''
Given the mandate of the Martha Wright-Reed Act and its revisions to
section 276(b)(1)(A), we find that the Commission's authority over
rates and charges necessarily extends to practices that affect our
ability to ensure that rates and charges are just and reasonable, as
well as that providers are fairly compensated.
83. If section 276(b)(1)(A) instead were read only to allow us to
regulate IPCS rate levels, providers' practices could thwart Congress'
direction to ensure just and reasonable rates and charges for consumers
and fair compensation for IPCS providers. The risk that providers'
practices could subvert the goals of the statute is not speculative.
For example, in light of evidence that inmate calling services
providers were ``engaging in unjust and unreasonable practices and
imposing unfair rates by instituting minimum or maximum amounts that
may be deposited for prepaid calling accounts,'' the Commission
prohibited providers from instituting prepaid account minimums and
required that any provider that limits deposits set the maximum
purchase amount at no less than $50 per transaction. Securus asks that
we ``set minimum funding amounts to allow [IPCS providers] to better
manage costs. We decline on the record before us to adopt its proposal,
but will continue to monitor its concerns. And, more recently, the
Commission concluded that all funds deposited into a debit-calling or
prepaid calling account and not spent on products or services are
generally the property of the account holder and that any action
inconsistent with this finding is an unjust and unreasonable practice.
The Commission also has found affirmative requirements, such as
consumer disclosure rules, necessary to ensure that rates and charges
as implemented are just and reasonable as applied to consumers. In sum,
we find that section 276, as amended by the Martha Wright-Reed Act,
gives us authority over providers' practices to the extent they may
affect the Commission's ability to ensure just and reasonable IPCS
rates and charges and fair compensation for all incarcerated people's
communications services. Those services include the full range of
services now subject to Commission authority as a result of the Martha
Wright-Reed Act, including intrastate IPCS and the advanced
communications services now included in the statutory definition of
``payphone service.''
84. We agree with commenters insofar as they note that Congress did
not incorporate the entirety of the section 201(b) legal framework to
ensure just and reasonable practices, classification, and regulations
into section 276(b)(1)(A). At the same time, we reject claims that we
lack any authority at all over IPCS provider practices under section
276(b)(1)(A). In particular, we reject arguments that our
interpretation
[[Page 77258]]
fails to properly credit Congress' decision to use different language
in section 201(b) and section 276(b)(1)(A). To the contrary, we honor
Congress's choice because we do not interpret our section 276(b)(1)(A)
authority over IPCS practices to be as extensive as the Commission's
authority over common carrier practices under section 201(b). At the
same time, we also must honor Congress's choice to leave intact the
requirement that the Commission ``establish a compensation plan'' in
the regulation mandated by section 276(b)(1)(A). As indicated by our
analysis above, the compensation plan provision goes beyond the
establishment of individual rates and necessarily entails a harmonized
set of requirements that act as a coordinated whole to achieve the new
statutory mandate of just and reasonable rates and charges.
85. Section 201(b) Authority Over Interstate and International
Practices. Apart from the statutory directives in section 276 taken as
a whole that support our finding of jurisdiction over certain IPCS
practices to the extent they bear on just and reasonable rates and
charges, we conclude that section 201(b) provides an independent
statutory basis for regulating providers' practices with regard to
IPCS. This authority explicitly extends to IPCS-related practices for
or in connection to the interstate and international telecommunications
services that are within our section 201(b) authority, as well as to
practices for or in connection with other IPCS services within our
section 276 authority to the extent those practices cannot practicably
be separated from practices applicable to services within our section
201(b) authority.
86. Section 201(b) grants the Commission jurisdiction over
``practices, classifications, and regulations'' of carriers ``for or in
connection with'' interstate and international communications services,
including those services used to provide IPCS. That authority has been
interpreted by the Commission to extend ``to the intrastate portion of
jurisdictionally mixed services `where it is impossible or impractical
to separate the service's intrastate from interstate components' and
state regulation of the intrastate component would interfere with valid
federal rules applicable to the interstate component.'' In 2023, the
Commission sought comment on whether it could use this ``impossibility
exception'' to regulate practices for or in connection with
incarcerated people's intrastate communications services and to audio
and video services that were unregulated prior to the enactment of the
Martha Wright-Reed Act. The record is mixed on this issue.
87. The Commission has previously applied section 201(b) and the
impossibility exception to regulate providers' practices that affect
both interstate and intrastate inmate calling services. In the 2020 ICS
Remand Order, the Commission relied on section 201(b) in adopting rules
applicable to both interstate and intrastate ancillary service charges,
finding that ``ancillary service charges generally cannot be
practically segregated between the interstate and intrastate
jurisdiction except in the limited number of cases where, at the time a
charge is imposed and the consumer accepts the charge, the call to
which the service is ancillary is a clearly intrastate-only call.'' In
the 2022 ICS Order, the Commission exercised its 201(b) authority to
prohibit provider seizure of outstanding balances in inactive accounts
that could be used to pay for interstate, intrastate, and nonregulated
services, and to set limitations on ancillary service fees in order to
curtail the incentives for providers to engage in revenue-sharing
schemes that drive up prices charged to inmate calling services
consumers.
88. Consistent with this precedent, we conclude that our section
201(b) authority over providers' practices extends to the full range of
``payphone service[s],'' as defined in section 276(d), to the extent
the practices for or in connection with the payphone services outside
of our separate section 201(b) authority cannot practicably be
separated from the practices for or in connection with the payphone
services within that authority. Consistent with the Commission's
finding in the 2020 ICS Remand Order, we find that this inseverability
generally extends to providers' rate and ancillary services charge
practices in connection with interstate and intrastate IPCS to the
extent that IPCS-related practices cannot practicably be separated into
interstate, intrastate or non-section 201(b) regulated services
components.
4. Amendment to Section 2(b) of the Communications Act
89. In the next step of our analysis, we address the Martha Wright-
Reed Act's confirmation of our jurisdiction to regulate the rates of
all forms of intrastate IPCS to ensure they are not unreasonably high.
Section 276(b)(1)(A) always has been clear that the Commission has
authority to establish compensation plans for ``intrastate and
interstate'' payphone calls, and as explained above, the Martha Wright-
Reed Act amended that provision to clearly establish the Commission's
authority to ensure just and reasonable rates for both intrastate and
interstate communications, as newly encompassed by section 276(d).
Above and beyond that, the Martha Wright-Reed Act added section 276 to
the express exceptions to the general preservation of state authority
in section 2(b) of the Act. Consistent with the Commission's proposal
in 2023, we conclude that the collective effect of the amendments to
section 276 as to intrastate communications, when coupled with the
Martha Wright-Reed Act's amendment to section 2(b) of the
Communications Act, is to remove any doubt that our authority over IPCS
includes both interstate and intrastate jurisdiction.
5. Inclusion of Advanced Communications Services Within the Definition
of Payphone Service
90. In 2023, the Commission recognized that the Martha Wright-Reed
Act had expanded its section 276 authority over ``payphone service'' in
correctional institutions to include ``advanced communications
services,'' as defined in sections 3(1)(A), 3(1)(B), 3(1)(D), and new
(3)(1)(E) of the Communications Act. The Commission asked how this
expansion of statutory authority applies to each type of enumerated
advanced communications service for incarcerated people. We conclude
that the Martha Wright-Reed Act not only retains the Commission's
preexisting authority over audio communications in the carceral
setting, but extends that authority to include four categories of
advanced communications services--``interconnected VoIP service,''
``non-interconnected VoIP service,'' ``interoperable video conferencing
service,'' and ``any audio or video communications service used by
inmates for the purpose of communicating with individuals outside the
correctional institution where the inmate is held, regardless of
technology used''--within the definition of ``payphone service. We also
conclude, as proposed in 2023, that the language in the new statute
confers on the Commission broad jurisdiction to develop a compensation
plan for the categories of audio and video communications included in
the definition of ``payphone service'' in order to ensure that IPCS
providers are fairly compensated and all IPCS rates and charges are
just and reasonable. We likewise find that the expansion of the types
of services and devices over which we have authority correspondingly
includes entities that may not have previously been subject to
[[Page 77259]]
our rules and that now fall under our regulatory oversight. Below, we
discuss, in turn, the four types of advanced communications services
now included in the definition of ``payphone service.''
a. Interconnected and Non-Interconnected VoIP Services (47 U.S.C.
153(1)(A) to (B))
91. The Martha Wright-Reed Act expressly confirms the Commission's
authority over interconnected and non-interconnected VoIP services,
adding interconnected and non-interconnected VoIP services, as
referenced in sections 3(1)(A) and 3(1)(B) of the Communications Act,
to section 276(d)'s definition of ``payphone service.'' Based on
universal support in the record, we find that this authority includes
audio services using interconnected or non-interconnected VoIP, and
extends to each entity that provides IPCS via interconnected or non-
interconnected VoIP, including entities that provide those services via
non-traditional equipment such as tablets or kiosks. As the Commission
has observed, ``[s]ection 276 makes no mention of the technology used
to provide payphone service. . . . Thus, the use of VoIP or any other
technology for any or all of an ICS provider's service does not affect
our authority under section 276.'' Our authority over inmate calling
services is therefore unaffected by the application of VoIP technology;
rather, the expansion of our inmate calling services authority to
include VoIP technology reflects the Commission's long-held
understanding of inmate calling services as inherently technology
neutral. If a particular service meets the relevant definition in the
Commission's rules, it is a form of inmate calling services and subject
to the Commission's inmate calling services rules. To the extent an
entity provides any of these services in ``correctional institutions,''
it will be subject to the rules we adopt in the Report and Order.
b. Interoperable Video Conferencing Service (47 U.S.C. 153(1)(D))
92. The Martha Wright-Reed Act extends our section 276 authority to
``interoperable video conferencing service'' by adding a reference to
sub-paragraph 3(1)(D) of the Communications Act to the definition of
``payphone service'' in section 276(d). The Communications Act defines
``interoperable video conferencing service'' as ``a service that
provides real-time video communications, including audio, to enable
users to share information of the user's choosing.'' This definition
encompasses video conferencing applications commonly in use outside the
incarceration context, including applications that rely on transmission
over the internet; and the rules we adopt in the Report and Order
extend to such applications and similar applications should they be
used in the incarceration context.
93. One commenter suggests that ``[i]n the absence of a Commission
adopted definition of `interoperable,' it is difficult to identify
which video services made available to incarcerated persons qualify for
potential rate regulation.'' That argument is outdated. In the Access
to Video Conferencing Order, the Commission revisited its previous
views regarding the interpretation of the statutory term
``interoperable video conferencing service'' and concluded that there
was ``no persuasive reason to modify or limit the scope of the
statutory definition of this term.'' There, the Commission explained
that the statutory definition of ``interoperable video conferencing
service'' encompasses a variety of video communication services that
are commonly used today, or that may be used in the future, to enable
two or more users to share information with one another. In 2011, the
Commission interpreted a qualifying phrase in the definition--``to
enable users to share information of the user's choosing''--to mean
that services ``provid[ing] real-time video communications, including
audio, between two or more users'' would be included, ``even if they
can also be used for video broadcasting purposes (only from one
user).'' It rejected arguments that the term ``interoperable'' had
meaning independent of the statutory definition or in some way limited
the scope of the statutory definition of the service. It concluded that
the term interoperable ``may simply reflect the fact that any video
service satisfying [the statutory] definition . . . necessarily
involves some level of interoperability among the particular devices
and software employed by users of that service.'' We find arguments to
the contrary to have been fully addressed by the Commission's actions
in the Access to Video Conferencing proceeding.
94. As the Commission has explained, the definition of
interoperable video conferencing services does not reflect an intention
to exclude any service based on whether it is used primarily for point-
to-point or multi-point conversations, or based on the type of device
used to access the service. Likewise, the definition does not depend on
the options offered to users for connecting to a video conference
(e.g., through a dial-up telephone connection or by broadband, through
a downloadable app or a web browser), what operating systems or
browsers users' devices may employ, whether the service works with more
than one operating system, or whether the service may be classified as
offered to the public or to a private group of users (such as a
telehealth platform). The Commission concluded that the important
characteristic is that two or more people can use the service to share
information with one another in real-time, via video.
95. Our section 276 authority over interoperable video conferencing
services in the IPCS context therefore includes all options offered to
users for connecting to a video conference, regardless of what
operating systems or browsers their devices may use, whether the
service works with more than one operating system, or whether the
service may be classified as offered to the public or to a private
group of users. Where two or more people can use a video conferencing
service to share information with one another in real-time, that
service is subject to our section 276 authority in the incarceration
context. This authority also extends to educational, vocational, or
other video programming in which incarcerated people participate in
real-time in the incarceration context. To be clear, entertainment and
other forms of content that are not real-time communications services
are not included in our authority over interoperable video
conferencing. They may, however, be subject to our authority under
section 3(1)(E), which is not limited to real-time communications
services.
96. We disagree that this interpretation somehow constitutes an
assertion of authority over internet content. Notwithstanding certain
parties' comments suggesting otherwise, we have not proposed to
regulate internet content, nor do we do so in the Report and Order. The
rules we adopt today are content-neutral, and our authority over
interoperable video conferencing services, like our authority over
traditional payphone services, is independent of the information
communicated though those services. Neither the Communications Act nor
the Martha Wright-Reed Act includes any language limiting the content
or information that may be offered through interoperable video
conferencing, and we do not impose any such limitations in our rules.
97. Interoperable Video Conferencing Service for People with
Disabilities. Under section 716 of the Communications Act, as amended
by the Twenty-First Century
[[Page 77260]]
Communications and Video Accessibility Act of 2010 (CVAA),
interoperable video conferencing service and equipment used for
interoperable video conferencing service must be accessible to and
usable by people with disabilities, unless those requirements are not
achievable. Consistent with the Commission's analysis in the Access to
Video Conferencing Order, we find no persuasive reason to modify or
limit the scope of these accessibility requirements as they apply in
the IPCS context. Instead, we conclude that the accessibility
requirements in section 716 of the Communications Act and part 14 of
our rules apply, without limitation, to all interoperable video
conferencing services provided in correctional institutions and to all
equipment that people with disabilities use to access those services.
As explained in more detail below, in the 2011 ACS Order the Commission
assumed that the word ``interoperable'' needed to be defined
independently of the term ``interoperable video conferencing service.''
In the Access to Video Conferencing Order, the Commission revisited
this issue and rejected arguments that the term ``interoperable'' had
meaning independent of the statutory definition or in some way limited
the scope of the statutory definition of the service. The Commission
explained that the statutory definition of ``interoperable video
conferencing service'' encompasses a variety of video communication
services that are commonly used today, or that may be used in the
future, to enable two or more users to share information with one
another.
c. Any Audio or Video Communications Service (47 U.S.C. 153(1)(E))
98. The Martha Wright-Reed Act added new subsection (E) to section
3(1) of the Communications Act to expand the definition of ``advanced
communications services'' to include ``any audio or video
communications service used by inmates for the purpose of communicating
with individuals outside the correctional institution where the inmate
is held, regardless of technology used.'' It also included these same
services in the definition of payphone service in section 276(d),
expanding the scope of the Commission's authority over incarcerated
people's communications services. As proposed in 2023, we interpret the
phrase ``any audio or video communications service'' in subsection
3(1)(E) as encompassing every method that incarcerated people may
presently, or in the future, use to communicate, by wire or radio, by
voice, sign language,'' or other audio or video media, without
qualification. The record strongly supports this interpretation. In
doing so, we fulfill Congress's intent that a broad range of
communications services and technologies be available to incarcerated
persons and their loved ones at just and reasonable rates. Congress
included all aspects of the section 3(1) definition of advanced
communications services in the section 276(d) definition of payphone
services with the exception of electronic messaging services defined in
section 3(1)(C). Certain commenters address the exclusion of electronic
messaging services from the Commission's regulatory jurisdiction in the
record, particularly to the extent audio or video communications may be
sent via electronic messaging service. On the limited record before us,
we decline at this time to determine what is or is not an electronic
messaging service for purposes of excluding such services from the
scope of the Act's implementation mandate. While we decline to make a
determination, we reiterate that under section 716 of the
Communications Act, electronic messaging service is required to be
accessible to and usable by people with disabilities, including those
in carceral facilities. Separately, some commenters argue that the
Commission should assert authority over voicemail. Other commenters
argue that the Commission may not regulate voicemail because the
Commission treats voicemail as an information service. The record in
this regard is underdeveloped. Thus, at this time, we decline to
address the Commission's regulatory jurisdiction over voicemail in the
IPCS context.
99. Our interpretation encompasses technology used by people with
disabilities. We find that, consistent with our mandate to provide TRS
to incarcerated persons with disabilities, ``any audio or video
communications services,'' as used in section 3(1)(E) includes all
services currently provided in correctional institutions that an
incarcerated person who is deaf, hard of hearing, deafblind, or has
speech or other disabilities may use to communicate with individuals
outside the correctional institution where the incarcerated person is
held, and incorporates all future services and technologies that will
assist incarcerated people with disabilities to communicate with the
non-incarcerated--or incarcerated people to communicate with non-
incarcerated people with disabilities--so long as it involves audio or
video communications services.
100. We interpret ``audio or video communications services'' to
encompass not only services that are audio and/or video at both ends of
the communication, but also services that are audio and/or video at
only one end of the communication or otherwise involve audio and/or
video for only a segment or portion of the communication. The focus of
section 3(1)(E) is not on whether a particular party to a communication
is communicating in audio and/or video form, but rather on whether the
service is an ``audio or video communications service.'' So long as the
communications service involves audio and/or video in at least some
respect, we conclude the ``audio or video communications service''
criterion is satisfied. The breadth of this interpretation, which may
be of particular relevance where communications involving people with
disabilities are concerned, is further supported by the fact that
Congress chose to include that service within the category of
``advanced communications services'' that are subject to various
disability access requirements, along with the recognition in section
276(b)(1)(A) that the communications services covered by that provision
would include TRS.
101. Unlike some other services included within the section 3(1)
definition of advanced communications services, the services included
in section 3(1)(E) are not expressly restricted to real-time or near
real-time communications services. We interpret Congress' omission of
such limiting language for the comprehensive set of IPCS services
covered by section 3(1)(E) as bringing non-real-time communications
services generally within the ambit of our IPCS jurisdiction, to the
extent an incarcerated person may use them to communicate with the non-
incarcerated.
102. While Congress included no limitations to the range of audio
and video communications services encompassed in section 3(1)(E), it
addressed the parties involved by limiting the definition to audio or
video services used for communications between two classes of users,
i.e., ``inmates'' and ``individuals outside the correctional
institution where the inmate is held.'' While there is no dispute in
the record regarding the meaning of the statute's reference to inmates,
parties do dispute the meaning of the latter phrase.
103. Consistent with one of the alternatives raised in the
Commission's discussion in 2023, we interpret the phrase ``individuals
outside the correctional institution where the inmate is held'' to
mean, not the precise physical location of the individual with whom the
incarcerated person is
[[Page 77261]]
communicating, but instead the status of that individual as someone who
is ``neither confined in nor employed by the institution, even if [they
are] temporarily located on the premises of the institution for
purposes of communicating with incarcerated individuals through some
form of audio or video communications service.'' The record supports
this interpretation. As the Public Interest Parties recognize,
``although the term `outside the correctional institution' can mean
`not physically within the structure,' it can equally mean `not held
within the institution.' '' The relevant statutory language appears
very similar to part of the Commission's longstanding definition of
``inmate calling service,'' which likewise refers to ``individuals
outside the Correctional Facility where the Inmate is being held.''
Although the Commission did not definitively interpret the meaning of
the ``outside'' language in its IPCS rules prior to the enactment of
the Martha Wright-Reed Act, in the inmate calling context it regularly
used the term ``outside'' of a correctional facility when referring to
the status--rather than the physical location--of the party with whom
the inmate was communicating. We recognize that the FCC Form
established for purposes of a proposed collection of data on video
visitation services described ``Off-Site Video Visitation'' as ``a call
that allows an Inmate to communicate via video with another party (or
parties) located outside the Facility where the Inmate is being
detained.'' That limited example does not overcome our understanding of
the broader usage of ``outside'' in Commission decisions in this
context, particularly where it referred to communications to another
party ``located'' outside the relevant correctional facility--a
qualifier signaling physical location that is not present in either the
Commission's definition of ICS or the text of section 3(1)(E) of the
Communications Act. Because our interpretation is both consistent with
the ordinary meaning of ``outside'' and accords with the trend we
discern in the regulatory backdrop relevant here, we find that the best
reading of ``outside the correctional institution'' in section 3(1)(E)
refers to a party's status rather than its physical location.
Consistent with the arguments of a number of commenters, we thus
conclude that communications with ``individuals outside the
correctional institution where the inmate is held'' is best understood
to mean communications with individuals who are neither incarcerated
in, nor employed by, the incarcerated person's correctional
institution, i.e., ``outside'' of the institution's framework,
regardless of the physical location where they can use the
communication service. By the same token, our analysis leads us to
reject claims that we must interpret ``outside the correctional
institution'' to refer to the physical location of the party with whom
the inmate is communicating. These commenters do not persuade us that
anything in the statutory text itself counsels against our
interpretation, and insofar as they otherwise have a narrow view of
congressional intent underlying the language it adopted, we are not
persuaded by that either, as discussed more below.
104. Our interpretation also is supported by our view of
congressional intent and associated policy considerations. We agree
with Worth Rises that ``[t]here is no evidence that Congress intended
for a miniscule regulatory cut-out that leaves IPCS ratepayers
unprotected from rate regulation when they are physically located
within a building that is property of the correctional authority.
Whether the outside called party is on their mobile phone in the lobby
of a correctional facility or sitting at a video kiosk booth in the on-
site video calling room, they should be protected by the Commission's
ratemaking authority.'' This reinforces our conclusion that the best
reading of the statutory language is that it refers to the non-
incarcerated status of the individual with whom the incarcerated person
is communicating, rather than the physical location of individuals with
whom an inmate can communicate using a given service.
105. The ordinary tools of statutory interpretation strongly
support the view that the qualifier, ``individuals outside the
correctional institution where the inmate is held,'' in section 3(1)(E)
should be limited to services that only meet the definition of advanced
communications services under that specific provision. Section 3(1)
consistently has been understood as a disjunctive list of services such
that meeting any one of those categories is sufficient to render a
service an advanced communications service. While several commenters
agree with this interpretation, one commenter contends that ``the
limiting phrase of new subsection 3(1)(E)'' applies to all of the
services included in section 3(1) ``in the context of IPCS.'' While the
scope of section 3(1)(E) outside of the phrase in question is
sufficiently expansive to encompass virtually all communications
services, the National Sheriffs' Association points to nothing in the
Martha Wright-Reed Act or the amended text of section 3(1) that would
suggest that Congress intended to override the preexisting operative
structure of that provision or subsume the definitions of
interconnected VoIP service, non-interconnected VoIP service, and
interoperable video conferencing service within section 3(1)(E).
Indeed, if the relevant qualifier in section 3(1)(E) either were
interpreted to apply to sections 3(1)(A), (B), and (D) or if section
3(1)(E) were read as subsuming sections 3(1)(A), (B), and (D), it is
not clear what remaining practical significances sections 3(1)(A), (B),
and (D) would have given the existence of section 3(1)(E). Under
ordinary canons of statutory interpretation, such an outcome cuts
against that reading. Had Congress intended the ``outside the
correctional institution'' language in section 3(1)(E) to apply to
other advanced communications services, it could have included that
language in section 3(1) as a whole, appended it to other subsections
of section 3(1) as it deemed appropriate, or incorporated that language
into section 276(d). It did none of these things.
106. Nor can the National Sheriffs' Association's interpretation be
reconciled with the broader statutory context. The definition of
``advanced communications service'' in section 3(1) does not owe its
existence solely to IPCS regulation under section 276 of the
Communications Act. Indeed, section 3(1) includes ``electronic
messaging service,'' 47 U.S.C. 153(1)(C), which was not included as a
specified category of service covered by amended section 276(d) of the
Communications Act. Rather, a range of statutory provisions rely on
that definition. Interpreting section 3(1) to mean that each of the
individual audio and video services listed in sections 3(1)(A), (B),
and (D) are subject to the limitation in (E) would result in a
substantial narrowing of preexisting statutory requirements dealing
with matters such as disability access.
107. Likewise, the National Sheriffs' Association's interpretation
cannot readily be squared with section 276(d) as amended by the Martha
Wright-Reed Act. In pertinent part, that provision as originally
enacted defined ``payphone service'' subject to Commission authority
under section 276 as encompassing ``the provision of inmate telephone
service in correctional institutions.'' When Congress amended that
definition in the Martha Wright-Reed Act to include certain advanced
communications services, it made those services subject to the ``in
correctional institutions'' limitation, as well. Yet if
[[Page 77262]]
the relevant terms in section 3(1) all already were subject to the
limitation in 3(1)(E), it is not clear how much work would be left for
the section 276(d) qualifier ``in correctional institutions'' to
perform. At a minimum, Congress's deliberate choice to subject the
advanced communications services covered by section 276(d) to the ``in
correctional institutions'' qualifier provides good reason to pause
before inferring arguably similar limitations in section 3(1) in a
manner that appears contrary to that statutory text.
108. Consequently, we adopt the proposal in 2023 that the language
requiring that communications involve ``individuals outside the
correctional institution where the inmate is held'' applies only with
regard to subparagraph 3(1)(E). We therefore agree with other
commenters that the phrase ``outside the correctional institution where
the inmate is held'' does not apply outside the context of section
3(1)(E).
6. Onsite Video Visitation
109. In 2023, the Commission sought comment on whether its expanded
authority over IPCS extends to onsite video visitation services. The
widespread use of onsite video visitation is a relatively recent
phenomenon, initially driven by significant health risks posed by the
COVID-19 pandemic. During the pandemic, ``nearly every jail and
prison'' shifted from in-person visitation to onsite video services to
prevent exposure to and the spread of coronavirus. In many instances,
correctional institutions continue to restrict onsite visits to video
communications in lieu of in-person visits.
110. Consistent with the description in 2023, we define onsite
video visitation services as services that enable video communications
between a person incarcerated in a correctional institution and a non-
incarcerated person visiting that institution. We find that our
authority over incarcerated peoples' advanced communications services
extends to onsite video visitation on two independent grounds: (a)
onsite video visitation's status as an ``interoperable video
conferencing service'' within the meaning of section 3(1)(D); and (b)
its status as an ``audio or video communications service used by
inmates for the purpose of communicating with individuals outside the
correctional institution where the inmate is held, regardless of
technology used'' within the meaning of section 3(1)(E).
111. Onsite Video Visitation as an Interoperable Video Conferencing
Service under Section Sec. 3(1)(D). We conclude that onsite video
visitation includes each of the elements of the definition of
interoperable video conferencing service in section 3(27) of the
Communications Act and that it is therefore a ``payphone service''
within the meaning of section 276(d) when provided in correctional
institutions. Section 3(27) defines ``interoperable video conferencing
service'' as ``a service that provides real-time video communications,
including audio, to enable users to share information of the user's
choosing.'' Onsite video visitation meets those criteria: it is a real-
time service that involves video communications, including audio, and
that enables the incarcerated and the non-incarcerated to share
information of their choosing. Notwithstanding the National Sheriffs'
Association's advocacy to the contrary, we find above that the
limitation to ``individuals outside the correctional institution''
included in section 3(1)(E) is specific to the grant of authority in
that section and is not generally applicable to section 3(1) as a
whole. Thus, to the extent it were relevant in a given scenario, we
observe that the definition of interoperable video conferencing service
does not include any limitation or requirement that the communications
be with individuals outside the correctional institution. Instead, we
find the statute best interpreted to mean that any interoperable video
conferencing service, a service that includes onsite video visitation,
is a payphone service, and therefore subject to our authority under
section 276(b)(1)(A), to the extent it is provided in correctional
institutions. Onsite video visitation uses the same or functionally
similar technology and equipment as is used generally for video IPCS.
112. We also find that Congress intended our authority under
section 276 to extend to the full range of interoperable video
conferencing services, including onsite video visitation services,
given the inclusion of section 3(1)(D) in section 276(d). By this
inclusion, Congress eliminated doubt that video visitation was subject
to the Commission's authority in response to the D.C. Circuit's GTL v.
FCC decision casting doubt on whether video visitation reporting
requirements were within the Commission's authority. As amended by the
Martha Wright-Reed Act, the definition of ``payphone service'' in
section 276(d) of the Communications Act now includes all interoperable
video conferencing services, without qualification, to the extent they
are provided in correctional institutions. Given this statutory
language, we conclude that our authority under section 276(b)(1)(A)
extends to all onsite video visitation services.
113. Our conclusion does not change regardless of whether onsite
video visitation is offered free of charge. Though one commenter argues
that we should limit our oversight because ``the industry has no
history of charging for such services, we find that because such
services meet the definition of ``payphone service'' in section 276(d),
they fall within the Commission's jurisdiction. We affirm that onsite
video visitation services are interoperable video conferencing
services, and as such, are subject to our section 276 jurisdiction and
the rules we adopt herein.
114. Onsite Video Visitation as a Video Communications Service
under Section 3(1)(E). In 2023, the Commission sought comment on
whether onsite video visitation services constitute ``video
communications service[s]'' within the meaning of section 3(1)(E). As
an initial matter, we find that, based on the record in response to
2023, onsite video visitation is a video communications service under
section 3(1)(E), giving us an alternative basis for exercising section
276 authority over those services independent of section 3(1)(D). We
are persuaded by commenters' explanations that ``[o]n-site video
visitation service used by an incarcerated person for the purpose of
communicating with those neither confined nor employed by the
correctional facility fits plainly within the statutory language in
section 3(1)(E), as the service is used by incarcerated persons to
communicate with . . . persons not held within the institution.''
115. Nor do we find any ``reasonable justification to interpret the
Act to allow the Commission to regulate [remote video services] but
[not onsite video services].'' We are not persuaded by suggestions that
Congress intended to include a limitation based on the physical
location of the non-incarcerated person involved in the communication
such that we have no authority over onsite video visitation under
section 3(1)(E). As discussed above, the language of the statute is
best read as focused on the status of the individuals involved in an
audio or video communication--not on the physical location of the
called party at the time of the communication. Indeed, even assuming
arguendo that the qualifier in section 3(1)(E) were interpreted to
apply to the physical
[[Page 77263]]
location rather than status of the individuals with whom an inmate is
communicating, the relevant statutory question would be where the
service can be used, and not where a given communication occurs. If an
audio or video communications service can be used by inmates for the
purpose of communicating with individuals outside the correctional
institution where the inmate is held, the details associated with a
given individual communication using that service would be irrelevant.
116. Policy considerations likewise support our interpretation. We
find it compelling that ``[b]oth remote and on-premises video calls are
typically operated by the same IPCS providers, involve the same
technological systems, and have the same functions and equipment for
the incarcerated user, regardless of the location of the person with
whom they are communicating.'' While some providers offer such service
for free today, it does not follow that consumers never would or could
need the protection of the ``just and reasonable'' standard provided by
the Martha Wright-Reed Act for these video communications. Absent
Commission oversight of onsite video visitation, both facilities and
IPCS providers could, for example, have ``a perverse incentive . . . to
reduce the availability of other forms of IPCS as well as in-person
visitation.'' We are persuaded that, because these services share
providers, equipment, and other technology systems, the only difference
between onsite and remote video communications is the location of the
non-incarcerated party with whom the incarcerated individual is
communicating. We therefore agree that ``[t]here is no reasonable
justification to interpret the Act to allow the Commission to regulate
one but not the other.''
D. Rate Caps
117. After carefully considering our expanded statutory authority,
the data received in response to the 2023 Mandatory Data Collection,
and the record developed from the 2023 and the precursor requests for
comment, we take a series of actions to establish just and reasonable
rates for IPCS while also ensuring fair compensation for providers.
Specifically, we adopt the Commission's proposals to set separate rate
caps for audio IPCS and video IPCS, and to treat interstate and
intrastate communications uniformly, as supported by both the record
and provider responses to the 2023 Mandatory Data Collection. We also
revise our rate cap tiers, and adopt separate per-minute rate caps
within each of those tiers for audio IPCS and video IPCS. Collectively,
these steps will achieve the dual directives of the statute to ensure
just and reasonable rates for consumers and providers and fair
compensation for providers.
118. These actions reflect our application of the ``used and
useful'' framework in evaluating the costs of providing IPCS,
consistent with the Commission's proposal in 2023. Under this
framework, the determination of just and reasonable rates focuses on
affording regulated entities an opportunity to recover their
``prudently incurred investments and expenses that are `used and
useful' in the provision'' of the regulated service. In applying this
framework, we use provider-submitted data and other information from
the record to estimate the costs incurred in providing IPCS, including
any safety and security measures used and useful in the provision of
these services. Our rate cap calculations incorporate the costs
providers reported as their costs of providing ancillary services,
consistent with our decision to eliminate separate charges for
ancillary services. Finally, our rate caps reflect our best estimate of
the costs incurred in implementing the TRS reforms adopted in the 2022
ICS Order and our best estimate of the costs facilities incur in the
provision of IPCS.
119. Accordingly, we adopt the following permanent rate caps for
audio IPCS, and interim rate caps for video IPCS:
For all prisons, $0.06 per minute for audio
communications, and $0.16 per minute for video communications;
For jails with an average daily population (ADP) greater
than or equal to 1,000 incarcerated people, $0.06 per minute for audio
communications and $0.11 per minute for video communications;
For jails with an ADP between and including 350 and 999
incarcerated people, $0.07 per minute for audio communications and
$0.12 per minute for video communications; and
For jails with an ADP between and including 100 and 349
incarcerated people, $0.09 per minute for audio communications and
$0.14 per minute for video communications.
For jails with an ADP with 99 or fewer incarcerated
people, $0.12 per minute for audio communications and $0.25 per minute
for video communications.
We establish these rate caps using a zone of reasonableness
approach. This approach allows us to respond to the limitations of the
cost-of-service data before us in a manner that appropriately balances
fair compensation for IPCS providers with just and reasonable rates and
charges for consumers and providers. Through this approach, we afford
providers an opportunity to recover the used and useful costs incurred
to provide IPCS and also keep IPCS rates affordable for incarcerated
people and their loved ones.
1. Rate Cap Structure
120. Adopting Rate Caps as the Regulatory Mechanism. We conclude
that rate caps are the appropriate mechanism for ensuring that all
rates for IPCS are just and reasonable. Consistent with the
Commission's prior ratemaking with regard to inmate calling services,
we find that rate caps provide the best overall rate structure for IPCS
because of the flexibility that rate caps afford providers while still
ensuring that the incarcerated individual and their loved ones are
protected from unreasonably high rates and charges. We also find that
rate caps are preferable to prescriptive rate setting for IPCS because
a rate cap approach does not preclude or prevent providers and parties
representing facilities from negotiating and entering into agreements
to provide IPCS at lower or no cost to incarcerated people and their
friends and family, as is shown in the record. The record strongly
supports the use of rate caps rather than prescriptive rate setting.
Rate caps also allow providers to be responsive to the differing needs
of each facility, and ``protect ratepayers as a group from high prices
and provide carriers with an incentive to increase productivity.'' As
the IPCS industry continues to develop and offer advanced
communications services including video communications, we find that
flexibility in pricing and in service offerings will be important to
ensure that providers and incarcerated people and their friends,
families, and loved ones benefit from the rate caps we adopt today.
121. Separate Rate Caps for Audio IPCS and Video IPCS. With the
Martha Wright-Reed Act's expansion of the Commission's authority to
regulate advanced communications services, and in keeping with the
Commission's obligation to ensure just and reasonable rates, we adopt
separate rate caps for audio IPCS and video IPCS. In adopting these
rate caps, we do not intend any modification of the requirements of
Sec. 64.6040(d) of our rules, which addresses TRS and certain related
services (TTY-to-TTY communications and point-to-point video
communication in American Sign Language). For IP CTS, CTS, and point-
to-point video communication in ASL, an IPCS provider may assess
charges
[[Page 77264]]
that do not exceed its charges for an equivalent voice telephone call.
Thus, charges for these services will be effectively capped at the
applicable rate cap for audio communications. For TTY-to-TTY
communication, an IPCS provider may assess a charge that does not
exceed 25 percent of the applicable per-minute rate for a voice call.
Thus, such charges are effectively capped at 25 percent of the
applicable per-minute rate for a voice call. We find the record,
including the 2023 Mandatory Data Collection data, overwhelmingly
support this approach. Record comments support separate rate caps
because of the materially different cost structures of offering audio
and video IPCS, and we agree. The data show that video communications
typically require more expensive equipment, and even when comparing
audio and video communications made using the same equipment, the data
suggest that video communications are more expensive to provide. This
difference in costs justifies the need to adopt separate rate caps for
these services to satisfy our obligations for both providers and
consumers of IPCS. Accordingly, we separately analyze audio and video
IPCS costs and develop separate rate caps at each tier for both
services.
122. As proposed in 2021 and 2023, we adopt permanent rate caps for
audio IPCS. The Commission has previously been constrained to adopt
only interim rates for these services given persistent limitations of
the industry data available to it. We now find that the audio cost data
received in response to our most recent data collection provide a
sufficient basis for setting permanent audio IPCS rate caps.
123. By contrast, video IPCS involves relatively new services in an
emerging market for the correctional industry, and one which the
Commission has not previously had the authority to regulate. The
reported costs show a marked differential between audio and video costs
per minute, which may be attributable, in part, to the respective
difference in maturity of the two types of service offerings. As a
result of the relative nascency of the video IPCS market generally, the
wide variations among facilities in the per-minute costs of providing
IPCS, and the likely need to revise any video rate caps in the future
to account for growth and evolution of the video IPCS marketplace, we
find that the reported costs and demand for video IPCS are best suited
for interim rate caps. We find that the video data present similarities
to the data that the Commission reviewed in 2021, when the Commission
was faced with data that it determined was unreliable, resulting in the
adoption of interim rate caps. NCIC argues that the Commission should
``delay the adoption of interim rates until it receives comprehensive
data from all video visitation providers, and deliver immediate relief
by simply prohibiting flat-rate billing, which is currently being
offered at up to $12.99 per session''). While we recognize that the
video marketplace is in its nascent stages, we find that the available
data sufficiently support the interim rate caps we adopt today. In
addition, as we note below, interim rate caps for video are necessary
to curb abuses identified in the record concerning other existing rate
structures in the video market.
124. Per-Minute Rate Caps for Audio IPCS and Video IPCS. We adopt
the Commission's proposal to set rate caps for audio and video IPCS on
a per-minute basis as the foundation of our efforts to ensure just and
reasonable IPCS rates and charges. The record provides no basis to
abandon the long-standing per-minute rate caps for audio IPCS, and we
find no reason to deviate from this approach. The Commission has
historically set per-minute rate caps for audio IPCS. This decision is
further supported by our adoption today of rules to permit alternate
pricing plans subject to specified conditions. Similarly, given the
per-minute rate structure we adopt for audio calls, we find that taking
a consistent approach for video communications would offer several
benefits for IPCS consumers. First, per-minute rates are simple to
understand and reflect the actual duration of the call or
communication. As a matter of policy, the Commission has stated that
transparency regarding the charges for IPCS ``is critical because it
ensures that incarcerated persons and their families understand the
prices they are, or will be, charged for the services they use,
enabling them to make informed decisions when purchasing those
services.'' We find that consistent use of per-minute rates for audio
and video IPCS will result in an easier to understand and more
transparent regulatory framework. We therefore reject proposals to use
other rate metrics, such as per-session charges, in the rate caps that
serve as the foundation for ensuring just and reasonable IPCS rates.
Per-minute rates also provide greater transparency and offer greater
familiarity and flexibility for both industry and consumers.
125. Establishing interim per-minute rate caps for video IPCS is
also responsive to concerns voiced in the record about the need to curb
abusive practices associated with other existing rate structures for
video IPCS. At the same time, however, our new rules permitting
providers to deploy alternate pricing plans for both audio and video
IPCS, subject to certain conditions, including, in particular,
compliance with the overall rate caps adopted here, will permit
providers to experiment with optional rate structures that may be
beneficial and desirable for IPCS consumers. Taken together, we find
these actions satisfy two goals: our default per-minute rates will
ensure just and reasonable rates for IPCS consumers and providers and
fair compensation for providers; and our optional alternate pricing
plan rules will provide some measure of flexibility for the industry,
allowing providers and customers to voluntarily opt-in to other pricing
arrangements that may be mutually beneficial. The Commission has
previously found that when providers used flat-rate charges for audio
calls, if the duration of the audio call was less than the maximum time
allowable, ``the price for that call is disproportionately high.''
Receiving no record evidence to the contrary, we find that a similar
result is likely in the case of per-call or per-session charges for
video IPCS.
126. We decline to adopt a model carrier approach to establish the
rates for either audio or video IPCS. As proposed in the record, a
model carrier approach would set rates by reference to general
telecommunications industry-average costs for non-IPCS calls, including
a predetermined return, ``and then potentially adjust for costs that
may be particular to the provision of service in incarceration
facilities.'' Although the Commission has employed a similar approach
in other circumstances, we find that our tiered approach based on the
currently available IPCS-provider data provides a more accurate
estimate of just and reasonable IPCS rates and will better reflect the
size variance and the economies of scale in the IPCS market rather than
relying on a uniform general telecommunications industry rate setting
approach. We find further that the marketplace is still adapting to the
requirements of IPCS video communications, which counsels in favor of
allowing more time before adopting a model carrier approach. Because we
do not base our analysis on the model carrier approach, we find it
unnecessary to address arguments concerning the Commission's authority
in this respect. At the same time, a model carrier based approach is
useful for comparative analysis, and as explained further in a
technical appendix, can be used to confirm our
[[Page 77265]]
understanding of certain aspects of providers' cost data.
127. Adopting Rate Caps Derived from Industry Average Costs. As
permitted by the Martha Wright-Reed Act, we use industry average costs
reported by IPCS providers at the company-wide and facility levels in
response to the 2023 Mandatory Data Collection as the basis for
developing the IPCS rate caps we adopt today. In 2021, the Commission
sought comment on whether to ``calculate industry-wide mean contract
costs per paid minute of use,'' or to ``analyze costs at the facility
level.'' We resolve this question by confirming that we analyze costs
at the facility level, in the interest of evaluating providers' costs
as accurately as possible, consistent with the facility-level cost data
staff sought and obtained through the 2023 Mandatory Data Collection.
The Commission previously used industry average costs to set inmate
calling services rate caps, but the D.C. Circuit rejected that approach
as not providing fair compensation for providers on a ``per call''
basis for ``each and every call,'' as was then required by the language
of section 276(b)(1)(a) of the Communications Act. The Martha Wright-
Reed Act removed the ``each and every call'' language from section
276(b)(1)(a) and authorized the Commission to use ``industry-wide
average costs'' in determining just and reasonable rates. We can only
conclude, and commenters concur, that the Act thereby removed the
limitations set forth in the D.C. Circuit's decision. We also believe
that using industry average costs to set rates will best ensure rates
that are just and reasonable for consumers and providers and provide
fair compensation for providers.
128. We further find that the Act's elimination of the requirement
that ``each and every'' completed communication be fairly compensated
means that we are no longer required to establish a per-call based
compensation plan. Commenters agree. Rate caps based on costs evaluated
on an aggregated basis generally will satisfy the requirement that all
payphone service providers be fairly compensated. Based on our
interpretation of the Act in light of the D.C. Circuit's holding in GTL
v. FCC, as well as the Act's explicit terms, we further find that
setting the upper and lower bounds of our zone of reasonableness based
on industry-wide average costs at each tier of facilities--without the
need to consider one standard deviation or any other measure of
deviance from the average--will satisfy this requirement. We find that
Congress's express permission to use industry average costs in setting
rate caps encompasses the specific approach to using industry average
costs that the Commission adopted in the 2015 ICS Order: setting rate
caps at the level of the weighted average of providers' reported costs
at each tier. The regulatory history--particularly our understanding of
the ways that the Martha Wright-Reed Act sought to respond to the D.C.
Circuit's decision in GTL, including with specific respect to the use
of industry average costs--reinforces the reasonableness of our
interpretation.
a. Rate Caps Based on Total Costs
129. Consistent with the changes to our authority, we adopt the
proposal to set rate caps that incorporate total IPCS costs by
including all relevant costs incurred in the provision of IPCS in our
calculations of average provider costs. In implementing that approach,
we depart from the Commission's previous approach to allowing and
capping separate charges for certain ancillary services and instead
include the costs related to the provision of those ancillary services
in our IPCS rate caps. We also depart from the Commission's use of
separate rate additives for facility-incurred costs in the 2021 ICS
Order, in favor of including those costs, to the extent recoverable, in
our per-minute rate caps. This will substantially simplify our cap
structure. Pay Tel proposes that we account for facility costs
``through an explicit additive to IPCS rate caps,'' as this will
``incentivize facilities to compare service-based, competitive market
factors when awarding contracts.'' We find that the approach we adopt
here will obtain a fundamentally similar result. After analyzing
providers' cost data, we find that the data for calendar year 2022
collected in response to the 2023 Mandatory Data Collection, together
with other record evidence, provide a sufficient and reasoned basis on
which to take these steps in establishing our rate caps. One commenter
notes that we should consider ``free video calls through off-the-shelf
video platforms,'' such as Microsoft Teams, Zoom, and Ameelio, as part
of the industry-wide definition of IPCS providers. We find that these
video platform business models are substantially different from those
of most IPCS providers, and we decline at this time to do so. Taken
together, reforming our ancillary services charge rules, and including
costs incurred by facilities to provide IPCS and TRS-related costs into
our rate caps, result in a total cost approach to setting IPCS rate
caps which is more straightforward, results in rates which are easier
to understand, and will empower incarcerated persons and their loved
ones to make better informed choices. We address each of these steps
below. Lastly, we disagree with commenters that suggest that we
incorporate an inflation factor into our methodology for setting rate
caps. Secretariat Economists' data show that, historically, growth in
the Telecommunications PPI has been lower, on average, than general
measures of inflation. Over the last decade, the average annual change
of the Telecommunications PPI was 0.7%, as compared to the average
annual change of the broader GDP Deflator over the same time period of
2.6%. Those commenters generally fail to acknowledge the role that
productivity increases play in offsetting inflation. Neither study
includes data on the rates of increase in productivity in the
telecommunications industry. We also note that the data in the
Secretariat Economists May 8, 2023 Report shows that inflation in the
telecommunications industry has generally been lower than the broader
measure of inflation. We find that they fail to establish that
productivity increases did not offset the inflation that has incurred
since 2022, much less that inflation will outpace productivity gains in
the future.
130. Incorporating Costs Associated with Ancillary Services. We
find that the five types of ancillary services addressed by our rules
are intrinsic to the provision of IPCS, and we incorporate the costs of
providing these services into our per-minute rate caps for a number of
reasons. For one, incorporating the costs of these services into a
single rate cap--rather than allowing providers to assess a separate
ancillary service charge for each ancillary service--will result in
rates and charges that are easier for consumers to understand and
easier for providers to administer, while still allowing providers to
recover the average costs associated with these ancillary services
through our per-minute rates.
131. In addition, in the 2021 ICS Order, the Commission found that,
based on record data, there was ``no reliable way to exclude ancillary
service costs'' from the calculations for the provider-related rate cap
component, resulting in interim rate caps that included the costs that
consumers already paid for through separate ancillary services fees. To
address this issue, in 2022 the Commission asked whether ``some or all
of [the ancillary] services'' for which separate charges were permitted
are ``an inherent part of providing inmate calling services,'' such
that the Commission should continue to
[[Page 77266]]
``include these costs in [the] per-minute rate cap calculations and
eliminate some or all charges for ancillary services.'' As the record
shows, all of these fees ``relate to payment and billing,'' and other
than the paper bill fee, all of these fees address consumers' means of
paying for the service they rely upon. Put otherwise, consumers may pay
for IPCS via a payment card or a third-party money transmitter, with
the assistance of a live agent, and/or may pay to complete a
communication without setting up an account. Although these ancillary
services may have qualified as a ``convenience'' in 2015 when the
Commission first identified them in its rules, the record indicates
that they are now the predominant means by which consumers gain access
to IPCS. While alternative methods of funding an account remain
available (e.g., by check or money order), we find that automated
payment or money transmitter services are ``an intrinsic part'' of
accessing the service, like most other services in the 21st-century
economy. Indeed, one provider has pointed to the decline in one
alternative payment mechanism--collect calls--in support of its
proposal that the Commission eliminate the fee for paper statements. In
short, ``incarcerated people and their families must either incur
[these charges] when making a call or forego contact with their loved
ones.''
132. Our decision to incorporate the costs of ancillary service
functions in our rate caps also reflects the limitations in the cost
data providers submitted for their ancillary services. Like the
Commission found in the 2021 ICS Order, we still cannot reliably
isolate the costs of providing each type of ancillary service from
other IPCS costs. In contrast to the Second Mandatory Data Collection,
the instructions for the 2023 Mandatory Data Collection required
providers to report their costs of each ancillary service separately.
Nevertheless, we find that providers failed to reliably or consistently
allocate their costs among the various ancillary services, or even
between ancillary services and other IPCS costs. Incorporating all of
these reported costs into the rate cap avoids the risk of setting
individual fee caps for each ancillary service that misestimate
providers' actual costs. We therefore find that incorporating ancillary
service costs into our rate caps is the best means of recovering the
aggregated ancillary services costs reported by providers and ensuring
just and reasonable IPCS rates. We find that this approach is
preferable to allowing double recovery of the same costs by adopting
separate rates and charges.
133. Incorporating the costs of providing ancillary services into
our rate caps will provide several benefits to IPCS consumers and
respond to concerns raised in the record. First, this rate cap
structure will eliminate the incentive and ability for providers to
charge multiple fees for the same transaction, as a way of exacting
revenue from consumers that far exceeds their actual costs of
completing the transaction, a problem that is well-documented in the
record. The comment record reflects substantial debate (even confusion)
as to whether--and if so, under what circumstances--multiple fees can
be charged for a single transaction, and more generally, what activity
the payment-related fees were intended to encompass. By folding the
costs of all ancillary services into our rate caps and eliminating
providers' ability to charge for them separately, we also remove the
incentive for providers to ``double dip'' in this manner, effectively
mooting related concerns under our new rules, and mitigate consumer
confusion arising from these practices. Certain providers contend that
any circumstances in which they have charged multiple fees are
legitimate. Because the rate cap structure we adopt enables providers
to recover their average costs of providing ancillary services, as
permitted by the Martha Wright-Reed Act, we find it unnecessary to
resolve this dispute in this rulemaking. The record also shows that
such practices have engendered consumer confusion. We similarly
eliminate the ability of providers to engage in other rent-seeking
activity described in the record, including concerns that providers may
``steer'' consumers to a more expensive single-call option for an
incarcerated person's initial call after incarceration in an effort to
artificially inflate revenues through single-call fees. These practices
undermine the intent of our rules, and inflate providers' revenues well
beyond costs, at the expense of consumers, all while providing no
additional consumer value. Indeed, by removing such incentives, we find
that the rate cap structure we adopt in this Order may, for example,
motivate providers to make it easier to set up an account when
consumers receive an IPCS communication for the first time.
134. We likewise find that incorporating ancillary service costs
into our rate caps will align rates and charges more fairly with actual
user activity. Several commenters point out the seeming
unreasonableness and disproportionality of charging a $3.00 fee for a
call that may only last one minute, or passing through similar fees for
small deposits, causing consumers to ``lose a significant amount'' of
their account deposits paying such fees. By incorporating ancillary
service costs into our rate caps, we ensure that the cost of any
particular communication for any IPCS consumer is more proportionate to
its duration. We also eliminate certain distortions that our current
fee structure may perpetuate, such as avoiding a live agent, or
transferring funds to relatives less frequently in an effort to avoid
such charges. Our actions today reduce these barriers to communication.
135. Incorporating ancillary service costs into our rate caps will
also simplify the billing process, easing the administrative burden on
providers and clarifying the bills and general operational process for
consumers. We agree that these changes will ``simplify matters for
consumers.'' Similarly, with respect to paper billing fees, by
incorporating the costs of these bills into our rate caps we align IPCS
billing practices more closely with consumers' experiences for other
forms of telecommunications service outside of the carceral context,
where separate charges are not assessed for paper bills.
136. Finally, we find that incorporating ancillary service costs
into our rate caps aligns our rate and fee structure more effectively
with broader patterns in the industry and the diminishing utility of
certain ancillary services. As the Commission has previously observed,
several jurisdictions have already banned ancillary service charges,
either piecemeal or outright. The record affirms that several of these
services are declining in use. For example, several providers assert
they rarely charge a paper bill fee as few consumers require paper
bills, even proposing outright that this fee be eliminated. At least
one provider no longer charges a live agent fee, having switched to an
automated system during the pandemic. Meanwhile, providers have shifted
from offering single-call services through third parties (as defined in
our rules) to instead provide these services themselves. The record
further suggests that the single-call service, which ostensibly offers
the convenience of completing initial contact without setting up an
account, may in practice--like paper billing--offer little benefit to
consumers, as they still have to enter their payment card information
to accept the call. The record does not establish the marginal
difference between single-call payment and account creation, and we are
not
[[Page 77267]]
convinced that the margin would be great enough to significantly deter
interested consumers.
137. Some commenters object to the approach of incorporating
ancillary service costs into the rate caps. Those commenters argue that
this methodology ``does not reflect the manner in which costs are
caused by users of the service,'' and ``would impose costs for payment
processing on all consumers, rather than just those consumers directly
responsible for the cost.'' We are unpersuaded. We find that most of
these functions have become ``an intrinsic part of providing'' IPCS
because they provide IPCS consumers the means to obtain IPCS, such that
consumers typically ``must either incur [these charges] when making a
call or forego contact with their loved ones.'' For the same reason, we
are not persuaded by Securus's implicit argument that the current
ancillary fees are offered ``as a convenience to incarcerated persons
or their friends and family and are not intrinsic to the provision of
ICS.'' The sole fee unrelated to paying for IPCS, the paper bill fee,
is sufficiently rarely used that it has a negligible impact on the per-
minute rate caps. It is not necessary that these services be used by
``all consumers''; the fact that these services operate as a threshold
to most IPCS communications, coupled with the many factors identified
above in support of ancillary service cost recovery through our per-
minute IPCS rate caps, establishes that our regulatory approach
provides for just and reasonable rates for consumers and providers,
while also providing appropriate cost recovery for providers. In the
2015 ICS Order, the Commission found that single-call services were not
``reasonably and directly related to the provision of ICS'' because
they ``inflate the effective price end users pay for ICS and result in
excessive compensation to providers.'' We find that this pattern has
been ameliorated, in part, by the changes to single-call fees adopted
in the 2021 ICS Order and 2022 ICS Order; we also recognize that
providers incur some amount of legitimate costs for providing this
service, which for at least some consumers may offer a crucial means of
completing an IPCS communication. At the same time, we find that the
continuing abuse of this fee described in the record supports
elimination of the single-call fee as an independent charge--and
suggests that our analysis of ancillary service costs may actually
overestimate providers' actual costs. We also find unpersuasive the
argument that we should abstain from ``[f]urther changes to, or
eliminating, ancillary fees'' because this ``likely will cause new
efforts to subvert the FCC's ancillary fee caps.'' NCIC also argues
that changes to, or elimination of, ancillary fees would ``require ICS
providers to spend thousands of hours renegotiating contracts to comply
with a new fee structure.'' The rate caps we adopt today will require
contract amendments or renegotiations regardless, and NCIC does not
provide evidence or elaboration to support its conclusory assertions
regarding the implications of the particular change associated with
ancillary fees, so we find this argument unpersuasive. The history of
this proceeding demonstrates that ``efforts to subvert [our] ancillary
fee caps'' or otherwise abuse ancillary fees is merely an endemic
feature of the market. The record contains no evidence that eliminating
separate ancillary service fees would amplify this pattern; indeed, the
record suggests, and logic supports the fact, that eliminating separate
fees would eliminate entirely the incentive and ability to subvert
them. For example, the 2015 ICS Order banned several types of ancillary
service charges, e.g., ``account set-up, maintenance, closure, and
refund fees.'' The record is bereft of any evidence that the
elimination of these fees has encouraged providers to attempt to
subvert the Commission's rules.
138. Incorporating Facility Costs in IPCS Rate Caps. We also
include in our rate caps an estimate of the costs that correctional
facilities incur that are used and useful in the provision of IPCS.
Previously, the Commission found that correctional facilities incur
certain costs that are ``reasonably and directly related'' to the
provision of IPCS. However, despite repeated efforts to collect data
from which to reliably measure such costs, we find that neither the
collected data nor the record before us allow us to identify those
costs with reasonable certainty. At best, the record discussion
concerning IPCS costs which facilities may bear falls short of the sort
of quantitative evidence which would ordinarily support the
Commission's ratemaking efforts. Further, requiring accurate cost
accounting of facilities' costs would unreasonably burden facilities,
and facilities have declined to provide such data voluntarily.
Consequently, as proposed in 2023, we make generalized findings based
on the available record information before us. Our rate caps,
therefore, include our best estimate of the used and useful facility
costs incurred in the provision of IPCS.
139. Incorporating TRS Costs in IPCS Rate Caps. We also include in
our IPCS rate caps an estimate of the costs associated with providing
TRS in correctional facilities as required by the 2022 ICS Order to the
extent that they are not recoverable through TRS support mechanisms.
Industry and stakeholders overwhelmingly support the provision of
communications services to incarcerated people with hearing or speech
disabilities, but the record indicates that, in the carceral
environment, enabling these services imposes certain costs upon IPCS
providers. We find that our inclusion of a TRS cost estimate into our
zones of reasonableness accounts for providers' concerns about the
imposition of costs at smaller facilities; and further, we disagree
that ensuring the availability of functionally equivalent communication
services provides ``little'' benefit to those who rely on such services
to communicate with their friends, families, and loved ones. We find,
as the record demonstrates, that these costs to provide TRS are
particularly challenging to recover at the smallest facilities. In
light of that record and informed by responses to the 2023 Mandatory
Data Collection, we now include cost recovery for the additional
infrastructure and hardware costs to deliver TRS in the carceral
environment in our rate caps, estimated based on the best available
data.
b. Additional Components of Rate Cap Structure
140. Single Rate Cap for Audio IPCS. Consistent with the proposal
in 2023 and the record, we find that the costs to provide interstate
and intrastate audio IPCS are not materially different from each other
and therefore adopt a single rate cap that applies to both interstate
and intrastate audio IPCS communications at each tier. The Martha
Wright-Reed Act's directive to set rates and charges that are ``just
and reasonable'' for interstate and intrastate IPCS establishes the
framework for our analysis. Examining the record through this lens, we
find support for treating the costs of providing interstate and
intrastate audio IPCS as functionally identical. The record indicates
that providers do not distinguish between the costs of providing
interstate and intrastate audio IPCS communications, and we find no
reason to do otherwise. We thus set a single rate cap for these
communications, and find that this simplified approach will benefit
consumers and providers alike. The record supports our conclusion that
the adoption of identical rate caps for interstate and intrastate audio
IPCS communications will benefit the public interest. For example, one
commenter
[[Page 77268]]
suggests that adopting a single rate cap for interstate and intrastate
audio IPCS communications will benefit providers by ``ensur[ing] a
consistent regulatory approach,'' and benefit consumers ``by
simplifying and unifying rate structures in a manner more consistent
with today's consumer expectations and experiences with other
telecommunications services.'' Indeed, at least one provider has
already independently set a unitary rate for interstate and intrastate
IPCS communications, reflecting that providers are likely to benefit
from the implementation of a single rate cap. We agree that a simple
unified rate cap will benefit both providers and consumers, and this
finding further supports our action today.
141. Our action today is consistent with the Commission's previous
findings that provider cost data failed to identify meaningful
differences between interstate and intrastate audio IPCS costs. In the
Third Mandatory Data Collection, the Bureau offered providers the
option to allocate their expenses so as to reflect any cost differences
between providing interstate and intrastate ICS, and no providers
exercised this option. This fact suggests either that no providers had
differences to report, or that any such differences were de minimis.
Commenters have subsequently recognized the same, and emphasized that
providers declined to distinguish between costs for interstate and
intrastate audio IPCS in responding to prior mandatory data
collections.
142. More recently, 2023 sought comment on whether to ``treat costs
for interstate voice services and intrastate voice services as having
identical per-unit costs.'' All commenters to address the subject
support this approach. Several commenters state that there is no
material cost difference between providing interstate and intrastate
audio IPCS. Subsequently, in the 2023 Mandatory Data Collection, the
Bureau again offered providers the option to allocate their costs
between intrastate and interstate audio IPCS. Once more, providers
declined to exercise this option. In short, nothing in the record
suggests any material differences between interstate and intrastate
audio IPCS costs, and we therefore adopt a single unified rate cap for
each facility tier. Independently, our adoption of identical rates
based on an analysis of the collective (i.e., aggregate of both
interstate and intrastate) average costs of providing IPCS is further
underpinned by the Martha Wright-Reed Act's authorization to ``use
industry-wide average costs'' in setting rates.
143. Single Rate Cap for Video IPCS. We also find that interstate
and intrastate video IPCS communications have costs that are not
materially different, and adopt a single rate cap for interstate and
intrastate video IPCS communications at each tier. As with audio IPCS,
the adoption of a unified rate cap for interstate and intrastate video
IPCS communications is uniformly supported by the record and fully
consistent with the treatment of interstate and intrastate video
services by providers.
144. In 2023, the Commission sought comment on whether to assume
that the average costs for intrastate and interstate video
communications services are identical. All commenters to address the
subject support taking this approach. Several commenters observe that
there are no material cost differences between interstate and
intrastate video IPCS, while others note that providers do not separate
costs between interstate and intrastate video IPCS internally and will
likely face challenges in separating such costs.
145. In the 2023 Mandatory Data Collection, the Bureau offered
providers the option to allocate their video IPCS expenses to reflect
any cost differences between providing interstate and intrastate video
IPCS. No providers exercised this option, supporting our view that such
costs are materially indistinguishable between the two jurisdictions.
In the absence of any demonstrated material differences between
interstate and intrastate video IPCS costs or record data supporting
such a distinction, we adopt a single unified rate cap for video IPCS
communications for each tier as well. Similar to audio IPCS, setting a
single rate cap for video IPCS will benefit both providers and
consumers by establishing an efficient and simplified mechanism for
video IPCS rate regulation.
c. Rate Cap Tiers
146. In light of the directives established by the Martha Wright-
Reed Act and record support, we adopt a rate cap structure that first
distinguishes between two types of facilities (jails and prisons) and
then four tiers of jails based on size. We agree with commenters that
continuing to ``distinguish[ ] between the type of facility (jails vs.
prisons), as well as, for jails, between different size facilities'' is
a reasonable approach. While one commenter supports differentiation
between prisons and jails, it also suggests that myriad factors may be
``glossed over'' by our reliance upon industry averages. As set out in
a technical appendix and explained below, we believe this tiering
structure best captures the costs across the various types and sizes of
facilities, and the record does not establish that such other factors
are more cost-causative. The record and the data also support rate cap
distinctions based on the ``differences in the costs'' of providing
IPCS that relate to facility size and ``other characteristics.'' We
adopt the following rate cap tiers to reflect the cost characteristics
attributable to differences in facility type and size:
(1) Jails with an average daily population of 0 to 99;
(2) Jails with an average daily population between and including
100 to 349;
(3) Jails with an average daily population between and including
350 to 999;
(4) Jails with an average daily population of 1,000 or more; and
(5) A separate tier for all prisons regardless of average daily
population.
We also revise the definition for average daily population in our
rules by establishing a date certain each year by which the jail
population during the preceding calendar year must be determined.
Specifically, we set April 30 as the date on which the annual
recalculation of average daily population becomes effective, in order
to promote greater uniformity in its application. We find that the
combination of size and type rate tiers that we adopt reflect the most
critical factors driving providers' costs, and will result in both just
and reasonable rates for consumers and providers and fair compensation
for providers.
147. Facility Size. The Martha Wright-Reed Act directs the
Commission to ``consider . . . differences in the costs'' incurred to
provide IPCS ``by small, medium, or large facilities'' in setting rates
for IPCS. We note that, by requiring only that we ``consider'' cost
differences ``by small, medium, or large facilities or other
characteristics,'' the statute does not require the Commission to set
rate tiers based on facility size or other applicable factors where,
after appropriate consideration, we determine that there are not
meaningful cost differences attributable to these factors. For example,
as discussed below, we do not find support in the record or the data
for establishing different size tiers for prisons, and so decline to
adopt such tiers. In 2023, the Commission sought comment on how to
interpret the requirement imposed by the Martha Wright-Reed Act to
``consider . . . differences in the costs . . . by small, medium, or
large facilities or other characteristics'' in
[[Page 77269]]
determining rates. The Commission asked for comment on what size
categories to adopt and where to set the size thresholds for each
category. The Commission proposed that the rate structure adopted in
the 2021 ICS Order, which ``establish[ed] separate caps for prisons and
jails, as well as separate rate tiers for different-sized jails,''
seemed consistent with this provision of the Act. However, the
Commission sought comment on whether the Act required any change to the
approach of analyzing providers' costs ``based on the type and size of
correctional institution being served,'' such as by implementing more
or fewer rate tiers based on facility type or size.
148. The record nearly uniformly supports maintaining a rate cap
structure that distinguishes among jails based on facility size. For
administrative simplicity, we decline to apply size tiering to prisons
for several reasons. First, as the Commission has previously observed,
``prisons are almost uniformly large,'' allowing them to enjoy greater
economies of scale than jails. Second, the data filed in response to
the 2023 Mandatory Data Collection do not indicate significant
differences in the costs of serving different prison facilities.
Finally, only one commenter raised the prospect of tiered rates for
prisons. All commenters addressing the issue agree that the Act permits
us to maintain this general tiering structure. Several commenters
contend that the available data do, in fact, indicate significant
variations in costs due to facility size, and that we should therefore
set rate tiers accounting for these variations. Indeed, the record in
this proceeding ``contains extensive documentation of [the] cost
differences, and the reasons for those differences,'' in providing
audio and video IPCS among different sizes of jails. Several factors
contribute to these cost disparities, particularly the economies of
scale associated with serving larger facilities and the fact that
smaller facilities are often located in more rural areas. As set forth
in Appendices D and G, our data analysis indicates that there remain
statistically significant differences in the costs of providing audio
and video IPCS among jails of different sizes. The data submitted in
response to the Third Mandatory Data Collection further support this
conclusion. The record supports adopting four size tiers of jails,
expanding the categories contemplated by the Martha Wright-Reed Act.
Although we find that the present record and data support establishing
rate caps that vary with size tiers for jails, we reiterate that the
statute does not require us to set rate tiers as described. After
appropriate consideration, however, we determine that the record and
data do support a tiering structure for prisons. Specifically, we find
evidence that providers incur progressively greater costs in serving
jails at the lower tiers of ADP than at the highest tier that we adopt.
We found in the 2021 ICS Order that the available data suggested that
``providers incur higher costs per minute for jails with [ADPs] below
1,000 than for larger jails.'' The data submitted for the 2023
Mandatory Data Collection continues to reflect this pattern. However,
at that time we deferred on further rate cap setting with respect to
jails with ADPs below 1,000 ``because the available data [did] not
allow us to quantify the extent to which providers' costs of serving
[such] jails . . . exceed the industry average.'' With the data
submitted for the 2023 Mandatory Data Collection, we are now able to
determine with greater accuracy the cost differential of providing
service to jails with ADPs below 1,000. Consequently, we adopt average
daily population cutoffs of 100, 350, and 1,000 incarcerated persons in
order to distinguish among different sizes of jails. Although certain
commenters suggest other size thresholds, we find that the size tiers
we adopt here best fit the data submitted for the 2023 Mandatory Data
Collection.
149. While the Martha Wright-Reed Act specifies that we consider
cost differences among three sizes of facilities (``small, medium, and
large''), we do not interpret that specification as a directive that
limits our actions to only three size tiers that correspond to the
terms referenced in the statute. Instead, we interpret Congress' intent
as mandating that the Commission analyze the relevant data to assess
the cost characteristics of different-sized facilities, including those
referenced in the statute, and then to reflect that analysis in the
rate cap structure the Commission ultimately adopts. Pursuant to their
delegated authority, WCB and OEA structured the 2023 Mandatory Data
Collection to ensure it included the requisite facility-level data
needed to support this analysis. After ``consider[ing] . . .
differences in the costs'' incurred to provide IPCS ``by small, medium,
or large facilities'' as directed by the Act, we find that the data do
reflect size differences among jails--and that the data further support
distinguishing a further, fourth size tier of jails to best ensure just
and reasonable rates for consumers and providers and fair compensation
for providers.
150. We find that the record supports adopting a more granular
tiering structure than that referenced in the Act or established by our
current rules to better capture cost differences among ``small, medium,
and large facilities,'' in addition to creating a separate tier for
very small jails. The record supports adopting this tiering arrangement
to better reflect the ``differences in the costs'' of serving various
sizes of jails, particularly where the record distinguishes jails of
the smallest sizes as subject to special per-unit cost differences. Our
adoption of an additional tier for very small jails is consistent with
the statutory directive to consider cost differences for ``small,
medium, and large'' facilities as well as an ``other characteristic''
for which to account. This rate cap structure finds further support in
the rate cap tiers previously adopted by the Commission, which also
distinguished among facilities based on facility type and size based on
average daily population. In the 2015 ICS Order, the Commission found
that there was ``substantial record support'' from commenters for
``rate tiering based on differences between jails and prisons as well
as population size'' given the differences in provider costs arising
from these factors, a conclusion supported by the Commission's analysis
of the First Mandatory Data Collection. The Commission therefore
adopted rate cap tiers based on facility type and size, to ``account[ ]
for the differences in costs to ICS providers'' and to avoid ``over-
compensating ICS providers serving larger, lower-cost facilities.'' In
the 2021 ICS Order, following similar reasoning, the Commission again
adopted a rate cap structure distinguishing between prisons and jails
and among jails based on size. We also seek comment in the Further
Notice on whether obtaining more granular data from providers serving
very small jails would allow us to further disaggregate this size tier
to better reflect the variability of provider costs and other
characteristics in our rate tiers.
151. Other Characteristics. In addition to the three specified
sizes of facilities, the Martha Wright-Reed Act also directs the
Commission to ``consider . . . differences in the costs'' incurred to
provide IPCS due to ``other characteristics.'' The Commission sought
comment on whether it should continue to use the type of facility as
another characteristic in determining its IPCS rate cap structure.
Several commenters propose that we maintain a rate cap structure that
incorporates
[[Page 77270]]
facility type as one of these ``other characteristics,'' by
distinguishing between prisons and jails. One commenter also proposes
that we consider several other factors that impact providers' costs,
including the variations in facilities' costs associated with providing
IPCS, the different IPCS systems employed by different facilities, and
the fact that facilities in rural areas may be more costly to serve.
152. All commenters that address the ``other characteristics''
language agree that the Act permits the Commission to maintain a
distinction between prisons and jails. Several commenters contend that
the available data indicate significant variations in costs due to
facility type, and that the Commission should therefore set rate tiers
to account for these variations. We agree that the record ``contains
extensive documentation of [the] cost differences, and the reasons for
those differences,'' of providing audio IPCS between prisons and jails.
Several factors contribute to these cost disparities, particularly the
higher turnover in jails than in prisons, economies of scale associated
with serving larger facilities (as prisons tend to be larger than
jails), and the fact that jails are often located in more rural areas.
Many of these cost differences stem from the fact that prisons, in
contrast to jails, are ``used primarily to confine individuals . . .
sentenced to terms in excess of one year.'' The consequent differences
in average durations of stay and turnover rates between prisons and
jails account for much of the disparities in costs between the two
types of facilities. As set forth in a technical appendix, our data
analysis indicates that there remain statistically significant
differences in the costs of providing audio IPCS in prisons versus
jails, as well as greater variations from mean costs for jails than for
prisons. The data submitted in response to the Third Mandatory Data
Collection further support this conclusion. The same pattern applies to
the costs of providing video IPCS. We find this evidence credible and
sufficient to support incorporating facility type, by adopting separate
rate cap tiers for prisons and jails, as an ``other characteristic''
contemplated by the Martha Wright-Reed Act.
153. One commenter proposed specific additional factors beyond
facility size and type. The National Sheriffs' Association identifies
several other factors that may impact the costs of providing IPCS: that
facility staff ``provide more functions in some cases tha[n] in others
and that the hourly wage and benefits of jail employees varies by state
and locality''; that ``different facilities employ different IPCS
systems,'' and ``require different security measures,'' with attendant
variation in costs; that ``jails in rural areas are more costly to
serve''; and that ``jails allow different amounts of inmate calling.''
Another commenter claims there are no significant differences after
accounting for facility size. However, after controlling for provider
and state, we find that the main predictors of providers' costs per
minute are facility size and type. By contrast, other variables provide
negligible independent predictive value. Consequently, we find that
such factors are best accommodated through the use of rate caps based
on industry-wide average costs, which enable the provision of IPCS to
be commercially viable across the tiers we adopt. In sum, we find that
incorporating these attributes into our rate caps would provide little
benefit in terms of meaningfully reflecting providers' costs, while
imposing additional administrative burden on providers and potentially
introducing consumer confusion. We also find that, in the absence of
any data indicating otherwise, many of the factors identified by the
National Sheriffs' Association are simply not well suited for direct
incorporation into a rate cap structure. Because these factors vary in
a nonlinear manner, they are ill-suited to a tiered rate cap structure,
and incorporating them into our rate caps would necessitate an
exceedingly granular and therefore intractable system. The National
Sheriffs' Association does not point to any concrete data that might
reflect the impact of any of these factors on providers' costs. After
``consider[ing] . . . other characteristics'' proposed by commenters as
directed by the statute, we decline to incorporate any other additional
characteristics in our IPCS rate cap structure. We have insufficient
data to evaluate the cost-causative impact of variations in the
services provided or staffing costs incurred by facilities. In the 2023
Mandatory Data Collection, we asked providers to submit ``any
verifiable, reliable, and accurate information'' they have regarding
any expenses incurred by facilities to provide IPCS. However, no
provider submitted any information on facilities' costs in response to
this request. Given this limitation, we address the role of costs
incurred by facilities in providing IPCS separately.
154. Alternative Proposals. Not all commenters agree with the
tiering structure we adopt in the Report and Order. The National
Sheriffs' Association supports adopting three size tiers of jails,
proposing that the thresholds be set at ADPs of 350 and 2,500.
Conversely, ViaPath argues that the rate caps adopted in the 2021 ICS
Order do not require any modification other than ``necessary
adjustments for market changes.'' We disagree, and find that neither
proposal takes into account the wider record; nor do they incorporate
the data provided in response to the 2023 Mandatory Data Collection.
The National Sheriffs' Association relies on data from its 2015 cost
survey, which we have previously distinguished. Meanwhile, the rate
structure adopted in the 2021 ICS Order was based on data from the
Second Mandatory Data Collection. Furthermore, in the 2021 ICS Order,
the Commission explicitly deferred on setting rate caps for jails with
ADPs below 1,000 because the available data did not enable accurate
calculation of the relative costs of such facilities--a gap that, as
noted above, has been rectified with the data submitted for the 2023
Mandatory Data Collection. Consequently, we find that both of these
proposals fail to accurately account for the current differences in the
costs that we observe.
155. For similar reasons, we decline to adopt the proposals from
NCIC and ViaPath that we adopt a single rate cap, either for all jails
(with a separate rate cap for prisons) or for all facilities. As
several commenters observe, setting a single rate cap for all
facilities, or even all jails, would almost certainly result in either
unreasonably low rates in smaller facilities, such that providers may
be unable to recover the costs of providing service to these higher-
cost facilities, or else a windfall for those serving prisons and
larger jails at the cost of those incarcerated in such facilities. We
find that these consequences would outweigh any benefits from adopting
a single rate cap. We agree with commenters that, given our analysis of
the data, adopting a single rate cap ``will run counter to'' the goals
of section 276 as well as the Martha Wright-Reed Act, and would less
effectively address the implications of our consideration of the
``differences in the costs . . . by small, medium, or large facilities
or other characteristics.'' Indeed, in the 2015 ICS Order, the
Commission thoroughly examined the negative consequences of
establishing a single rate cap in the context of data indicating that
costs of providing IPCS vary by facility size and type. Once again, we
find that the commenters proposing a single rate cap ``provide no real
evidence or support for why rate tiers would be any more
[[Page 77271]]
difficult or challenging than'' the current approach.
156. Definition and Use of Average Daily Population. In 2023, the
Commission sought comment on the ``use of average daily population as
the primary metric'' for the size of correctional institutions,
including whether there were ``compelling reasons to adopt a different
metric for determining size.'' The Commission also incorporated prior
calls for comments on how ADP should factor into our rate caps,
including on whether the definition for ADP in the Commission's rules
``sufficiently addresses fluctuations in jail populations and
variations in how correctional facilities determine average daily
populations.'' The record confirms that ADP continues to be the most
practical metric for determining the size of correctional facilities
for the purposes of applying our rate caps. However, the record
reflects a need for ``a clear date and a clear standard by which the
ADP is measured,'' so that all parties can uniformly determine
``whether a particular jail must comply with'' different rate caps than
in the prior year. Additionally, we find that the definition for
average daily population under our rules, which requires the
measurement of all incarcerated persons ``in a facility'' (rather than
those merely within that facility's jurisdiction), over a ``calendar
year,'' effectively addresses related concerns that states and
localities may track population figures differently. Accordingly, we
revise the definition for average daily population in our rules by
establishing April 30 as the date on which the annual recalculation of
ADP reflecting data from the prior calendar year (and, as applicable,
the new corresponding rate cap) becomes effective.
157. Adopting a specific date on which the annual ADP recalculation
must be performed--and by which providers must implement new rates to
comply with the appropriate rate cap, where applicable--will yield
greater uniformity and accountability in the application of this
metric, and address related concerns raised in the record. A uniform
effective date for implementing each year's newly recalculated ADP (and
corresponding rate caps) will help consumers ``to determine which jails
must comply with [each of] the FCC's new rate caps,'' and will help
providers by establishing a more predictable and consistent calculation
process. We select April 30 as the effective date for the annual ADP
recalculation because, as Securus points out, providers need to obtain
data from correctional officials in order to determine each jail's
average daily population during the preceding calendar year. To the
extent they have not already done so, providers should ensure that
their contracts with correctional facilities provide for the providers'
timely receipt of all information they need to recalculate average
daily populations in accordance with our rules. Our rules already
require providers to report that information in their annual reports,
which are due each year on April 1. An April 30 date for determining
each jail's rate cap tier going forward avoids the imposition of any
additional burden on providers, while providing a ``realistic
timeframe'' for providers to collect and process data on average daily
populations as part of the mandated annual review and updating of rate
cap tiers.
158. ViaPath cites the ``concerns [raised] about consistency and
variations in population'' and suggests that the current requirement
for annual calculation of ADP ``could require negotiated per-minute
IPCS rates to increase or decrease each year due to changes in facility
population year-to-year.'' To address this concern, and aid
consistency, ViaPath proposes that we redefine ADP to permit it to be
``calculated and applied for the initial term of an IPCS contract, and
thereafter recalculated and applied for each renewal term of a
contract.'' We decline to adopt ViaPath's proposal. We are concerned
that this approach would incentivize providers to commence or renew
contract terms at times of unusually low populations to ``lock in'' the
consequently higher rates for the full contract term. ViaPath's
proposal may not even meaningfully improve consistency in the
calculation of ADP, given the substantial variation in IPCS contract
terms. Although we recognize that requiring ADP to be recalculated
annually may entail a near-term administrative burden, the record fails
to suggest that this burden outweighs the benefit of IPCS rates that
correspond to the costs associated with different size jails. No other
commenter addresses the issue of the yearly recalculation requirement
for ADP, suggesting that this requirement does not impose a
disproportionate burden. We also find that the revision we adopt today,
which grants providers a full month to calculate and (where necessary)
implement the newly-applicable ADP figures each year, will help to
ameliorate this burden. For similar reasons, we decline to adopt Talton
Communications' proposal that ADP be calculated quarterly ``by taking
an average of the population of detainees across all facilities
serviced by a single ICS provider.'' First, we find that this proposal
risks generating either insufficient returns or excessive returns for a
given provider, depending on the nature of the facilities it serves.
Second, we find that it would also make the rates imposed on any given
consumer relatively arbitrary, based purely on the portfolio of the
IPCS provider serving their respective facility rather than the actual
costs of providing service. Finally, this proposal would ultimately
require updating the applicable rates even more frequently than under
our current rules, imposing greater administrative burdens on providers
and greater inconsistency on consumers. And over the longer term,
contracting will occur against the backdrop of our rule providing
certainty regarding the timing of ADP calculations and from the outset
such contracts can be tailored accordingly as needed.
2. Preliminary Costing Issues
159. To assess the costs that should be included in or excluded
from our rate cap calculations to ensure just and reasonable rates for
IPCS, we rely on the ``used and useful'' framework and its associated
prudent expenditure standard. Under the used and useful framework the
Commission first considers the need to compensate providers ``for the
use of their property and expenses incurred in providing the regulated
service.'' Second, the Commission looks to the ``equitable principle
that ratepayers should not be forced to pay a return except on
investments that can be shown to benefit them.'' In this regard, the
Commission considers ``whether the expense was necessary to the
provision of'' the regulated service. And third, the Commission
considers ``whether a carrier's investments and expenses were prudent
(rather than excessive),'' and has found that ``imprudent or excess
investment . . . is the responsibility and coincident burden of the
investor, not the ratepayer.'' Although the Commission has identified
these ``general principles regarding what constitutes `used and useful'
investment,'' it ``has recognized `that these guidelines are general
and subject to modification, addition, or deletion' '' and that ``
`[t]he particular facts of each case must be ascertained in order to
determine what part of a utility's investment is used and useful.' ''
The Commission ``may, in its reasonable discretion, fashion an
appropriate resolution that is tailored to the specific circumstances
before it.''
160. We apply this framework in evaluating the costs and expenses
to be included in our IPCS rate cap
[[Page 77272]]
calculations. As described below, we rely on a zone of reasonableness
approach to adopt separate rate caps for audio and video IPCS by
facility size and type. As applied here, our approach begins by looking
to the record to identify an upper limit for each rate category that
corresponds to a rate level above which rates would clearly be unjustly
and unreasonably high. We then make adjustments to that upper limit
based on the record to remove costs that are not used and useful for
the provision of IPCS in order to identify the lower limit of our zone
of reasonableness. Between the upper and lower limits of that zone, we
then seek to identify a particular rate level that will best reflect
the proper balancing of the equitable interests that ratepayers only
bear costs or expenses that reasonably benefit them and that providers
earn a reasonable return when their property is used in the provision
of regulated services. The particular rate level we identify within
that zone of reasonableness is then adopted as the relevant rate cap
for that rate category.
161. The upper bounds we adopt include all reported provider costs,
including those categories that we generally find are not ``used and
useful'' in the provision of IPCS. We are confident based on this
record that rate caps set above the upper bound clearly would be
unjustly and unreasonably high. In turn, we rely on the used and useful
framework to make reasonable adjustments to those upper bound costs to
establish the lower bounds of the zones of reasonableness. By deriving
our rate caps from the ``used and useful'' framework, our approach
reflects the Commission's longstanding methodology for ensuring that
providers are able to obtain recovery for the costs and expenses that
demonstrably benefit ratepayers. At the same time, including all
reported provider costs to establish the upper bound reflects a
conservative approach. As a result, we are confident that setting rates
within that zone of reasonableness will yield rate caps designed to
afford fair compensation to IPCS providers.
162. Next, our interpretation of section 3(b)(2) of the Martha
Wright-Reed Act requires us to examine available evidence of ``costs
associated with any safety and security measures necessary to provide''
IPCS which, along with the other costs, we review and use to arrive at
a reasoned conclusion regarding the recoverability of those costs. To
conduct that examination--including with respect to safety and security
costs--we employ the ``used and useful'' framework. In doing so, we
consider all relevant cost evidence in the record before us that could
conceivably fall within the scope of costs of safety and security
measures required to be considered as ``necessary'' under section
3(b)(2) of the Martha Wright-Reed Act. As we discuss below, we
therefore have no need to more precisely define the ultimate scope and
contours of the term ``necessary'' under section 3(b)(2) at this time.
3. Accounting for Correctional Facility Costs
163. To account for the possibility that some correctional
facilities may incur--and IPCS providers may reimburse--used and useful
costs in allowing access to IPCS, we incorporate into our zones of
reasonableness the Commission's best estimate of IPCS costs that
correctional facilities may incur. To facilitate recovery of any used
and useful costs--but only such costs--that correctional facilities
incur, we permit IPCS providers to reimburse correctional facilities
for the used and useful costs they may incur as those costs have been
identified in the Report and Order. Together, these measures ensure
that we account for used and useful correctional facility costs in our
ratemaking calculations to the extent the record allows. Finally, our
actions also ensure that rates and charges for IPCS will be just and
reasonable as required by the Martha Wright-Reed Act, while also
ensuring fair compensation for providers to the extent justified by the
record here.
164. Our treatment of correctional facility costs reflects a
careful balancing of two competing factors. First, certain commenters
generally assert--though largely without support or current data--that
correctional facilities may incur some used and useful costs in
providing access to IPCS. While the nature and extent of such costs is
unclear on the current record, Worth Rises explains that ``[w]hile
exceedingly rare in the provision of IPCS, correctional facilities may
incur used and useful costs which the Commission could include within
rates.'' These assertions and the Commission's prior recognition that
correctional facilities may incur some costs in allowing access to IPCS
persuade us to recognize a measure of these costs in our ratemaking
calculus to the extent the record permits.
165. Second, despite some commenters' assertions that correctional
facilities incur costs in their administration of IPCS, the available
cost data (i.e., the 2015 survey data submitted by the National
Sheriffs' Association) do not allow us to quantify what those costs are
with any level of exactitude. This issue is not new. In the 2020 ICS
Notice, the Commission asked ``correctional facilities to provide
detailed information concerning the specific costs they incur in
connection with the provision of interstate inmate calling services.''
In the 2021 ICS Order, the Commission observed that despite this
request, ``nothing more current was submitted'' into the record
regarding correctional facility costs. Again the Commission, in 2021,
sought broad comment on correctional facility costs, including
methodologies to estimate such costs and how to obtain reliable data.
And, in an effort to understand potential cost differentials between
prisons and jails of differing sizes, the Commission also sought
specific comment on facility costs for each type of correctional
facility. Finally, in the 2023 Mandatory Data Collection, WCB and OEA
directed IPCS providers to report ``any verifiable, reliable, and
accurate information'' in their possession showing the costs incurred
by correctional facilities.
166. Despite these numerous and repeated public attempts to obtain
relevant data, commenters have neither provided updated facility cost
data nor proposed a methodology that would allow the Commission to
accurately estimate used and useful correctional facility costs.
Instead, the National Sheriffs' Association continues to rely on its
2015 cost survey as a ``reasonable proxy'' for facility costs, while a
single provider simply lists various tasks for which correctional
facilities allegedly incur costs but provides no supporting data as to
what those costs are. Given the state of the record, it is reasonable
for us to conclude that no allowance for correctional facility costs is
warranted in our lower bounds. In particular, the failure of providers
and facilities--which would have the relevant data--to provide such
data to the Commission despite repeated calls for them to do so
warrants an adverse inference that actual information would not support
the case for recovery. However, out of an abundance of caution, and in
recognition of those commenters that continue to assert that
correctional facilities may incur used and useful costs in allowing
access to IPCS, we conclude that we should incorporate some allowance
for such costs into the upper bounds of the zones of reasonableness.
Specifically, based on data from a 2015 cost survey provided by the
National Sheriffs' Association we incorporate $0.02 into the upper
bounds of our zones of reasonableness for all facilities. We do not
include an estimate of correctional facility costs in the lower
[[Page 77273]]
bounds of our zones of reasonableness as neither the record nor
providers' cost data reported in the 2023 Mandatory Data Collection
adequately or consistently support the inclusion of any specific level
of cost.
167. To that end, there are two sources of data we can look to in
determining whether and how to incorporate a measure of correctional
facility costs into our ratemaking calculus. The first is the 2015 cost
survey from the National Sheriffs' Association, upon which the National
Sheriffs' Association and Pay Tel ask us to rely. The Commission
relied, in part, on data from that survey in the 2021 ICS Order when it
adopted a $0.02 interim cap for recovery of IPCS providers'
contractually prescribed site commission payments. Although the
Commission expressed concerns about the National Sheriffs' Association
survey data at that time, it explained that ``they are the best data
available from correctional facility representatives regarding their
estimated costs.'' That remains true today. As the Prison Policy
Initiative observes, the National Sheriffs' Association survey relies
``entirely on self-reported data from correctional facilities'' and
involves ``inappropriately expansive descriptions'' of IPCS-related
tasks. Such infirmities make it very likely that the National Sheriffs'
Association data overstated correctional facility costs at the time of
the survey, and severely limit the data's value as a proxy for current
facility costs. Indeed, neither correctional facilities nor IPCS
providers have an incentive ``to understate their costs in the context
of a rate proceeding, lest the Commission adopts rates that are below
cost.'' But, as the Commission has explained, ``an agency may
reasonably rely on the best data available where perfect information is
unavailable.'' The National Sheriffs' Association survey data are the
best data available from correctional facility representatives which we
may, and do, reasonably consider in determining how to account for used
and useful correctional facility costs in our ratemaking calculations.
168. The second source of data we consider in determining whether
and to what extent correctional facility costs may incur used and
useful costs is the data providers reported regarding their site
commission payments in response to the 2023 Mandatory Data Collection.
A technical appendix compares the costs per minute that providers
reported for contracts requiring the payment of monetary site
commissions with the costs per minute that providers reported for
contracts not requiring the payment of monetary site commissions. We
find this comparison potentially helpful because both facilities and
providers have explained that some portions of some site commission
payments may compensate facilities for costs they incur in permitting
access to IPCS. If we saw lower per-minute costs for providers at
facilities with site monetary commission payments than for facilities
without monetary site commission payments, we might reasonably infer
(or at least hypothesize, subject to further analysis) that facilities
may be incurring such significant levels of used and useful costs as to
require an approach materially different from our approach in this
Order. Our comparison, however, shows higher per-minute costs for
providers at facilities with monetary site commission payments than for
facilities without monetary site commission payments. Previously, the
Commission relied in part on a similar analysis of earlier provider
data--in conjunction with the National Sheriffs' Association data--as
grounds for a $0.02 per minute interim allowance for reasonable
correctional facility costs. However, even the 2021 data analysis
suggested that the $0.02 per minute interim allowance might have been
too high. And our analysis of the data from the 2023 Mandatory Data
Collection ultimately provides no basis to identify an amount of
correctional facility costs that should be recoverable through
regulated IPCS rates. In particular, performing the same comparison
used in 2021, but updated to reflect the latest data, discloses that
providers actually incur greater costs per minute to serve facilities
for which they pay monetary site commissions, providing no
substantiation of certain commenters' suggestion that site commissions
operate to compensate for the transfer of some costs of service from
providers to facilities. We conclude that because providers report
greater costs per minute for contracts requiring the payment of
monetary site commissions versus those that do not, our approach of
including a $0.02 per-minute additive for facility costs in the upper
bounds of our zones of reasonableness, but no additive for facility
costs in the lower bounds of those zones, is the best approach given
the record before us. This balancing reflects our recognition, on the
one hand, that correctional facilities may well incur used and useful
costs in allowing access to IPCS, with the absence of any basis in the
record that would enable us to estimate those costs with any degree of
precision.
169. In accounting for correctional facility costs in this manner,
we decline requests that we instead account for those costs by adding a
specific amount per-minute to our rate caps based on data from the
National Sheriffs' Association cost survey. These data do not enable us
to quantify such costs with anything near the level of specificity that
would be required to adopt a specific ``just and reasonable'' additive
reflecting used and useful correctional facility costs. Commenters
supporting a rate additive have failed to explain a connection between
their proposed additives and the National Sheriffs' Association 2015
cost survey data. Nor have they explained the methodology used to
derive the additives they propose or, indeed, any alternative
additives. We therefore cannot accept at face value the proposed rate
additives, or adopt any alternative additive, based on these data and
simultaneously ensure that the rate caps we adopt are just and
reasonable and fairly compensatory. Given the state of the record, we
conclude that our approach, as described below, strikes the best
balance.
170. Incorporating A Measure of Correctional Facility Costs Into
the Upper Bounds of the Zones of Reasonableness. In establishing the
upper bounds of our zones of reasonableness, we use providers'
unadjusted reported IPCS costs. Ordinarily, we would undertake the same
exercise to incorporate correctional facility costs into our upper
bounds. But as detailed above, we have no reliable reported
correctional facility cost data, which requires us to find a reasonable
substitute. Because the National Sheriffs' Association 2015 cost survey
is the only available correctional facility cost data reported by
correctional facility representatives in the record, we rely on those
data to incorporate $0.02 into the upper bounds of our zones of
reasonableness for all facilities. The $0.02 figure derives from the
Commission's prior analysis of the amount of used and useful
correctional facility costs the National Sheriffs' Association's cost
survey reasonably supported. In the 2021 ICS Order, the Commission
relied, in part, on these data to conclude that $0.02 was a reasonable
estimate of the used and useful correctional facility costs recovered
through IPCS providers' contractually prescribed site commission
payments for prisons and for jails with average daily populations of
1,000 or more. The Commission explained that the majority of prisons
and large jails that responded to the National Sheriffs' Association
survey reported ``average total costs per minute
[[Page 77274]]
of less than $0.02'' but declined to adopt a lower figure, reflecting
the Commission's ``conservative approach'' to estimating correctional
facility costs in setting interim rate caps based on these data. The
Commission, nevertheless, continued to express concerns about the data.
171. The record has not developed in any meaningful way since the
Commission determined that the National Sheriffs' Association data
supported, at most, a $0.02 allowance for correctional facility cost at
prisons and jails with average daily populations of 1,000 or more. We
sought to identify in using data from the 2023 Mandatory Data
Collection the extent to which correctional facilities bear costs by
seeking to determine how much providers' reported expenses decline when
they pay monetary site commissions, but found providers' reported
expenses increase in a statistically significant manner when they pay
such commissions. We thus see no principled or reasonable basis on
which to depart from that determination so as to find a higher cost
justified now. As one commenter explains, instead of ``refreshing the
record or seriously engaging on the merits of the Commission's
inquiry,'' the National Sheriffs' Association ``simply continues its
years-long practice of rote repetition of the cost categories
identified in its 2015 survey findings.'' The National Sheriffs'
Association contends that because the Commission found its cost survey
``credible'' in the 2016 ICS Reconsideration Order, there is ``no
basis'' to change that conclusion now. This argument is unpersuasive.
The Commission made a credibility determination in the 2016 ICS
Reconsideration Order in the context of a record on facility costs that
the Commission acknowledged was lacking. The National Sheriffs'
Association's arguments do not acknowledge the very specific
circumstances under which the Commission relied on the 2015 survey
data, and do not provide sufficient basis for the Commission to deviate
from its subsequent findings in the 2021 ICS Order.
172. The National Sheriffs' Association acknowledges the
imprecision of the data it provided but argues that the ``wide
unexplained variations'' in costs that the Commission observed in the
data are attributable to the fact that ``there are different hourly
rates for Sheriffs' and jail employees'' and that different facilities
use different IPCS systems and require different administrative and
security measures. These arguments do not provide us with a methodology
that would let us verify or isolate costs used and useful in the
provision of IPCS from the other costs that correctional facilities
incur and that are reflected in the survey data. Rather, the National
Sheriffs' Association's statements concede that correctional facilities
do not incur costs uniformly, making it even more likely these data
overstate correctional facility costs. The National Sheriffs'
Association also continues to maintain that the costs reported in its
cost survey should be fully recoverable. These include costs related to
various safety, security, surveillance, and administrative tasks. The
National Sheriffs' Association explains that without these functions no
IPCS would be provided in certain correctional facilities and,
conversely, without IPCS, correctional facilities would not incur costs
associated with the administrative and security tasks it lists. We find
the argument that IPCS would not be provided in certain facilities as
the National Sheriffs' Association and FDC claim to be unsubstantiated.
In effect, then, the National Sheriffs' Association's argues that
because IPCS is made available to incarcerated people, the costs that
it has put into record are necessarily used and useful and therefore
recoverable in full. This argument misses the mark. Simply because some
tasks ``are sometimes performed does not end the Commission's
inquiry.'' But simply because certain tasks are performed by facilities
or sheriffs does not automatically mean that such tasks are related to
communications services. If anything, the fact that certain tasks may
be performed by the correctional facilities suggests that these are
costs of incarceration, not of IPCS. For example, the fact that a
correctional facility might elect to undertake certain activities given
the existence of IPCS in that facility does not automatically mean that
the activities are of sufficient benefit to IPCS ratepayers to warrant
their bearing the activities' costs through IPCS rates. We instead must
undertake a more nuanced analysis to determine the types of costs that
are allowable in IPCS rates. And we do so by applying the used and
useful framework the Commission has relied on for decades. Employing
that approach, we incorporate, to the extent the record provides
meaningful data, the used and useful costs incurred in the provision of
IPCS into our rate cap calculations, regardless of whether those costs
are incurred directly by IPCS providers or instead incurred directly by
correctional facilities and subject to IPCS provider reimbursement. As
to costs that we do not find used and useful in the provision of IPCS,
IPCS ratepayers should not be forced to bear them--nor should IPCS
providers be compelled to do so themselves. Thus, while correctional
facilities remain free to engage in (or employ) activities or functions
that are not used and useful in the provision of IPCS, they must look
elsewhere besides regulated IPCS rates to fund them.
174. Fundamentally, the costs reflected in the National Sheriffs'
Association survey are, for the most part, ``cost[s] of operating
prisons and jails, not providing communication service'' and, as such,
do not benefit IPCS consumers sufficiently to render them used and
useful in the provision of IPCS. Stated differently, ``[t]he presence
or absence'' of these tasks ``does not actually prevent or enable
communication.'' Subject to those costs we conclude are used and useful
in the provision of IPCS as reflected in our ratemaking calculus, we
agree. But outside of the costs we do allow, the National Sheriffs'
Association cost survey fails to support the inclusion of any amount
greater than $0.02 to account for used and useful correctional facility
costs.
175. We decline to give any weight to the survey provided by Pay
Tel's outside consultant, which purports to quantify ``an estimate of
the [s]afety and [s]ecurity costs incurred by confinement facilities
that are specifically caused by making IPCS available at that
facility.'' We find this survey to be unreliable. First, the survey is
unrepresentative. As the consultant concedes, the ``sample size of
[the] data collection effort is limited.'' It encompasses 30
correctional facilities, which is less than 1% of all facilities
included in the 2023 Mandatory Data Collection, and covers only ``small
county jails and large regional facilities'' thereby excluding prisons
and large jails. Second, the survey does not attempt to account for the
nuances of how safety and security measures are administered and, in
particular, the division of labor between correctional facilities and
IPCS providers. The record is clear that these and other functions and
activities for which correctional facilities allegedly incur costs are
sometimes performed by the IPCS provider and sometimes performed by the
correctional facility. What is more, certain IPCS providers have stated
that they offer comprehensive services, that include safety and
security services, as part of a unified platform they sell to
correctional facilities.
Thus, we find it unlikely that the information provided in the Pay
Tel consultant's survey is representative of
[[Page 77275]]
the costs incurred by correctional facilities in connection with safety
and security measures across the IPCS industry. As such, we decline to
rely on it to estimate used and useful correctional facility costs.
Even if we were to find the data reliable enough to be decisional, it
would support the $0.02 that we incorporate into the upper bounds of
our zones of reasonableness based on the National Sheriffs' Association
survey. The June 7, 2024 Wood Report, which is based on information
self-reported by correctional facilities across seven categories of
safety and security measures, suggests that the ``average reported cost
for these 30 facilities in $0.08 per MOU.'' However, this estimate
includes three categories of safety and security measures that we
conclude today are not used and useful in the provision of IPCS,
including ``Routine Preventative Call Monitoring,'' ``Call Recording
Review'' and ``Enrolling Inmates for Voice Biometrics.'' These three
categories account for a total of 74% of the average reported costs of
safety and security measures in the Wood June 7, 2024 Report (38% for
routine preventative call monitoring, 28% for call recording review,
and 8% for enrolling inmates for voice biometrics). Removing costs
associated with those measures reduces the $0.08 per minute figure that
the report argues represents facilities' safety and security costs by
74%, yielding an average cost of approximately $0.0208 per minute.
Thus, in excluding categories of safety and security costs that we
conclude are generally not used and useful from the amount in the Wood
June 7, 2024 Report, we arrive at essentially the same $0.02 that we
incorporate into the upper bounds of our zones of reasonableness.
176. Therefore, we adopt the $0.02 allowance for correctional
facility costs in the upper bounds of our zones of reasonableness for
all facilities. In the 2021 ICS Order, the Commission limited the
applicability of the $0.02 cap for recovery of contractually prescribed
site commissions to prisons and jails with average daily populations of
1,000 or more individuals ``in response to criticism that this value
would not be sufficient to recover the alleged higher facility-related
costs'' of smaller facilities. Because commenters ``did not provide
sufficient evidence to enable [the Commission] to quantify'' the
allegedly higher costs incurred by smaller correctional facilities, the
Commission sought comment on that issue in 2021. The Commission further
explained that the National Sheriffs' Association data varied too
widely to determine whether correctional facility costs were indeed
higher for smaller facilities.
177. Here, too, commenters have not substantiated their claims that
correctional facility costs are higher in smaller facilities. The
National Sheriffs' Association argues that the Commission's concerns
about its data concerning smaller facilities ``contradict the
Commission's finding in the 2016 ICS Reconsideration Order.'' They also
argue that ``a wide variation in data is not disqualifying when there
is an explanation for the variation,'' which they claim the survey data
provide. Prior statements from the National Sheriffs' Association
potentially account for the variation in costs for smaller facilities,
including differences in employee time spent on certain tasks,
compensation rates, and differences in minutes of use. And the
Commission noted that ``there are many potential variables that impact
facilities' costs'' and sought ``detailed comment on those variables''
in an attempt to obtain a clearer record on costs for smaller
facilities. Yet commenters have not provided any such details to
explain the wide variation in facility costs for smaller facilities
reflected in the National Sheriffs' Association survey. In short, the
record does not support the inclusion of an amount greater than $0.02
into the upper bounds of the zones of reasonableness for all
facilities.
178. Correctional Facility Costs in the Lower Bounds of the Zones
of Reasonableness. The lower bounds of our zones of reasonableness
reflect only those costs that the record affirmatively establishes as
generally being used and useful in the provision of IPCS. Due to the
lack of any reliable data concerning correctional facility costs in
connection with IPCS, we rely on data reported by IPCS providers in the
2023 Mandatory Data Collection in connection with providers' site
commission payments. While we recognize that correctional facilities do
incur used and useful costs in allowing access to IPCS, the record
provides no data that would allow us to estimate those costs with any
degree of precision. Accordingly, we include no estimate for such costs
in the lower bounds of our zones of reasonableness. We decline to rely
on the National Sheriffs' Association cost survey in connection with
our evaluation of whether and how to incorporate correctional facility
costs into the lower bounds of our zones of reasonableness. As
discussed above, we find that the National Sheriffs' Association survey
data that we use to incorporate correctional facility costs into the
upper bounds of the zones of reasonableness do not enable us to
quantify such costs with any level of specificity. The same applies to
the Wood June 7, 2024 Report. As discussed above, that ``limited''
report covers only 30 correctional facilities and only includes ``small
county jails and large regional facilities,'' rendering the survey far
too unrepresentative as a measure of correctional facility costs across
the industry. We therefore conclude that we cannot meaningfully adjust
the data providers reported for purposes of establishing the lower
bounds.
179. We reach our decision regarding correctional facility costs in
the lower bounds based on the absence of a record quantifying such
costs, and supported by the analysis described in a technical appendix.
This analysis, which is based on the Commission's analysis in the 2021
ICS Order, takes providers' cost and site commission data reported in
response to the 2023 Mandatory Data Collection and compares providers'
relative costs per minute for contracts with and without site
commissions. That analysis indicates that contracts with site
commissions exhibit greater costs per minute than those without site
commissions, which provides no support for the assertion that site
commissions operate to transfer some costs of service from providers to
facilities. If the opposite were true, and site commissions did recover
facility costs used and useful in the provision of IPCS, we would
expect to see higher costs to the provider for contracts without site
commissions. Because providers' responses to the 2023 Mandatory Data
Collection ``incorporate[ ] no correctional facility-provided cost
data,'' we find that our approach of including a $0.02 per-minute
additive for facility costs in the upper bounds of our zones of
reasonableness, but no additive for facility costs in the lower bounds
of those zones, properly balances our recognition that correctional
facilities may well incur used and useful costs in allowing access to
IPCS with the absence of any basis in the record that would enable us
to estimate those costs with any degree of precision. Pay Tel argues
that not including a measure of facility costs in the lower bound
``reflects a misunderstanding of the evidence in the record and in no
way justifies withholding cost recovery from facilities.'' Yet Pay Tel
does not contend with the inadequacies of the record data we have
identified in any meaningful way beyond asserting that they show that
correctional facilities incur costs associated with making IPCS
available. As we explain above, the available
[[Page 77276]]
correctional facility cost data are unreliable for purposes of
including a measure of correctional facility costs in the lower bounds
of our zones of reasonableness. Furthermore, we do not withhold cost
recovery from facilities by declining to include a measure of
correctional facility costs in the lower bounds. As explained below, we
take the fact that our lower bounds may not reflect all used and useful
costs into account in setting rate caps, and we allow IPCS providers to
reimburse correctional facilities for the used and useful costs they
may incur, if any. And because the available provider data do not
enable us to quantify the extent to which providers' site commission
payments compensate facilities for any costs that they incur that are
used and useful in the provision of IPCS, we do not incorporate
correctional facility costs into the lower bounds of our zones of
reasonableness.
180. We acknowledge that because we do not incorporate a measure of
correctional facility costs in the lower bounds of our zones of
reasonableness, those bounds may understate the used and useful costs
of providing IPCS. As discussed above, none of the data in the record
concerning correctional facility costs allow the Commission to quantify
these costs with any level of precision and, as such, preclude any
adjustment to the lower bounds. We account for that fact in choosing
rate caps at levels that exceed the lower bounds, as discussed below.
181. Reimbursement for Used and Useful Correctional Facility Costs.
Despite the limitations in our data reflecting facilities' costs, we
nevertheless take measures to ensure that correctional facilities have
a mechanism to recover their used and useful costs, if any, in the
provision of IPCS. To that end, we permit IPCS providers to reimburse
correctional facilities for such used and useful costs, if it is
apparent that such costs are, indeed, incurred by a facility. The IPCS
rate caps we adopt today reflect, based on the record before us, all of
the used and useful costs incurred in the provision of IPCS regardless
of whether such costs are incurred by IPCS providers or correctional
facilities. Thus, the rate caps recognize, consistent with the record,
that correctional facilities may incur some used and useful costs in
allowing access to IPCS. Pay Tel's contention that the Commission
``fail[s] to allow for a mechanism by which facilities may recover
their costs associated with making IPCS available'' is contradicted by
our explicit allowance for such a mechanism here. Pay Tel's argument
appears to be grounded in its preference for an ``express additive to
IPCS rate caps'' rather than the reimbursement mechanism permitted by
the Report and Order. As we explain above, the available data do not
enable us to quantify correctional facility costs in a way that would
allow us to disaggregate our rate caps into just and reasonable
provider components and facility components, and Pay Tel has not
supplied more robust data or otherwise attempted to cure the defects in
the available data. As a result, we rely on our rate caps, which
reflect all of the used and useful costs incurred in the provision of
IPCS, and therefore ``allow IPCS providers to recover facility costs,''
despite Pay Tel's argument to the contrary. Because we eliminate site
commissions below, which have historically been the primary means by
which correctional facilities may have, to some extent, recovered used
and useful costs they may incur in allowing access to IPCS,
correctional facilities would have no means to recover those costs
absent that further action to allow a level of provider reimbursements.
182. The reimbursement we allow extends only to those costs that
are used and useful in the provision of IPCS as reflected in the Report
and Order. Given the over-arching problems associated with site
commission payments, if a correctional facility seeks reimbursement
from an IPCS provider for an allegedly used and useful cost, the IPCS
provider should determine whether the cost for which the correctional
facility seeks reimbursement is a cost that the Commission has
determined to be used and useful and thus properly reimbursable under
the standard set forth in the Report and Order. We otherwise leave the
details of any reimbursement transaction to the parties to resolve.
IPCS providers and their correctional facility customers are well aware
of the types of costs that are used and useful in the provision of IPCS
and are in the best position to negotiate reimbursement as they see
fit. We also clarify that while we permit IPCS providers to reimburse
correctional facilities for their used and useful costs in allowing
access to IPCS, nothing in the Report and Order should be interpreted
to require IPCS providers to do so. To the extent a correctional
facility incurs used and useful costs in allowing access to IPCS, the
correctional facility and the IPCS provider are free to negotiate such
reimbursement in accordance with the Report and Order. ICSolutions asks
whether, within the rate caps, IPCS providers can ``pay correctional
facilities up to the $0.02/minute for reasonable corrections
facilities' costs'' and, if so, whether the $0.02 per minute is a safe
harbor. ICSolutions July 12, 2024 Ex Parte at 1. We do not establish a
safe harbor. The $0.02 figure to which ICSolutions presumably refers
reflects the Commission's best estimate of used and useful correctional
facility costs for the purpose of calculating the upper bounds of our
zones of reasonableness. That figure is not meant to suggest that $0.02
per minute would be an appropriate reimbursement amount and does not
establish a safe harbor for purposes of the reimbursement we permit.
For example, ``[i]f a correctional facility were to pay for internet
installation and maintenance to enable the provision of IPCS,'' that
payment would be considered used and useful in the provision of IPCS.
In that case, the IPCS provider could reimburse the correctional
facility for its costs from the revenue collected by the IPCS provider
since the cost of internet installation is included in our rate caps.
In contrast, IPCS providers may not reimburse correctional facilities
for costs that we find not to be used and useful in the provision of
IPCS, such as costs for certain safety and security measures that we
conclude are not used and useful in the provision of IPCS. Finally,
under no circumstances may reimbursement result in IPCS consumers being
charged more than the rate caps we adopt today.
4. Adopting Audio and Video Incarcerated People's Communications
Services Rate Caps
183. We adopt permanent audio IPCS and interim video IPCS rate caps
by employing a zone of reasonableness approach, similar to the
Commission's previous efforts. We find that adopting zones of
reasonableness, updated from the Commission's approach in the 2021 ICS
Order, is the best means of establishing rate caps in which IPCS rates
are ``just and reasonable'' and, in conjunction with our ban on site
commissions, providers are ``fairly compensated.'' We further find that
the data collected in the 2023 Mandatory Data Collection offers a
sufficient basis from which to derive the zones and rate caps, despite
the limitations of the reported cost data. We reject cursory claims
that our rate caps will be unreasonable because our rules ``impose[ ]
significant and new operational obligations and changes on all
providers'' but ``fails to account for the costs of these new
obligations.'' Securus does not quantify or otherwise substantiate this
claim, nor does it demonstrate that the waiver process
[[Page 77277]]
would be inadequate to address any unusual implementation costs that
theoretically might arise for a given provider. We derive the upper
bounds and lower bounds of the zones for each facility tier by
evaluating and analyzing the data and other information received in
response to the 2023 Mandatory Data Collection.
184. Reliance on Data from the 2023 Mandatory Data Collection. The
2023 Mandatory Data Collection, which updated and supplemented the
Third Mandatory Data Collection, is the most comprehensive data
collection in the IPCS proceeding to date, building upon the lessons
learned from each previous effort. As instructed by the Commission, WCB
and OEA structured this data collection to strike a balance between
meeting the statutory timeline directed by the Martha Wright-Reed Act
and simultaneously reducing the burdens on providers to respond to an
expanded collection, such as by limiting the information requested,
lowering reporting requirements, and making other changes associated
with reducing burdens through the notice and comment process. To reduce
the time required and the burdens associated with responding to the
2023 Mandatory Data Collection, it was decided to only require parties
to report data collected in the ordinary course of their business, to
require at least GAAP consistency for financial reporting, and to allow
providers to develop cost allocations based on their knowledge of their
businesses and accounts, rather than imposing a regulatory set of
accounts on providers. These decisions traded minimizing burdens off
against obtaining useful data. Staff experience acknowledged that
different providers would take different approaches, would have
different business models, and would differ in other important ways,
and accordingly, questions designed to provide necessary context to
understanding these differences were updated and included as well. We
agree with commenters who assert that the currently available data are
of substantially greater quality than that available in 2021 when we
established interim rates, and we find the most recent reported data
continued to improve in the same fashion. These data are derivative of
the cost allocation instructions for this data collection, which have
been improved and refined themselves. Even so, the data from the 2023
Mandatory Data Collection are imperfect. While we afforded providers
the leeway to report data collected in the ordinary course of business
rather than imposing a regulatory set of accounts upon them, the
absence of a uniform system of accounting rules engenders variance in
the reported data. We likewise acknowledge that providers are
incentivized to report their data in ways that produce higher IPCS
costs, that providers are differently situated and may interpret our
data requests differently, and that cost allocation, as a general
matter, can be difficult. While the record raises some questions as to
whether these data accurately capture IPCS expenses, we have sought to
account for that risk as best we can, including by using a range of
other record sources or publicly available information beyond our data
collection.
185. Nevertheless, we find the data from the 2023 Mandatory Data
Collection sufficient to support our actions today. As stated
previously, agencies may reasonably rely on the best available data
where perfect information is unavailable. The Supreme Court has
recognized that ``[i]t is not infrequent that the available data does
not settle a regulatory issue,'' and in such cases, ``the agency must
then exercise its judgment in moving from the facts and probabilities
on the record to a policy conclusion.'' Having ``explain[ed] the
evidence which is available,'' we apply our judgment to the record and
reach results that provide a ``rational connection between the facts
found and the choice made.'' In doing so, we minimize our reliance on
data that we find inaccurate or unreliable by setting lower bounds that
adjust for anomalies in the reported data. Under the circumstances, we
choose ``to use the best available data, and to make whatever
adjustments appear[ ] necessary and feasible'' to ensure that audio and
video IPCS rates are just and reasonable. NCIC argues that ``nearly
half of the current video visitation service providers'' did not
respond to the 2023 Mandatory Data Collection, and so urges the
Commission to ``delay the adoption of interim rates until it receives
comprehensive data from all video visitation providers, and deliver
immediate relief by simply prohibiting flat-rate billing.'' In effect,
NCIC asks that we pursue ``the perfect at the expense of the
achievable.'' For the reasons set forth herein, we find it appropriate
to address the limitations in providers' video IPCS data by making
appropriate adjustments to our upper and lower bounds and in setting
interim rate caps, rather than abandoning the effort to set rate caps
altogether in contravention of Congress's mandate. We have undertaken a
comprehensive analysis of the available data, explained our concerns
with the imperfections that we have identified, and fully explicated
the basis for the rate methodology that we adopt in light of the
relative merits of the data. We also provide our reasoning for
excluding certain data from our analysis, based on both flaws in the
data and the directives of the Martha Wright-Reed Act.
186. Implementing the Zone of Reasonableness Approach. In 2023, the
Commission sought comment on the approach to ratemaking and the
statutory directive that we may use industry-wide average costs. The
zone of reasonableness approach is well-suited to reconcile competing
concerns, such as those reflected by the Martha Wright-Reed Act's
respective obligations to set ``just and reasonable'' rates that
``fairly compensate[ ]'' providers. This approach helps avoid ``giving
undue weight to the assumptions that would lead to either unduly high
or unduly low per-minute rate caps,'' and helps us balance the
respective competing interests of providers and consumers. Precedent
establishes that we are ``free, within the limitations imposed by
pertinent constitutional and statutory commands, to devise methods of
regulation capable of equitably reconciling diverse and competing
interests.'' It also gives us the flexibility to effectively address
imperfections in the data and ultimately select rate caps that satisfy
both statutory standards. Indeed, the D.C. Circuit has emphasized the
``basic principle'' that ``rate orders that fall within a `zone of
reasonableness,' where rates are neither `less than compensatory' nor
`excessive,' '' are ``just and reasonable.'' We reiterate, ``[i]t is
well-established that rates are lawful if they fall within a zone of
reasonableness.''
187. The record supports this approach. As certain commenters
observe, the zone of reasonableness approach ``allowed the Commission
to take into account the different approaches to cost reflected in the
Second Mandatory Data Collection,'' and it ``continues to be the
appropriate method for establishing permanent rates based on the data
submitted in response to the Third Mandatory Data Collection.''
Commenters add that the zone of reasonableness remains appropriate
under the Martha Wright-Reed Act, which ``embraces the use of industry-
wide average costs to set rate caps for IPCS'' and ``adjust[ing] those
costs as necessary.''
188. Not all commenters agree, however. A few argue that the zone
of reasonableness approach is unnecessary with higher quality data and
advocate for us to employ a statistical method paradigm. While the data
collected in
[[Page 77278]]
the 2023 Mandatory Data Collection are more comprehensive and reliable
than the data from prior data collections, we disagree that the
improvement in the collected data requires us to change our approach.
As we discuss elsewhere, the market for video IPCS is still developing,
which strengthens the case for applying the zone of reasonableness to
the data before us. Nor have those commenters persuaded us that their
alternative approaches to rate regulation would be an improvement. The
alternative statistical methods advanced by providers, including using
a mean plus standard deviation or an interquartile range, ignore the
limitations of the data and the likelihood that providers have
overstated their costs, problems which the zone of reasonableness
approach helps us address. We also find that the zone of reasonableness
approach remains particularly apt for balancing the directives
established by the Martha Wright-Reed Act on the basis of the data
before us. NCIC separately criticizes the zone of reasonableness as
``overly complicated,'' and suggests that it ``may well be impossible
to monitor at small- and medium-sized facilities that have frequently
fluctuating populations with varying lengths of incarceration.'' We are
unpersuaded. The resultant caps are straightforward, and NCIC fails to
explain how monitoring rates at individual facilities (regardless of
size) is problematic. Indeed, providers are required to track and
report the rates they charge, and neither providers nor facilities have
any role (much less any responsibility) in the ``zone of
reasonableness'' calculation process. Nor has NCIC explained how
population turnover impacts the zone of reasonableness calculation
process. As we explain in a technical appendix, by distinguishing
between prisons and jails, our rate-setting methodology helps account
for turnover to the extent relevant, and NCIC's comments do not
demonstrate what, if anything, more is justified in that regard.
a. Establishing the Zones of Reasonableness
189. Our zone of reasonableness approach involves three distinct
steps which echo the approach the Commission took in the 2021 ICS
Order. First, we establish ceilings, or upper bounds, for our zones for
each audio and video tier by using the data that providers submitted in
response to the 2023 Mandatory Data Collection. To reach these
ceilings, we also add all reported safety and security costs to the
industry averages reflected by the reported data without regard to
whether those costs are used and useful, and include estimates of
facility costs and TRS costs. Second, we make reasonable, conservative
adjustments to the reported data, including by reducing the types of
safety and security costs and amount of facility costs we incorporate
into our industry average cost calculation, among other steps. We use
those adjusted data to establish reasonable floors, which become the
lower bounds of our zones of reasonableness. In determining the upper
and lower bounds, we calculate industry average costs across the sum of
both billed and unbilled minutes, as we find that this sum (rather than
billed minutes alone) more accurately reflects providers' average
costs. Finally, we rely on record evidence and on our agency expertise
to pick reasonable rate caps for each tier from within those zones for
both audio and video IPCS communications.
190. Determining Upper Bounds for the Zones of Reasonableness. We
begin our determination of the upper bounds for our permanent audio
rate caps and our interim video rate caps by identifying the weighted
average of providers' reported IPCS costs at each tier. To do this, we
exclude those submissions we find incomplete or otherwise unusable, and
we otherwise accept providers' costs as reported. Because reported
costs include costs which we find are not used and useful in the
provision of IPCS, our upper bounds mark the upper limits of what might
be considered ``industry-wide average costs'' within the meaning of
section 3(b)(1) of the Martha Wright-Reed Act.
191. In keeping with our acceptance of providers' IPCS costs as
reported, we also include all reported safety and security costs in our
upper bounds of the zones of reasonableness. We do so for several
reasons. First, we recognize that while questions were pending
surrounding the inclusion of such costs in our IPCS rates, providers
continued to develop and offer safety and security measures for the
benefit of and use by authorized personnel in the carceral environment.
This suggests that historically, IPCS providers were able to provide
service without certain safety and security services which have been
more recently developed. In developing our upper bounds, however, we
decline to weigh the various categories of safety and security
measures, and instead give providers the benefit of the doubt by
treating all such measures as used and useful IPCS costs, regardless of
whether such measures are of the type that were historically used and
useful in the provision of IPCS. Second, because of limitations in the
reported data, we cannot further disaggregate or distinguish costs for
individual safety and security measures with precision. Rather than
attempt to remove costs for specific constituent safety and security
measures which are not used and useful in the provision of IPCS, we
take a conservative approach and include all reported safety and
security measures costs within the upper bounds.
192. Next, we incorporate an estimate of the separate IPCS costs
which facilities may incur in allowing access to IPCS. First, as we
explain above, we adopt an estimate of $0.02 per minute for the
proposed caps at each tier for our upper bounds to reflect any used and
useful costs facilities may incur. As we have explained, the record
does not sufficiently quantify the amount of such costs, particularly
at smaller facilities. Although the Commission has repeatedly sought
more recent and more accurate data, the record before us is lacking. We
derive an estimate of these costs from the facility cost additive the
Commission used in its 2021 ICS Order, which previously applied to
prisons and large jails, depending on the existence of contractually
prescribed site commissions related to a given facility. This $0.02
estimate continues to reflect the best data available concerning
facility costs despite outstanding questions. The use of this additive
did not generate any waiver requests in the interim, suggesting that
the estimate was not unduly low. Without better data from which to
determine how facilities' IPCS costs may differ, if at all, between
facilities of different sizes and types, we apply this same estimate
uniformly across all tiers.
193. Finally, we also include an estimate of the costs incurred by
providers to implement the changes to TRS services required under the
2022 ICS Order. These changes did not take effect until January 9,
2023, and the costs of implementing them therefore were not reflected
in the data filed in response to the 2023 Mandatory Data Collection,
which are for calendar year 2022. We understand that the costs to
provide TRS in the carceral environment may frequently exceed the
support available to TRS providers because of the specialized equipment
and networks often required to deploy these services inside of prisons
or jails. We include this estimate so that our rate caps will cover
these excesses and fully compensate providers for the costs of
providing these services. However, the record quantifying these costs
is once again scant. The only available data in the 2023 Mandatory Data
Collection stems from the response of a single provider, which suggest
that these costs
[[Page 77279]]
may be $0.002 per minute. Without more data on which to rely, we
incorporate that estimate into both our upper and lower bounds.
194. As we explain in a technical appendix, we find that the upper
bounds overstate providers' actual costs of providing both audio IPCS
and video IPCS, likely by a significant margin. This conclusion echoes
the reasoning in the Commission's 2021 ICS Order. In addition to the
overinclusion of safety and security costs and facility costs which we
discuss above, all providers have reasons to overstate their general
IPCS costs in response to our data collection, as higher costs could
lead to higher cost-based rate caps, and thus higher profits.
195. Additionally, our upper bounds also incorporate the weighted
average cost of capital (WACC) as reported by providers, another factor
which heightens the likelihood that they are overstated. The
instructions to the 2023 Mandatory Data Collection included the caveat
that the Commission would apply a WACC figure of 9.75% for any provider
that failed to justify the application of an alternative figure.
Generally, 9.75% is the Commission's currently authorized rate of
return for incumbent local exchange carriers regulated on a rate-of-
return basis. Of all providers, only Securus and ViaPath reported
higher costs of capital than the standard 9.75% rate of return. We find
Securus and ViaPath failed to justify the higher costs of capital they
reported and therefore use 9.75% in determining our lower bounds.
Particularly because the weighted average cost of capital has a
cascading effect upon reported costs, accepting these figures as
reported tends to overstate the upper bounds.
196. There are also distinct attributes of the video IPCS market
which reinforce our conclusion that the upper bounds likely overstate
providers' used and useful costs. One overarching attribute is that
video IPCS remains a developing marketplace--in fact, providers report
offering video IPCS at less than half of all facilities where they
offer audio IPCS. Currently, video IPCS is being deployed at 49.24% of
facilities in the dataset. There are significant indicia that the
reported data reflect high upfront costs to develop and deploy video
IPCS across the nation's carceral facilities, which costs should
decrease over time. For example, many facilities represented in the
dataset have extraordinarily high costs per minute for video IPCS, yet
very low relative demand, which is consistent with newly deployed
services. Further, the variation in providers' reported data for almost
every aspect of video communication is substantially higher than for
audio, suggesting that video supply in 2022 was in an early
developmental stage, and that providers will likely become more
efficient over time, resulting in lower unit costs. Keeping in mind the
rate caps that we adopt today reflect data from 2022, we expect
providers have become more efficient in supplying video services and
will continue to do so. We also expect usage of video IPCS to increase
and hence, as providers reap economies of scale, for costs relative to
demand to decrease over time.
197. In light of the above, we calculate the upper bounds for audio
and video IPCS rate caps for each tier as follows:
Prisons: $0.107 per minute for audio communications and
$0.326 per minute for video communications;
Large Jails: $0.098 per minute for audio communications
and $0.223 per minute for video communications;
Medium Jails: $0.110 per minute for audio communications
and $0.216 per minute for video communications;
Small Jails: $0.121 per minute for audio communications
and $0.208 per minute for video communications; and
Very Small Jails: $0.151 per minute for audio
communications and $0.288 per minute for video communications.
Taken together, these upper bounds form a reasonable, yet
cautiously overstated, edifice from which to continue our calculation
of the zones of reasonableness.
198. Determining Lower Bounds of the Zone of Reasonableness. Our
lower bound calculations begin by incorporating the results of our
upper bound analysis, which ``provides an appropriate starting point
for determining the lower bounds of the zones.'' We then make
reasonable adjustments to the upper bound figures to ``minimize our
reliance on data that we find inaccurate or unreliable.'' We also
adjust the upper bound figures to remove the costs of those categories
of safety and security measures that we find generally are not used and
useful in the provision of IPCS.
199. Our lower bound adjustments to providers' reported costs
entail several modifications beyond those applied to reach our upper
bound figures. Nevertheless, we find that several significant anomalies
in providers' reported data justify these modifications. Most
critically, providers' total reported costs across the industry for
2022 exceed their total reported revenues by approximately $219
million. This represents a deficit amounting to over 16% of the total
size of the IPCS market. This pattern applies individually as well as
in the aggregate, with half of the providers making up our database
reporting cost-revenue deficits for 2022, including four of the top
five providers by market share, a result ``inconsistent with the record
evidence establishing that providers are able to achieve significant
economies of scale.'' The existence of such a disparity, let alone its
magnitude, strongly suggests that reported costs are inflated, given
that rational firms are profit seeking. Nor have any providers offered
an explanation of why costs might reasonably exceed revenues at such a
magnitude, either in their responses to the 2023 Mandatory Data
Collection or otherwise in the record. Consequently, we find that even
the more impactful modifications that we adopt to establish our lower
bounds represent reasonable, conservative adjustments, which help
account for this deficit, in addition to addressing the other anomalies
in the reported data we detail further below.
200. The construction of the lower bounds is driven by removing the
costs of those categories of safety and security measures that we find
generally are not used and useful in the provision of IPCS. As
discussed above, we find that only two of the seven categories of
safety and security measures identified in the 2023 Mandatory Data
Collection are generally used and useful in the provision of IPCS: the
Communications Assistance for Law Enforcement Act (CALEA) compliance
measures and communication security services. By incorporating the
costs reported for these service categories into our lower bounds, we
retain a significant portion of providers' reported safety and security
costs, i.e., $180 million. This sum is equivalent to nearly half of
providers' reported costs of providing audio and video IPCS (even
before applying the additional adjustments addressed below).
Additionally, as discussed above, several commenters contend that none
of the costs of providing safety and security measures should be
incorporated into our rate caps, arguing that these measures are not
``used and useful'' to IPCS consumers but instead merely ``elective
features,'' and that incorporating these costs into our caps
effectively requires consumers to finance the conditions of their own
confinement as a condition of communicating with loved ones. We
disagree, and find that allowing a portion of such costs results in
just and reasonable rate caps. Conversely, incorporating the costs of
the five remaining categories would run counter to the purposes and
language of the Martha Wright-Reed Act and would fail
[[Page 77280]]
to yield just and reasonable rates. Excluding these costs reduces
industry-wide total costs by approximately $326 million. By excluding
these costs from our lower bound figures, we ``ensure that IPCS
consumers do not bear the costs of those safety and security measures
that are not necessary to provide IPCS.''
201. Next, we revisit our per-minute estimate of the IPCS related
costs that facilities incur, and set the estimate of such costs at zero
for the lower bounds. Again, the lower bounds of our zones of
reasonableness include only those costs we find are used and useful;
with respect to the costs facilities may incur to provide IPCS, the
limited record and the lack of quantifying data persuade us to estimate
that there are no facility costs that we should consider used and
useful in IPCS. Given the likelihood that the estimate we accepted for
the upper bounds is overstated, we find that using a lower estimate of
these costs at the lower bounds minimizes reliance on flawed data while
we still provide for the opportunity to recover costs for providing
IPCS through our process for determining rate caps. In sum, we conclude
from both the record and the reported cost data that it is reasonable
to estimate facility costs to be zero in our lower bounds. And because
we do not permit--let alone require--IPCS providers to reimburse
correctional facilities for costs those facilities incur that are not
used and useful in the provision of IPCS and not allowed in regulated
IPCS rates, or to otherwise provide in-kind site commissions to
correctional facilities, providers will not face the prospect of paying
unrecoverable site commissions to correctional facilities that might
deny the providers fair compensation.
202. We do, however, continue to incorporate the same estimate for
TRS costs in our lower bounds as we did in our calculation of the upper
bounds. There is nothing in the record that suggests a range for these
costs.
203. We also revise the weighted average cost of capital (WACC) for
ViaPath and Securus, the only two companies which elected to estimate
an alternative WACC figure. ViaPath and Securus adopted a weighted
average cost of capital of 14.86% and 11.43%, respectively, well above
the 9.75% rate which every other reporting provider adopted. We find
that neither provider offered sufficient justification to support their
proposed alternatives to the Commission's 9.75% WACC. Both providers
rely on several assumptions which we find lacking and which
consistently favor material overestimation of the ultimate WACC figure.
For example, certain components of the WACC calculation are supposed to
rely on data assimilated from a ``demonstrably comparable group of
firms.'' Both providers assembled groups of firms that we find, on
balance, are not ``demonstrably comparable.'' Furthermore, ViaPath
failed to document its underlying calculations and processes with the
requisite detail, rendering its approach nonreplicable--a flaw that not
only undermines the reliability of such calculations, but also makes
them impossible to validate. Given these concerns, we find that Securus
and ViaPath failed to meet their burden of justifying the alternative
WACCs they propose and that the most reasonable approach for factoring
the WACC into our lower bounds is to apply the default WACC figure of
9.75% for both providers. This default 9.75% WACC is equal to the
Commission's authorized rate of return for local exchange carrier
services subject to rate-of-return on rate base regulation, which
reflects comprehensive analyses of capital structures and the costs of
debt and equity, and is designed to compensate these carriers for their
cost of capital.
204. Finally, we adjust Securus's reported video cost data downward
in order to address significant and unresolvable, on the record before
us, issues with those data. Unadjusted, Securus's reported video cost
data stand apart from those reported by the rest of the industry. For
example, Securus reports average video IPCS costs per minute that
exceed the average of the rest of the industry by anywhere from 100% to
over 250%, depending on the facility tier. Across all facilities,
Securus's reported per-minute video IPCS costs are over four times the
average of all other providers: an anomalous result, given that we
would expect Securus--as one of the two largest providers in the IPCS
market--to benefit from economies of scale and scope. Indeed, Securus's
reported cost data for audio IPCS reflect such economies of scale--with
substantially lower costs per minute at each tier than the industry
average--which only raises further concerns with the reliability of its
reported video IPCS costs. This situation is analogous to the situation
the Commission confronted in 2021; as the Commission then concluded
with respect to ViaPath, Securus ``should be better enabled to spread
its fixed costs over a relatively large portfolio of contracts relative
to other providers,'' but ``[i]nstead, taking [its] reported costs at
face value would imply that it does not achieve economies of scale.''
Indeed, Securus's reported video IPCS costs are even more out of
proportion than ViaPath's reported costs examined in the 2021 ICS
Order. This conclusion is strengthened by comparing Securus's and
ViaPath's reported costs to their respective minutes of use. Instead,
we find that Securus's reported video IPCS data likely reflect
substantial initial investment in fixed assets that, while presumably
proportionate to the number of video IPCS minutes over which this
investment may eventually be spread, is disproportionate to the number
of video IPCS minutes Securus provided in 2022, the year covered by the
2023 Mandatory Data Collection. Incorporating Securus's video cost data
as reported would therefore inaccurately skew the industry's mean above
what it is likely to be as demand grows significantly over time. At
base, we find that Securus's per-minute video IPCS costs are simply
non-representative for the industry at large. We disagree that it is
appropriate to set rates for the IPCS industry based on per-minute cost
data so heavily skewed by one provider's outsized investment in upfront
costs for a nascent service offering; to do so would lead to recovery
in excess of long run average costs, failing to meet our obligations
for just and reasonable rates.
205. We conclude that the best way to address this anomaly is to
follow an approach similar to that adopted in the 2021 ICS Order, and
adjust Securus's video expenses to align more closely with their
competitors. Specifically, we set Securus's video IPCS cost per minute
equal to the weighted average for all other providers and estimate
Securus's new annual total expense for video. We then calculate the
percentage reduction in Securus's annual total expenses as a result of
this adjustment, and reduce the cost per-minute data reported for each
facility at which Securus provides video IPCS by the same percentage,
in order to retain Securus's relative allocations of video expenses. We
describe this method in greater detail and show its application to
Securus's data in a technical appendix. In the 2021 ICS Order, the
Commission applied the k-nearest neighbor method to determine
appropriate substitutes for ViaPath's reported cost data. This approach
reasonably preserves the non-cost information that Securus reported for
the facilities it serves (e.g., average daily population, facility
type, and total video IPCS minutes of use), while reducing its
anomalous reported cost data to fit the industry norm. We also
considered removing all of Securus's data from our lower bound
calculations; however, we
[[Page 77281]]
find this approach too sweeping because it would exclude all of
Securus's video cost data from our analysis. Given the developing
nature of the video IPCS market, and the role which Securus plays
within it, excluding its data would create an incomplete picture of the
video IPCS industry. However, we recognize that this adjustment may
still overestimate Securus's costs per minute, particularly given
certain attributes of the nascent market for video IPCS. These flaws in
providers' video IPCS cost data (both industry-wide and for Securus in
particular), as well as evidence suggesting that this market has
significant room for future growth, confirm that it is appropriate to
adopt interim video rate caps to effectively account for these
conditions. Conversely, the fact that we do not implement any
adjustments specific to any provider's reported audio IPCS costs
further reflects our confidence in our approach to audio IPCS and our
incrementally greater confidence in the underlying data, such that we
do not apply the ``interim'' descriptor to the rate caps that we adopt
for audio IPCS. In particular, the more established marketplace for
audio IPCS, coupled with our experience with audio IPCS data analysis
in the past, gives us sufficient confidence that our overall rate-
setting approach will appropriately account for the remaining
limitations in those data sufficient to justify rate caps that will
apply indefinitely. Although our audio IPCS rate caps are in that sense
``permanent'' rate caps, they naturally remain subject to reevaluation
if warranted in the future based on new developments or new
information.
206. Following the aforementioned steps, we calculate the lower
bounds for audio and video IPCS rate caps for each tier as follows:
Prisons: $0.049 per minute for audio communications and
$0.122 per minute for video communications;
Large Jails: $0.047 per minute for audio communications
and $0.087 per minute for video communications;
Medium Jails: $0.061 per minute for audio communications
and $0.102 per minute for video communications;
Small Jails: $0.080 per minute for audio communications
and $0.126 per minute for video communications; and
Very Small Jails: $0.109 per minute for audio
communications and $0.214 per minute for video communications.
b. Determining Permanent Rate Caps for Audio IPCS and Interim Rate Caps
for Video IPCS
207. Based on our analysis of the available information, we find
that the following rate caps within the zones of reasonableness for
each tier of facilities will provide just and reasonable rates while
ensuring fair compensation:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Audio (per minute) Video (per minute)
-----------------------------------------------------------------------------------------------
Tier (ADP) Audio rate Interim video
Lower bound caps Upper bound Lower bound rate caps Upper bound
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prisons (any ADP)....................................... $0.049 $0.06 $0.107 $0.122 $0.16 $0.326
Large Jails (1,000+).................................... 0.047 0.06 0.098 0.087 0.11 0.223
Med. Jails (350 to 999)................................. 0.061 0.07 0.110 0.102 0.12 0.216
Small Jails (100 to 349)................................ 0.080 0.09 0.121 0.126 0.14 0.208
Very Small Jails (0 to 99).............................. 0.109 0.12 0.151 0.214 0.25 0.288
--------------------------------------------------------------------------------------------------------------------------------------------------------
208. We settle on these rate caps through our examination of the
record, our analyses of the available data, and on the basis of our
extensive regulatory experience in this market. As discussed above, the
Commission has been engaged in an ongoing process of examining and
regulating various aspects of the IPCS market for over a decade, in the
course of which the Commission has conducted several notice and comment
cycles and supporting data collections (and analyses of the data
produced therefor).
209. Lower Bounds as an Accurate Metric for Used and Useful Costs.
We begin by considering the midpoint in each of the zones of
reasonableness, and whether the record and evidence suggest the
appropriate cap lies above or below those midpoints. On balance, we
find that just and reasonable rates are likely below the midpoint of
each tier for both audio and video IPCS. As discussed above, we find
that only those categories of safety and security costs included in the
lower bounds generally are truly used and useful in the provision of
IPCS. Setting rate caps at the midpoint, which would give equal weight
to both upper and lower bounds would risk incorporating costs that we
find are ultimately highly unlikely to benefit the ratepayer and,
therefore, produce rates that are not ``just and reasonable.'' This
risk is nontrivial: the adjustment made for safety and security costs
accounts for 84% of the overall reduction in audio costs and 50% of the
overall reduction in video costs between the upper and lower bounds,
such that even a minor increase above our midpoint is likely to
incorporate a significant portion of costs we find are properly
excluded from the rate caps. The record suggests that some providers
may have had difficulty isolating and properly allocating their safety
and security expenses, a difficulty which would increase reported IPCS
costs where providers were unable to report these costs separately.
Consequently, we find that the lower bounds operate as a more accurate
reference point for providers' used and useful costs. As discussed
further below, we recognize that, given the limitations inherent in the
2023 Mandatory Data Collection and providers' responses to the data
collection, our estimate of providers' safety and security costs may
not incorporate all costs that are used and useful in providing IPCS.
While we find that this warrants setting rate caps marginally above the
lower bounds, it does not fundamentally change our conclusion here. The
substantive evidence in support of the other adjustments we make in
setting our lower bounds warrants a similar conclusion: that we must
set rate caps well below the midpoint if we are to obtain an accurate
estimate of those costs that are used and useful in providing IPCS.
210. Unaccounted Factors Which Support Choosing Lower Rate Caps.
Our calculation of the lower bound left several other factors
unaccounted for, which collectively reinforce our decision to set caps
below the midpoints. While we were unable to precisely quantify the
effect of these factors upon reported industry costs, the factors
nevertheless indicate that providers' reported costs are likely
inflated. At the outset, we reiterate that total industry reported
costs exceeded total industry revenues by $219 million. Without
context, this might indicate that the IPCS industry at large is
unprofitable, and suggests that rational
[[Page 77282]]
firms might exit the market, results inconsistent with the fact that
there is no evidence that any provider is not an ongoing viable
operation. This is also inconsistent with the lack of competition and
competitive pressures that we have documented above. While some of the
observed cost-revenue gap for the industry can be explained by the
nascent state of the video IPCS marketplace as providers continue to
develop and deploy video IPCS, investing heavily in fixed assets needed
to provide those services, this does not explain the gulf, which
strongly suggests that costs are overstated. As discussed elsewhere,
the high per-minute video costs attributable to nascency do not reflect
the efficient costs of the industry in a steady-state.
211. There are also several factors that we find are likely to
decrease providers' costs per minute going forward, suggesting that
their reported costs tend to overestimate future costs. As the
Commission has previously observed, ``[w]hen prices fall, quantity
demanded increases.'' NSA points out that the increase in minutes of
use will also result in an increase in ``associated safety and security
costs.'' Our rate cap structure accounts for this demand-driven basis
of safety and security costs by basing the recovery of those costs that
we find used and useful in the provision of IPCS on relative demand,
i.e., via the incorporation of such costs into the per-minute rate
caps. We find that the increase in communications generated by the
reductions in price which our rate caps will achieve should reduce
providers' average costs, other things being equal. And incorporation
of ancillary service charges into our rate caps (which, as noted above,
should reduce overall prices) will only amplify this effect. This
effect should be further augmented to the extent that the growth in
market-wide minutes of use from 2021 to 2022 reflects an independent
trend of increased demand, unrelated to the impact of the decrease in
rates resulting from the 2021 ICS Order. Similarly, video IPCS, as a
service, is still in its nascent stages, and it may be that the
reported figures overstate costs (as providers, in addition to Securus,
make large capital investments that will be depreciated over time) and
understate demand compared to what could be expected in a more mature
market. We expect that, as the video IPCS market approaches a more
stable equilibrium, cost per minute will decline. The record suggests
that the hardware used by providers in deploying video IPCS (including
both tablets and network infrastructure) may also be used to provide,
or improve the service for, audio IPCS. Thus, as providers continue to
invest in capital as part of the expansion of their video IPCS
offerings, these investments will cross-subsidize costs for audio IPCS,
reducing the net costs of providing IPCS.
212. Several elements of providers' responses to the 2023 Mandatory
Data Collection also indicate that providers accounted for costs in a
way that likely overestimated the costs attributable to IPCS and
ancillary services. For example, several providers recognize
substantial amounts of goodwill. The size of these amounts, whether
these amounts are amortized or written down upon being tested for
impairment, and how these amounts are allocated can significantly
impact reported IPCS costs. Goodwill represents the difference between
the purchase price of a company and the company's fair market value at
the time of purchase. Under the Generally Accepted Accounting
Principles (GAAP), until 2021, private companies were required to elect
either to amortize goodwill on a straight-line basis over a period of
up to ten years, or to conduct annual impairment testing. The threshold
step of the impairment testing process is a qualitative assessment of
whether the goodwill carried on a company's balance sheet likely
exceeds its fair market value, which takes into account several factors
including macroeconomic developments and regulatory changes. Since the
goodwill reported by these providers was first recorded on their
balance sheets, several events have transpired that would seem likely
to have triggered the impairment testing process, potentially leading
to a significant write down of these amounts: most notably, the Covid-
19 pandemic, several orders issued in this proceeding and by certain
state Commissions, and the passage of the Martha Wright-Reed Act. We
question whether providers' goodwill figures are overstated as none
recorded any significant write down of the goodwill on its balance
sheet notwithstanding these events, and thus we find their reported
goodwill figures unreliable. These providers left their allocations of
goodwill largely unexplained, which makes it difficult to assess to
what extent it is properly attributable to IPCS. The instructions for
the 2023 Mandatory Data Collection require providers to comply with
GAAP in calculating their goodwill figures attributable to IPCS.
However, GAAP does not necessarily entail distinguishing between
goodwill attributable to IPCS and IPCS-related services versus
nonregulated services. A similar principle applies to providers'
incentives to over-allocate costs that support both video IPCS and
nonregulated services to IPCS, particularly where the Commission has no
effective means of auditing these allocations. Providers often offer
IPCS using the same platform as nonregulated services (and thus the
platform costs are shared between these services). The instructions to
the 2023 Mandatory Data Collection, despite a high level of specificity
left providers with substantial leeway in choosing precisely how to
allocate costs that support both video IPCS and nonregulated services
(e.g., tablet and app development expenses) between video IPCS (and
ancillary services) and nonregulated services. For example, providers'
Word template responses illustrate that they may have failed to
disaggregate platform development costs, reporting the full costs of
development as a video IPCS expense even where the platform provides
non-IPCS services. Such expenses can be significant, and misallocating
them could readily skew costs toward IPCS. Each of these factors tend
to inflate reported costs--and therefore suggests our rate caps should
be lowered--for reasons entirely unrelated to the costs of service.
213. Factors Supporting Rates Above the Lower Bounds. We also
recognize a series of factors which support setting the rate caps above
our lower bound. As a general matter, we find it appropriate to set
rates somewhat above the lower bounds to minimize reliance on the
imperfect data on which we base our rate caps, which will better ensure
that providers will have the opportunity to recover the costs of
providing IPCS, consistent with both the equitable considerations
underlying just and reasonable rates and the fair compensation mandate
of section 276(b)(1)(A). Setting rate caps above the lower bounds will
help to account for the possibility that the adjustments we applied to
providers' reported costs to obtain the lower bound estimates were too
aggressive, to account for the possibility that aspects of our
evaluation of used and useful costs to provide IPCS may be inaccurate
to some degree, to account for any inflation not offset by productivity
growth, and to ensure that providers will be better able to recover
their costs of providing TRS.
214. We also recognize several specific factors that guide us to
select rate caps above our lower bounds. In particular, we find that
the data submitted for the costs of providing safety and security
measures are imperfect and imprecise; we recognize
[[Page 77283]]
these flaws are likely attributable, at least in part, to the
inevitable imprecision of the allocations required to comply with the
2023 Mandatory Data Collection. For example, providers generally
declined to provide further detail on the costs attributable to each
individual function. The questions regarding safety and security costs
in the 2023 Mandatory Data Collection necessarily reflected some
imprecision for at least two reasons. First, the Commission was
operating with limited information on this subject, given the limited
detail obtained on this subject in prior data collections. Second, the
Commission took efforts to avoid imposing an outsize burden on
providers in reporting specific details of their safety and security
costs, particularly in light of the comment record suggesting that
providers have not historically accounted for the costs of their safety
and security measures in particularly discrete detail. Due to the
aggregation of the submitted data within each category, we are unable
to meaningfully identify the specific costs for the various functions
within each safety and security category enumerated in the data
collection. Consequently, we recognize the possibility that providers
may have misallocated the costs of providing certain component
functions, causing those costs to be improperly excluded from the
calculation of the lower bounds. For example, NCIC {[REDACTED]{time} .
Material that is set off by double brackets {[ ]{time} is subject to a
request for confidential treatment and is redacted from the public
version of this document. Given the limitations in the data provided,
we are unable to ascertain costs for any of these individual services.
The costs of any such services, to the extent they exist, would have
been improperly excluded from the calculation of the lower bounds.
Similarly, we recognize that facilities may incur certain costs that
are used and useful in the provision of IPCS but the lack of reliable
data in the record makes it impossible to quantify those costs with any
degree of precision. Finally, although we exclude one-time
implementation costs which are inappropriate for inclusion in permanent
rate caps, providers' ongoing costs of implementing the Report and
Order may, on balance, exceed their ongoing savings from, for example,
not having to process site commission payments. We thus take the
conservative approach of setting our rates somewhat above the lower
bounds to account for facilities' used and useful costs. Additionally,
as noted above, the record and the data make clear that video IPCS is
still a developing market. Given this context, we find it appropriate
to set interim rates above the lower bounds for video IPCS in
particular, to afford providers flexibility in responding to the cost
and demand uncertainties inherent to such markets. As discussed above,
we recognize that the developing nature of the video IPCS market also
suggests that providers' reported costs per minute may be higher than
similar figures would be in a more mature market. We account for both
of these implications of the nascent market in selecting our rate caps.
215. Collectively, these reasons counsel in favor of setting our
rate caps higher than the lower bounds. But we find that these factors
are generally outweighed by countervailing factors, including the
providers' incentive to overstate their costs and the lack of evidence
that the upper bounds accurately capture providers' actual costs of
providing IPCS. Accordingly, we find it appropriate to set our rate
caps at levels nearer to, but still above, the lower bounds, to more
accurately account for all of these factors. We reiterate, however,
that even these lower bounds largely reflect providers' costs as
reported. The rate caps we set reflect our reasonable balancing of
these considerations.
216. Commercial Viability and Cost Recovery. Applying these rate
caps to each provider's reported minutes of use allows us to calculate
their potential revenues under these caps. In making this
determination, we refer to providers' reported costs, net of those
categories of costs that we identify in this Order as unrelated to the
provision of IPCS: i.e., site commissions, and the five excluded
categories of safety and security costs discussed above. The fact that
several states and smaller jurisdictions have adopted rate caps equal
to or lower than those we adopt today--with no evidence in the record
indicating that these rates have made the provision of IPCS
unprofitable--lends further support to our findings as to providers'
commercial viability. Potential revenues for eight out of 12 IPCS
providers exceed their total reported costs when excluding site
commissions and safety and security categories that generally are not
used and useful in the provision of IPCS. Because our estimates of
providers' average costs are likely overstated, we find it unlikely
that any provider will be unable to recover its individual average
costs of providing audio and video IPCS. In the event providers are
unable to recover their used and useful IPCS costs, providers remain
free to seek a waiver of our rules, a process we revise herein. These
eight firms represent over 90 percent of revenue, 96 percent of ADP,
and 96 percent of billed and unbilled minutes in the dataset. An
alternate method to estimate potential revenue under the rate caps sums
reported IPCS and ancillary services for audio and video by facility,
reducing these values, if applicable to match potential revenues under
the rate caps. Under this method, the projected revenues of the same 8
of 12 providers exceed their costs. In the 2021 ICS Order, the
Commission conducted a similar analysis at the facility-specific level.
However, in light of the Martha Wright-Reed Act's amendments to section
276, and its authorization to use both ``industry-wide average costs''
and the ``average costs of service of a communications service
provider'' in setting rates, we find it more appropriate to conduct
this analysis across each provider's full portfolio of facilities
served and, more generally, across the full IPCS industry.
217. We reiterate that our rate caps likely overestimate providers'
actual costs of providing IPCS, for the reasons set forth above.
Additionally, our rate caps, by lowering prices, will likely increase
communications volumes (and so decrease average costs per minute), as
will providers' continuing expansion of and investment into their video
IPCS services. Taken together, we find that these reasons demonstrate
that this number is conservative, and that we likely underestimate the
extent to which providers will be able to recover their costs under our
rate caps. We anticipate that, over time, revenues for additional
providers will exceed their total actual costs even beyond those
already identified in our analysis above. Our analysis of the
underlying facility-level data corroborates this conclusion.
{[REDACTED]{time} of facilities report per-minute revenues net of site
commissions under our rate caps, meaning that providers will be able to
recover the same per-minute revenues at these facilities under our rate
caps. Assuming that these facilities are generally profitable (as
profit-maximizing firms are unlikely to bid for unprofitable
contracts), our rate caps will therefore not undermine providers'
profitability for these facilities. However, this does not mean that
the remaining facilities would not recover their costs under our rate
caps, as detailed further in a technical appendix (for example, per-
minute revenues net of site commissions likely exceed providers' per-
minute costs net of site commissions).
218. Finally, we find that our rate caps do not threaten providers'
financial
[[Page 77284]]
integrity such that they could be considered confiscatory, even in
those anomalous circumstances where a provider cannot recover its costs
under our rate caps. Further, we find the fact that providers negotiate
for per-minute rates lower than our choice of caps to support our
conclusion that these rate caps do not threaten providers' financial
integrity. The rate caps are based on data supplied by providers and
correctional facilities. As the Commission has previously observed,
neither of these parties ``have incentives to understate their costs in
the context of a rate proceeding, lest the Commission adopts rates that
are below cost.'' Rather, providers had ``every incentive to represent
their [IPCS] costs fully, and possibly, in some instances, even to
overstate these costs.'' Further, our rate caps explicitly account for
all costs of providing IPCS identified in the record, including costs
incurred by correctional facilities, costs of necessary safety and
security measures, and cost variations attributable to facility size
and type. Additionally, as the Commission has repeatedly observed, the
offering of IPCS ``is voluntary on the part of the [IPCS] providers,
who are in the best position to decide whether to bid to offer service
subject to the contours of the request for proposal''; IPCS providers
have no obligation ``to submit bids or to do so at rates that would be
insufficient to meet the costs of serving the facility or that result
in unfair compensation.''
c. Consistency With Statutory Requirements
219. Section 276(b)(1)(A) of the Communications Act, as amended by
the Martha Wright-Reed Act, requires the Commission to ``establish a
compensation plan to ensure that all payphone service providers are
fairly compensated and all rates and charges are just and reasonable
for completed intrastate and interstate communications.'' We conclude
that the rate caps and waiver process we adopt in the Report and Order
fully satisfy this mandate. We find that rates will be just and
reasonable if they afford providers an opportunity to recover their
``prudently incurred investments and expenses that are `used and
useful' in the provision of the regulated service for which rates are
being set,'' and upon reflection of the amendments to section 276, we
find that a provider will be fairly compensated if it is afforded an
opportunity to recover the industry average of those costs on a
company-wide basis. Securus argues that the Martha Wright-Reed Act
requires that each provider be able to recover its average costs. We
conclude the Act does not require such particularized analysis and
reiterate that rate caps based on costs evaluated on an aggregated
basis generally will satisfy the requirement that all payphone service
providers be fairly compensated. And as the Public Interest Parties
explain, ``for a service provider to be `fairly compensated' for its
services would signify that it is paid an amount that reasonably
reflects the value of the services that it provides. . . . The standard
does not require every carrier to be profitable, but rather for rates
to be set at a level where carriers receive compensation that would
allow a well-run and prudent IPCS carrier to realize a fair rate of
return.'' Securus argues that our rate caps fail to ensure that ``all''
providers are fairly compensated, threatening the competitiveness of
the IPCS marketplace, because our industry average-based rate caps do
not account for costs on a provider-by-provider basis. We disagree.
Securus interprets the term ``all payphone service providers'' in
section 276(b)(1)(A) to mean ``each payphone service provider,'' and
ignores the fact that fair compensation does not require the Commission
to adopt rate caps which allow for the recovery of inefficiently
incurred costs.
220. Across the industry, these rate caps will allow providers to
generate sufficient revenue from the audio and video communications
they provide (1) to recover the actual, direct costs of each
communication, and (2) to make a reasonable contribution to their
indirect costs related to IPCS. Because they reflect what we have
determined are the industry average costs incurred to provide IPCS,
falling ``squarely within the zones of reasonableness,'' the rate caps
we adopt today meet this standard. Indeed, by setting our rate caps
above our lower bounds, ``[o]ur approach incorporates assumptions and
actions that lean toward over-recovery of costs.'' At the same time,
these rate caps reflect our best estimate of providers' actual costs of
providing IPCS, therefore limiting the recoverable costs to those costs
``that directly benefit the ratepayer'' and excluding ``any imprudent,
fraudulent, or extravagant outlays.'' Direct Action for Rights and
Equality, et al., argue that our caps ``remain far from `just and
reasonable' for indigent individuals and communities,'' and so
``encourage the Commission to propose even lower caps--the lowest
possible caps for voice and video communications. However, these
commenters fail to identify what rate caps would be more appropriate,
or how such rate caps would both be ``just and reasonable'' and ensure
that providers are ``fairly compensated.''
221. The rate caps we adopt in the Report and Order also meet the
separate rate-making evaluation requirements set out by the Martha
Wright-Reed Act. The Act requires that we ``shall consider costs
associated with any safety and security measures necessary to provide''
IPCS, as well as the ``differences in costs'' of providing IPCS ``by
small, medium, or large facilities or other characteristics.'' We
disagree that ``small facility cost[s]'' are not adequately captured by
our use of industry averages. Because we set our caps on the basis of
several tiers, costs for facilities of various sizes are captured at
the respective tier. WCB and OEA directed providers to explain the
nature of their safety and security costs in their responses to the
2023 Mandatory Data Collection, and we sought comment on these issues
in 2023. Having examined the data and the record on these issues, we
have incorporated into our rate caps the costs of those safety and
security measures we find are, in fact, used and useful in the
provision of IPCS, as well as the most critical factors driving the
differences in providers' costs, including facility size. Our analysis
therefore takes into account all of the factors identified in the
record and the data that ``account[ ] for cost discrepancies among
providers,'' and addresses certain commenters' concerns that our use of
average costs ``must take into account size and type differences.'' We
find that any cost variation that is not accounted for by the tiers we
adopt (and not reflective of ``imprudent, fraudulent, or extravagant
outlays'' by individual providers) is accommodated by our use of a rate
cap structure. Accordingly, our rate caps meet these requirements
imposed by section 3 of the Act. The Act also requires that we
``promulgate any regulations necessary'' to implement the Act ``[n]ot
earlier than 18 months and not later than 24 months after the date of
[its] enactment.'' The Act was enacted on January 5, 2023, requiring
the adoption of implementing regulations between July 5, 2024 and
January 5, 2025.
222. Our regulatory approach also includes measures to ensure that
providers are not forced to bear unrecoverable costs, through our
actions to prohibit all monetary and in-kind site commissions at all
facilities. Thus, outside the context of reimbursements paid to
correctional facilities for costs or expenses that we find used and
useful in the provision of IPCS--and for which we allow recovery in
IPCS rates--providers will not be permitted or
[[Page 77285]]
required to make monetary payments or in-kind contributions to
correctional facilities that arguably could represent unrecoverable
costs at odds with section 276(b)(1)(A)'s fair compensation mandate. To
the extent that providers voluntarily elect to incur other costs or
expenses that are not used and useful in the provision of IPCS and
subject to recovery under the rate caps we adopt (or the associated
waiver process), that voluntary assumption of costs or expenses does
not give rise to a burden on the Commission to provide for recovery
under the fair compensation mandate of section 276(b)(1)(A). In the
event that a provider is not afforded the opportunity to recover its
costs for providing IPCS under our caps, that provider may seek a
waiver of those caps in accordance with our revised waiver procedures
adopted in the Report and Order. The combination of our regulatory
actions here, including our rate caps and our revised waiver process,
consequently will afford all providers the opportunity to be fairly
compensated at just and reasonable rates for providing IPCS consistent
with section 276(b)(1)(A). Our approach of setting rate caps that we
find reasonable based on general conclusions from the industry as a
whole, while leaving providers the opportunity to make provider-
specific showing that additional recovery should be permitted, thus
does not ``preclude[ ] a[ ] `provider-by-provider' assessment'' as some
contend. The regulatory approach we employ also is consistent with
regulatory approaches the Commission has employed in setting just and
reasonable rates in other contexts in the past.
5. Preemption
223. Consistent with section 2(b) of the Communications Act, as
amended by the Martha Wright-Reed Act, and section 276(c) of the
Communications Act, we preempt state and local laws and regulations
that require IPCS rates that exceed the rate caps we adopt today. We
similarly preempt state and local laws and regulations requiring
separate ancillary service fees. We decline, however, to preempt state
and local laws and regulations requiring IPCS rates below the rate caps
we adopt today.
224. It is well established that ``a federal agency may pre-empt
state law only when and if it is acting within the scope of its
congressionally delegated authority.'' Section 276(b)(1)(A) always has
been clear that the Commission has authority to establish compensation
plans for ``intrastate and interstate'' payphone calls, and as
explained above, the Martha Wright-Reed Act amended that provision to
clearly establish the Commission's authority to ensure just and
reasonable rates for both intrastate and interstate communications, as
newly expanded under section 276(d). Above and beyond that, the Martha
Wright-Reed Act added section 276 to the express exceptions to the
general preservation of state authority in section 2(b) of the Act.
Commenters uniformly agree that this demonstrates Congress's intent to
grant the Commission authority to ensure just and reasonable rates for
all intrastate IPCS, firmly anchoring the Commission's authority over
such services. Furthermore, while the Martha Wright-Reed Act decisively
expanded the scope of the Commission's authority over IPCS, it retained
the express preemption provision in section 276(c), which provides 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.''
225. We find that state and local laws and regulations that require
IPCS rates that exceed the rate caps we adopt today or that require
separate ancillary service charges conflict with the Commission's
regulations adopted in the Report and Order to ensure just and
reasonable rates and charges for intrastate and interstate IPCS and
fair compensation for IPCS providers under section 276(b)(1)(A).
Pursuant to section 276(b)(1)(A), as amended by the Martha Wright-Reed
Act, the compensation plan the Commission adopts today includes IPCS
rate caps carefully calibrated to ensure that all payphone service
providers are fairly compensated and all rates and charges are just and
reasonable for all IPCS, including intrastate. These rate caps are
ceilings limiting what IPCS providers may charge for intrastate and
interstate audio and video communications. To the extent state and
local laws or regulations require IPCS rates that exceed those
ceilings, such state and local laws or regulations would, by
definition, lead to unjust and unreasonable IPCS rates and charges. In
connection with ancillary service charges, as noted above, our rate
caps incorporate the costs of providing these services. Thus, to the
extent state or local laws and regulations require separate ancillary
service charges, such charges would also be unjust and unreasonable as
they would exceed the Commission's IPCS rate caps.
226. Commenters broadly agree that state and local requirements
mandating IPCS rates and charges that are higher than the rate caps we
adopt today are subject to preemption. No commenter argues that the
Commission lacks authority to preempt such state and local requirements
or should not do so. As noted above, the Communications Act provides
the Commission the necessary authority to adopt regulations ensuring
just and reasonable rates and charges for intrastate and interstate
IPCS, which requires preemption of state and local laws and regulations
requiring IPCS rates that exceed the Commission's adopted rate caps or
that require separate ancillary service charges.
227. Preemption of State Requirements. When a federal law contains
an express preemption clause, the courts ``focus on the plain wording
of the clause, which necessarily contains the best evidence of
Congress' preemptive intent.'' The Supreme Court has explained that
where a ``statute `contains an express pre-emption clause,' we do not
invoke any presumption against pre-emption but instead `focus on the
plain wording of the clause, which necessarily contains the best
evidence of Congress' pre-emptive intent.' '' Independently, even
assuming arguendo that any preemption analysis should begin ``with the
assumption that the historic police powers of the States [are] not to
be superseded by the Federal Act unless that was the clear and manifest
purpose of Congress''--particularly where ``Congress has `legislated .
. . in a field which the States have traditionally occupied' ''--it
nonetheless remains the case that ``Congress' intent, of course,
primarily is discerned from the language of the pre-emption statute and
the `statutory framework' surrounding it.''
228. Here, the express preemption clause in section 276(c) applies
to ``State requirements'' to the extent they are ``inconsistent with
the Commission's regulations.'' ViaPath argues the Commission should
``preempt any existing state rates that are higher than the
Commission's rates as well as all future state regulation of voice
IPCS.'' As stated herein, the Report and Order preempts state
regulations which mandate prices above the caps we set today. As also
discussed, we see no rationale for disturbing state regulations which
require pricing below our caps, nor has ViaPath offered any, and we
decline to preempt such regulations at this time. ViaPath also suggests
that the Commission should preempt state regulation of all video IPCS
because it has ``historically been treated under the law as inherently
interstate.'' We are unpersuaded. Our exercise of our preemption
authority does not require
[[Page 77286]]
such a categorical approach. The term ``state requirements'' in express
preemption provisions has been interpreted by the Supreme Court more
broadly than terms like ``laws or regulations.'' For example, the Court
has concluded that ``[a]bsent other indication, reference to a State's
`requirements' in an express preemption provision includes its common-
law duties.'' By contrast, the Court has found that references to state
``laws or regulations'' preempt only ``positive enactments.''
Consistent with this precedent, we find that the reference to ``state
requirements'' in section 276(c) is broad enough to reach state laws
and regulations requiring IPCS rates that exceed the rate caps we adopt
today.
229. The surrounding statutory framework also demonstrates that
preemption of laws and regulations requiring IPCS rates that exceed the
rate caps we adopt today is authorized by section 276(c). As noted
above, section 276(b)(1)(A) always has been clear that the Commission
has authority to establish compensation plans for ``intrastate and
interstate'' payphone calls, and as explained above, the Martha Wright-
Reed Act amended that provision to clearly establish the Commission's
authority to ensure just and reasonable rates for all communications
now encompassed by section 276(d). In amending section 276, Congress
left the express preemption provision in section 276(c) unaltered,
revealing Congress' understanding that Commission regulations
implementing the full scope of amended section 276(b)(1)(A) would be
subject to that express preemption provision.
230. This point was further emphasized by the amendment of section
2(b) of the Communications Act to expressly exempt section 276 from the
preservation of state authority over intrastate communications under
that provision. In the Martha Wright-Reed Act, Congress expressly
considered the potential effect of that statute on other laws, and only
disclaimed the intent to ``modify or affect any'' state or local law
``to require telephone service or advanced communications services at a
State or local prison, jail, or detention facility or prohibit the
implementation of any safety and security measures related to such
services at such facilities.'' That narrow express preservation of
existing law is not implicated by our preemption here. The statutory
context provided by section 276 as a whole, coupled with the Martha
Wright-Reed Act, thus reinforces our understanding of the scope of
preemption encompassed by section 276(c).
231. Relatedly, we conclude that preemption is consistent with
section 4 of the Martha Wright-Reed Act, which states that nothing in
that Act ``shall be construed to modify or affect any Federal, State,
or local law to require telephone service or advanced communications
services at a State or local prison, jail, or detention facility or
prohibit the implementation of any safety and security measures related
to such services at such facilities.'' We preempt only those state laws
and regulations that require IPCS rates that exceed the rate caps we
adopt today or that require separate ancillary service charges. To the
extent federal, state, or local laws or regulations require IPCS to be
provided to incarcerated people at state or local correctional
facilities, such laws and regulations are not preempted by our actions
here. Similarly, we do not prohibit the implementation of any safety
and security measures related to IPCS at any state or local
correctional facility. As we explain above, section 4 of the Martha
Wright-Reed Act is ``not intended to interfere with any correctional
official's decision on whether to implement any type of safety and
security measure that the official desires in conjunction with audio or
video communications services.'' Consistent with that interpretation,
here we preempt state laws and regulations requiring IPCS rate caps
that exceed the Commission's adopted caps or that require separate
ancillary service charges, a pre-emption that we conclude is necessary
to achieve the statutory requirements of section 276(b)(1)(A) to ensure
just and reasonable rates and charges for IPCS consumers and fair
compensation for providers. Correctional officials remain free to
implement desired safety and security measures.
232. Preemption of Local Requirements. Our analysis of our
preemptive authority is somewhat different when it comes to local
requirements that may require IPCS rates and charges that exceed the
Commission's rate caps because section 276(c) does not expressly
reference ``local'' laws or regulations. Nonetheless, we conclude that
principles of conflict preemption allow us to also preempt such local
laws and regulations. As an initial matter, we note that ``for the
purposes of the Supremacy Clause, the constitutionality of local
ordinances is analyzed in the same way as that of statewide laws.''
Thus, relevant precedent concerning state law is equally applicable to
local law.
233. As a threshold matter, we find that local laws and regulations
that require IPCS rates and charges that exceed the Commission's IPCS
rate caps or that require separate ancillary service charges stand as
an obstacle to our regulation of IPCS. We explained above the conflict
that occurs as a result of state requirements, and that conclusion is
not altered if the requirements originate instead at the local level.
Consequently, under section 276(b)(1)(A) coupled with standard conflict
preemption principles we preempt local laws and regulations that
require IPCS rates and charges exceeding the Commission's caps or that
require separate ancillary service charges.
234. Our conflict preemption determination is bolstered by the
enactment of the Martha Wright-Reed Act, which modified the
Communications Act in a manner that we see as intended to establish a
uniform system of federal regulation for all IPCS under section
276(b)(1)(A). As explained above, the Martha Wright-Reed Act was
enacted against the regulatory backdrop of--and in response to--the GTL
v. FCC decision, where the D.C. Circuit found that the Commission had
unreasonably relied on the ``just and reasonable'' standard of section
201(b) when implementing the differently-worded language of section
276. Insofar as that left the Commission to rely on section 201(b) to
ensure IPCS rates and charges were not too high, it generally precluded
the Commission from addressing excessive intrastate IPCS rates. The
Martha Wright-Reed Act's amendment of section 276(b)(1)(A) gave the
Commission clear authority to ensure just and reasonable rates under
that provision, which always has encompassed both intrastate and
interstate services. Given the legal and regulatory backdrop, that
persuades us that Congress envisioned a uniform system of federal
regulation as far as IPCS rates and charges are concerned.
235. Scope of Preemption. At this time, our preemption extends only
to those state and local laws and regulations that require IPCS rates
and charges exceeding the Commission's rate caps or that require
separate ancillary service charges. The record is mixed as to whether
the Commission should or must also preempt state and local laws or
regulations that set IPCS rates and charges that are below the
Commission's caps. For example, Pay Tel and Securus assert that the
Commission must preempt these lower rates. They argue that the
Commission must adopt rates for intrastate and interstate IPCS that
ensure fair compensation for IPCS providers, and state rate caps that
are below the
[[Page 77287]]
Commission's caps are necessarily ``inconsistent'' with the
Commission's regulation of IPCS since such caps would be below cost and
thus not afford fair compensation. These commenters assert that below-
cost intrastate rate caps are problematic insofar as they may require
``increases in federal rates to defray costs which are not being
recovered at the state level'' and lead to cross-subsidization between
states because ``[i]f consumers in one state pay less than the rate the
Commission has determined is necessary to fairly compensate providers .
. . consumers in other states may end up making a larger contribution
to the company's costs.'' They add that below-cost intrastate rates
``may lessen the willingness of providers to bid for facilities,
depress market participation (particularly by smaller, regional
providers), and reduce investment in new technologies'' while also
raising the ``very real possibility of confiscatory rates,''
particularly if rates are set using a zone of reasonableness approach.
We address concerns about confiscatory rates in connection with our
zone of reasonableness analysis above.
236. On the other hand, state commenters and public interest
advocates argue that the Commission is not required to preempt state
rates that are lower than the Commission's caps. The California Public
Utilities Commission explains that ``states and local governments are
in a better position to assess what a reasonable rate would be for the
provision of services in their geographic locations.'' The Public
Interest Parties assert that state and local laws that require
intrastate rates to be lower than the Commission's rate caps are not
inconsistent with the Commission's regulations ``because any intrastate
rates lower than the Commission's rate cap would not violate any
specific provision of the Communications Act and lower rates are
consistent with the underlying purpose of the MWRA.'' Both the
California Public Utilities Commission and the Public Interest Parties
explain that to the extent the Commission's rate caps act as ceilings
and not floors, the Commission should not preempt lower state rates. We
agree. State IPCS rate proceedings are designed to look at cost data
and market conditions unique to that particular state, a much smaller
geographic area and a much more disaggregated basis than the ratemaking
analysis the Commission was required to undertake on a national level
which covered the entire country. It is entirely possible that cost
data reflecting a smaller subset of the national footprint of
facilities targeted to only certain state specific facilities could
yield fair compensation for providers operating in that state at those
facilities at lower rates than reflected by the Commission's rate caps
adopted today.
237. We decline to preempt state or local laws and regulations
requiring rates lower than the caps we adopt today. As the California
Public Utilities Commission explains, the argument from Securus and Pay
Tel that lower intrastate rates is necessarily inconsistent with the
Commission's regulation of IPCS is ``question-begging'' as it ``assumes
that the FCC's regulations do not allow rates below the federal cap.''
The rate caps we adopt today establish ceilings, rather than floors
that inherently would limit potential state action. These rate caps,
which are based on provider-supplied data, appropriately balance the
need to ensure just and reasonable rates and charges for IPCS consumers
based on industry averages and fair compensation for IPCS providers.
More generally, it is well established that rates can be lawful if they
fall within a zone of reasonableness. Thus, a state's intrastate rate
cap might fall within that zone even if it is lower than the
Commission's specified rate caps.
238. We also find that state or local requirements that mandate
intrastate IPCS rates or charges below the Commission's caps are
consistent with the ``underlying purpose of the [Martha Wright-Reed
Act]'' to fundamentally reform the IPCS marketplace and eliminate, to
the greatest extent possible, decades of exorbitant rates for
communications services used and paid for by incarcerated people and
their loved ones. Finally, this approach is also consistent with the
policy the Commission established when it considered this issue in the
2021 ICS Order. In light of considerable state-level reform efforts,
the Commission decided that the ``federal requirements will operate as
ceilings'' for jurisdictionally mixed calling services.
239. Should an IPCS provider claim that a state or local
requirement leads to unfair compensation, that provider may seek
appropriate relief in the relevant state or locality or from the
Commission by submitting a petition for preemption.
240. Our approach to state or local requirements mandating lower
IPCS rates is consistent with the legal and regulatory backdrop here.
When the Commission undertook regulation of intrastate inmate calling
services rates in the 2015 ICS Order, the Commission adopted an
analogous approach to preemption--it declined requests to treat state
or local requirements mandating rates below the FCC's caps as
inherently in conflict with the Communications Act or Commission rules,
instead leaving providers to seek relief on a case-by-case basis should
they be able to demonstrate in a particular scenario that they were not
being fairly compensated. Although the D.C. Circuit in GTL subsequently
rejected the Commission's claim of statutory authority to cap
intrastate calling services rates under section 276, the Martha Wright-
Reed Act made clear the Commission's authority to ensure just and
reasonable rates for intrastate IPCS under section 276(b)(1)(A). Yet
Congress left section 276(c)'s express preemption of conflicting state
laws unchanged relative to the provision in place when the Commission
acted in 2015. Nor does the amended text of section 276(b)(1)(A)
expressly mandate the exclusivity of the Commission's implementing
rules. Thus, in acting consistent with the general approach to
preemption adopted in 2015, we are acting consistent with the
Commission's historical regulatory approach, which we see no intent by
Congress to displace through the Martha Wright-Reed Act.
241. Finally, we decline to adopt Securus's proposal that the
Commission preempt lower state rates unless a state can ``make a
showing to the Commission that IPCS costs in the state justify a lower
rate and that the lower rate satisfies the statutory standard that
providers are fairly compensated and that rates and charges are just
and reasonable.'' We also decline to pursue Securus's recommendation
that ``states should be required to adopt a waiver process.'' We see no
basis on which we could mandate that states or localities adopt such a
process and Securus offers none. Under this proposal, ``a lower state
rate cap would not take effect until the Commission first finds that
the state had met its burden of demonstrating that the lower rate
complies with the statutory standard.'' Securus's proposal would have
us begin from the premise that lower state rates and charges are
necessarily inconsistent with the Commission's regulations and preempt
them. In order to reverse this preemption decision, the onus would then
be on the state or locality to justify why its lower rates or charges
are consistent with the statutory standard in that they provide fair
compensation for providers and just and reasonable rates for consumers.
We decline to make a determination ex ante that state and local rates
and charges below our caps are inconsistent with a fair compensation
plan. As we explain above, we do not find lower state rates
[[Page 77288]]
to be inconsistent with the Commission's IPCS regulations.
6. Site Commissions
a. Introduction
242. We next comprehensively reform the Commission's treatment of
site commission payments associated with IPCS to implement the
requirements of the Martha Wright-Reed Act. Our actions today continue
to allow IPCS provider reimbursement of correctional facilities for
costs used and useful in providing IPCS while decoupling other IPCS
provider payments to correctional facilities, which constitutes what we
henceforth refer to as ``site commissions.'' We then end the practice
of paying site commissions associated with IPCS.
243. In 2021, the Commission highlighted the difficulties in
accounting for and isolating the portion of site commission payments,
if any, that may be used and useful in the provision of audio calling
services for incarcerated people. The Commission sought comment on
whether it should prohibit providers from entering into contracts
requiring the payment of site commissions and whether it should preempt
state or local laws and regulations that require such payments. The
Commission also questioned the propriety of allowing providers to
recover the costs of their site commission payments from consumers.
244. After carefully considering the record in these proceedings
and the Martha Wright-Reed Act, we find that site commission payments--
payments from IPCS providers to correctional facilities that are not
used and useful in the provision of IPCS--are fundamentally
incompatible with our mandate under section 276(b)(1)(A), as amended,
to ensure both just and reasonable IPCS rates and charges for IPCS
consumers and providers as well as fair compensation for IPCS
providers. Considering the requirements of the Martha Wright-Reed Act
and the demonstrated negative effects of site commission payments,
particularly with regard to consumer affordability, we conclude that we
must eliminate site commissions associated with IPCS.
245. Accordingly, we prohibit all IPCS providers from paying site
commissions of any kind associated with intrastate, interstate,
international, jurisdictionally mixed, and jurisdictionally
indeterminate audio and video IPCS, including all monetary and in-kind
site commissions, at all facilities. To implement this prohibition, and
consistent with the record and the Commission's proposals in 2021, we
preempt all state and local laws and regulations requiring or allowing
IPCS providers to pay site commissions associated with IPCS and
prohibit IPCS providers from entering into contracts requiring or
allowing them to pay site commissions associated with IPCS. Compliance
with our reforms associated with site commission payments will be
required by the dates specified in Section III.H below.
246. Although we eliminate site commissions associated with IPCS,
we do not deny correctional facilities the opportunity to be reimbursed
by IPCS providers for any costs the correctional facilities incur that
are used and useful in the provision of IPCS. The IPCS rate caps we
adopt today reflect, based on the record before us, all of the used and
useful costs incurred in the provision of IPCS regardless of whether
such costs are incurred by IPCS providers or correctional facilities.
Consistent with that record, the rate caps account for used and useful
costs associated with IPCS providers' provision of IPCS incurred by
correctional facilities. Therefore, we permit IPCS providers to
reimburse correctional facilities for the used and useful costs the
facilities incur to enable the provision of IPCS. We therefore find
without merit the National Sheriffs' Association's argument that
``[t]he proposals to arbitrarily disallow legitimate costs and preclude
their recovery is contrary to the Communications Act requirement to set
reasonable rates, the Commission's statutory mandate to promote access
to ICS, and court precedent.'' The Commission has identified the used
and useful costs, including a measure of facility costs for safety and
security measures, in the rate caps it adopts today. The Commission is
thus fully in accordance with ``rate-making principles that require the
allowance of legitimate costs in rates.'' We also find the National
Sheriffs' Association's argument that ``[f]acility compensation through
rates also is consistent with the Commission's precedent that costs
should be recovered from the cost causer'' to be moot given our
allowance for facility-related cost recovery in our rate caps. We are
unpersuaded by the National Sheriffs' Association's assertion that the
Commission has ``found that the calling and called party are the cost
causer and the beneficiary of calls'' such that the costs of calls
should be recovered from the ratepayers. The Commission made that cost-
causation determination in the context of certain intercarrier
compensation reforms, not with respect to IPCS, which occurs in a
fundamentally different context where the users of the service have no
choice in the provider they use--and the choice of provider can
significantly affect the cost of service. In any case, costs that are
not used and useful in the provision of IPCS are not caused by IPCS
communications, and thus neither party to such communications
reasonably can be seen as causing those costs through the use of IPCS.
To the extent a correctional facility performs a function that is used
and useful in the provision of IPCS under the standards set forth in
the Report and Order, the IPCS provider may reimburse the correctional
facility for that function's cost. As we explain above, any costs that
facilities incur to provide ``safety and security measures necessary''
for the provision of IPCS are also used and useful in the provision of
IPCS. This reimbursement therefore encompasses any costs a correctional
facility incurs in performing safety and security measure functions
that are necessary for the provision of IPCS. We emphasize, however,
that the cost recovery we permit extends only to costs that the
Commission has classified as used and useful in the Report and Order.
Costs that the Commission has not found to be used and useful in the
provision of IPCS may not be recovered from IPCS providers through
revenues under the rate caps we establish. And under no circumstances
may reimbursement result in IPCS consumers being charged more than the
rate caps we adopt today.
b. Background
(i) Site Commissions and IPCS
247. IPCS connect incarcerated people to their families, loved
ones, clergy, and counsel. But unlike communications services offered
to the general public outside of the correctional environment, IPCS
providers have monopoly power in the facilities they serve. As the
Commission has explained:
[I]ncarcerated people have no choice in the selection of their
calling services provider. The authorities responsible for prisons
or jails typically negotiate with the providers of [IPCS]. Once the
facility makes its choice--often resulting in contracts with
providers lasting several years into the future--incarcerated people
in such facilities have no means to switch to another provider, even
if the chosen provider raises rates, imposes additional fees, adopts
unreasonable terms and conditions for use of the service or offers
inferior service.
248. In many cases, correctional authorities award contracts for
IPCS ``based in part on what portion of [IPCS] revenues a provider has
offered to share with the facility.'' These payments, historically
referred to as ``site
[[Page 77289]]
commissions,'' are salient components of the exclusive contracts
between correctional authorities and IPCS providers. Site commissions
broadly include ``any form of monetary payment, in-kind payment
requirement, gift, exchange of services or goods, fee, technology
allowance, product or the like.'' They can be expressed ``in a variety
of ways, including as per-call or per-minute charges, a percentage of
revenue or a flat fee.''
249. Site commissions can arise in several different scenarios.
First, a state or local statute or regulation ``that operate[s]
independently of the [IPCS] contract process'' may mandate ``site
commission payments at a specified level.'' Second, ``there can be
situations where the correctional institution's request for proposal,
or the like, asks bidders to agree to pay site commissions at a
specified level.'' And third, there may be circumstances where no state
or local law or regulation ``compels site commission payments and the
correctional institution soliciting bids does not request any specific
payment (even if it indicates that offers to pay site commissions will
influence bid selection).'' Some state laws permit--but do not
require--correctional institutions to collect site commissions while
others may require site commissions but do not specify any particular
level. In these circumstances, IPCS providers and correctional
institutions may negotiate the amount of the site commission.
250. In general, site commissions provide benefits to correctional
authorities and the IPCS providers bidding on IPCS contracts. By
providing a mechanism for correctional authorities to share in some
portion of IPCS revenues, site commission payments allow correctional
authorities to ``benefit financially from the contract that they sign
with their [IPCS] provider.'' And ``by proposing higher prices'' during
the bidding process, IPCS providers ``can pay more in commissions to
the state, thereby increasing the probability with which they win the
contract.'' It is due to these market dynamics that site commissions
have sometimes been described as ``kickbacks'' or ``legal bribes.''
251. Regardless of how they arise, site commissions, as
historically understood, ``fund a wide and disparate range of
activities.'' In some cases, site commission revenues may be used to
fund programs related to ``education and reintegration into society.''
``In certain jurisdictions, state law requires that revenue from site
commission payments, or a portion thereof, be deposited into welfare
funds or the state's general treasury. In other cases, site commission
payments may be used to ``defray costs of maintaining carceral
facilities.'' Because site commission revenues can include many
different types of payments, they may also be offered for the benefit
of correctional officials, through, for example, campaign contributions
or ``payments to influential sheriff-led associations'' or through in-
kind payments. In one instance, correctional officials were offered
cruises as part of IPCS contracts. Finally, site commissions--as that
term historically was understood--may also serve, in part, to
``compensate correctional facilities for the costs they reasonably
incur in the provision of [IPCS].'' Those facility-related costs may
encompass various safety, security, surveillance, and administrative
tasks. These functions and activities may be performed by correctional
authorities or IPCS providers, depending on their mutually agreed
arrangements.
252. Regardless of the purposes for which site commissions may be
used, they historically have been ``a significant driver of rates''
that incarcerated people and their loved ones pay. Specifically, site
commissions have exerted and continue to exert ``upward pressure'' on
rates. By imposing higher rates, IPCS providers historically could
afford to pay more in commissions to correctional authorities. Thus,
providers ultimately recovered the costs of their site commission
payments through the rates they charged consumers. This means that
incarcerated people and their loved ones, who cannot choose their own
IPCS providers, were forced to bear the financial burden imposed by
site commissions in the rates they pay, thereby subsidizing the tasks
or activities that correctional officials or, in some cases, state law,
dictate associated with the use of site commission revenue. As
explained above, this subsidization could have extended to tasks and
activities that have nothing to with enabling communication between
incarcerated people and their loved ones, including funding ``inmate
welfare programs . . . salaries and benefits of correctional
facilities, states' general revenue funds, and personnel training.''
253. These historical consumer costs could be substantial. Site
commissions historically could account for ``33 percent of the out-of-
pocket consumer call charges on average'' and rising ``to more than 70
percent in some jurisdictions.'' Collectively, as set forth in a
technical appendix, providers reported total industry site commissions
of over $446 million. Relatedly, in jurisdictions that have eliminated
site commissions, IPCS rates have ``decreased significantly.'' In
short, there is ``no question'' that the site commissions result in
higher consumer prices.
254. At the same time, site commissions have distorted the IPCS
marketplace. Each correctional facility has ``a single provider of
[IPCS] that operates as a monopolist within that facility,'' and very
often ``correctional authorities award the monopoly franchise for
[IPCS] based in part on what portion of inmate calling services
revenues a provider has offered to share with the facility.'' Such
scenarios can create ``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).''
Thus, as a matter of historical practice, ``providers bidding for a
facility's monopoly franchise compete to offer the highest site
commission payments,'' instead of competing on ``service-based,
competitive market factors'' such as price or quality of service that
would ultimately benefit incarcerated people and their loved ones.
While reverse competition occurs in other contexts, it has been ``at
its most pernicious in the inmate phone service context because buyers
not only do not have a choice of service providers, they also have
strong reasons not to forego using the service entirely.'' What is
more, once a contract is signed, ``the terms of the contract are set in
stone'' in that they need not be renegotiated by the IPCS provider
absent a change in law and, because the provider then has monopoly
power, it ``[does] not have to worry about'' lowering its prices ``in
order to stay competitive.'' As a result in such scenarios, ``at any
given time, the end-users are not necessarily benefitting from the
lowest possible'' IPCS prices.
(ii) The Commission's Regulation of Recovery for Site Commission
Payments
255. The Commission has historically viewed site commission
payments as ``a division of locational monopoly profit'' and not a cost
of providing payphone service. This characterization led the Commission
to exclude site commission costs from the costs it used to set interim
calling services rate caps in the 2013 ICS Order and permanent rate
caps in the 2015 ICS Order. Over time, however, the Commission
recognized that ``some portion of [site commission payments] may be
attributable to legitimate facility costs.'' Thus, in the 2016 ICS
Reconsideration Order (81 FR 62818, September 13, 2016), the
[[Page 77290]]
Commission explained that ``some facilities likely incur costs that are
directly related to the provision of ICS,'' and determined that ``it is
reasonable for those facilities to expect ICS providers to compensate
them for those costs . . . [as] a legitimate cost of ICS that should be
accounted for in [the] rate cap calculations.'' As a result, the
Commission reconsidered its decision to entirely exclude site
commission payments from its 2015 rate caps and adopted additives to
those caps ``to account for claims that certain correctional facility
costs reflected in site commission payments are directly and reasonably
related to the provision of inmate calling services.''
256. In the 2017 GTL v. FCC opinion, the D.C. Circuit held that the
``wholesale exclusion of site commission payments from the FCC's cost
calculus'' in the 2015 ICS Order was ``devoid of reasoned decision-
making and thus arbitrary and capricious.'' The court was unpersuaded
by the Commission's assertion that site commissions have nothing to do
with the provision of calling services, reasoning that ``[i]n some
instances, commissions are mandated by state statute'' while in others
``commissions [are] required by state correctional institutions as a
condition of doing business with ICS providers.'' The court also
explained that because the Commission acknowledged that some portion of
some providers' site commission payments might represent ``legitimate''
costs of providing inmate calling services, the Commission could not
``categorically exclude[ ] site commissions and then set rate caps at
below cost.'' ``Ignoring costs that the Commission acknowledges to be
legitimate,'' the court explained, ``is implausible.'' But the court
left it to the Commission on remand to determine ``which portions of
site commissions might be directly related to the provision of ICS and
therefore legitimate, and which are not.''
257. In 2020, the Commission proposed rate reform of the inmate
calling services then within its jurisdiction with the 2020 ICS Notice.
Based on extensive analysis of the data the Commission collected in the
Second Mandatory Data Collection, the Commission proposed to lower the
interstate rate caps to $0.14 per minute for debit, prepaid, and
collect calls from prisons and $0.16 per minute for debit, prepaid, and
collect calls from jails. Consistent with the D.C. Circuit's opinion in
GTL v. FCC, the Commission also proposed to include ``an allowance for
site commission payments in the interstate rate caps to the extent
those payments represent legitimate correctional facility costs that
are directly related to the provision of inmate calling services.'' The
Commission proposed an allowance of $0.02 per minute, which reflected
the Commission's ``analysis of the costs correctional facilities incur
that are directly related to providing inmate calling services and that
the facilities recover from inmate calling services providers as
reflected by comparing provider cost data for facilities with and
without site commission requirements.'' Recognizing that facility costs
for contracts covering only jails with low average daily populations
might exceed the proposed $0.02, the Commission invited comment on
adopting higher allowances for correctional facility costs for such
contracts if the record supported such allowances.
(iii) 2021 Rate Structure Reforms
258. In the 2021 ICS Order, the Commission adopted interim inmate
calling services rate caps that included an allowance for site
commission payments ``consistent with section 276's fair compensation
provision'' as interpreted by the D.C. Circuit's decision in GTL v.
FCC. In relevant part, the Commission adopted two facility-related rate
components reflecting different types of site commissions for prisons
and larger jails: legally mandated site commission payments that
providers are obligated to pay under laws or regulations; and
contractually prescribed site commission payments that providers agree,
by contract, to make. The Commission did not adopt facility-related
rate components for jails with average daily populations below 1,000,
which remained subject to the existing $0.21 per-minute total rate cap.
This outcome reflected, in part, record arguments suggesting that
``legitimate facility costs related to [IPCS] may indeed be higher for
smaller facilities.'' Because commenters ``did not provide sufficient
evidence to enable [the Commission] to quantify any such costs,'' the
Commission sought comment on facility costs for smaller jails as part
of 2021. The Commission permitted providers to recover the costs of
their legally mandated site commission payments, without any markup, as
an additive to the interim interstate per-minute rate caps up to a
total rate cap of $0.21 per minute. Where site commission payments
resulted from contractual obligations or negotiations between providers
and correctional officials, the Commission permitted providers to
recover no more than $0.02 per minute for prisons and larger jails.
259. In evaluating cost recovery for site commissions in the 2021
ICS Order, the Commission emphasized that full recovery of site
commission payments is not required by the D.C. Circuit's decision in
GTL v. FCC, given that the court made clear that the Commission may
``assess on remand which portions of site commissions might be directly
related to the provision of [inmate calling services] and therefore
legitimate, and which are not.'' The Commission reasoned that full
recovery of site commissions ``cannot be reconciled with [the
Commission's] statutory duty to ensure that incarcerated people and the
people with whom they speak are charged `just and reasonable' rates for
inmate calling services.'' At the same time, the Commission concluded
that it could not, consistent with the record before it at that time
and ``current law and policy'' treat all site commissions solely as a
division of locational monopoly profit and therefore deny any recovery
of such payments.
260. The Commission relied on its section 201(b) authority over
interstate and international rates and charges in the 2021 ICS Order in
analyzing cost recovery separately for legally mandated and
contractually prescribed site commissions. As to legally mandated site
commissions payments, the Commission recognized them ``as a cost that
providers must incur to provide calling services, consistent with
section 276's fair compensation provision.'' Thus, the Commission found
legally mandated site commission payments ``to be used and useful in
the provision of interstate and international inmate calling services
at least as long as the Commission continues to permit providers of
interstate and international inmate calling services to continue to
make these site commission payments.''
261. The Commission next found that contractually prescribed site
commission payments ``reflect[ ] not only correctional officials'
discretion as to whether to request site commission payments . . . but
also providers' voluntary decisions to offer payments to facilities
that are mutually beneficial in the course of the bidding and
subsequent contracting process.'' The Commission also recognized that
contractually prescribed site commissions payments that ``simply
compensate a correctional institution for the costs (if any) an
institution incurs to enable interstate and international inmate
calling services'' were ``prudently incurred expenses used and useful
in the provision of interstate and international inmate calling
services.'' Contractually prescribed site
[[Page 77291]]
commission payments were deemed not recoverable, however, ``insofar as
they exceed[ed] the level needed to compensate a correctional
institution for the costs (if any) an institution incurs to enable
interstate and international inmate calling services.''
262. Ultimately, the Commission arrived at the $0.02 per minute
allowance for prisons and larger jails on two independent bases. First,
it estimated ``the portion of site commissions that are legitimately
related to inmate calling services'' based on a comparison of per-
minute costs for facilities that receive site commission payments and
those that do not from cost and site commission data that providers
reported in response to the Second Mandatory Data Collection. The
Commission first used this methodology in Appendix E of the 2020 ICS
Notice but updated it with corrected cost data in Appendix B of the
2021 ICS Order. Because those data ``incorporated no correctional
facility-provided cost data,'' the Commission's methodology ``reflected
its reasoned judgment as to the best estimation of legitimate facility
costs related to inmate calling services in the absence of cost data
from correctional facilities themselves.'' The Commission agreed with
commenters that it is ``difficult to disentangle which part of the site
commission payment goes towards reasonable facility costs and which
portion is due to the transfer of market power.'' The Commission
emphasized that its own analysis ``reflect[ed] even lower estimates for
legitimate facility costs'' but declined to adopt an allowance lower
than $0.02 at that time.
263. Second, data from a survey of facilities' inmate calling
services costs that the National Sheriffs' Association had conducted in
2015 independently supported the $0.02 allowance for correctional
facility costs at prisons and larger jails. Though the Commission had
previously relied on these data in the absence of any other data, the
Commission expressed continuing concern about their reliability because
``some of the facilities included in the . . . survey [had] report[ed]
an exceedingly high number of hours of correctional facility officials'
time compared to most other reporting facilities.'' The Commission
flagged one facility with an average daily population of approximately
1,500, which reported approximately 694 total hours per week on inmate
calling services-related activities, which was ``roughly 400 hours more
than the next highest facility with an equal or lower average daily
population.'' The Commission did ``not find these data credible when
comparing them to data of similarly sized reporting facilities that
have no incentive to under-report their hours or costs.''
Notwithstanding these issues, the Commission concluded that they were
``the best data available from correctional facility representatives''
that allowed the Commission to balance the ``objectives to ensure just
and reasonable rates under section 201 of the Act with the requirement
to ensure fair compensation under section 276 of the Act.'' The
Commission therefore relied on the data from the National Sheriffs'
Association survey in addressing providers' site commissions payments
to prisons and larger jails. The Commission found, however, that the
survey data for jails having average daily populations of fewer than
1,000 incarcerated people ``varied far too widely to comfortably
estimate any values'' for correctional facility costs ``that would
withstand scrutiny today'' (i.e., in May 2021). The Commission
circumscribed its interim treatment of site commissions based on the
record and regulatory backdrop at that time, and confirmed that nothing
in the 2021 ICS Order would limit its ``ability, on a more complete
record and with sufficient notice, to reconsider [its] treatment of
site commission payments.''
264. In 2021, adopted at the same time as the 2021 ICS Order, the
Commission sought comment on how and where to draw the line between
legitimate and illegitimate portions of site commission payments and
asked for specific data concerning legitimate portions of those costs,
if any. Additionally, the Commission asked commenters to provide
methodologies that the Commission could use to identify legitimate site
commission expenses. The Commission also sought comment on
``prohibiting providers from entering into any contract requiring the
payment of contractually prescribed site commissions for interstate and
international calling services'' and ``preempting state or local laws
that impose [legally mandated site commission] payments on interstate
or international calling services.''
(iv) The Martha Wright-Reed Act and 2023 Request for Comment
265. On December 22, 2022, Congress passed the Martha Wright-Reed
Act, which was signed into law on January 5, 2023. Just slightly over
two months later, the Commission adopted 2023, in which it sought
comment on several aspects of the effect of the Martha Wright-Reed Act
on the Commission's consideration of site commission payments. First,
as a general matter, the Commission incorporated its prior questions on
site commissions from 2021 into 2023. In particular, the Commission
asked whether its ratemaking calculations should ``include providers'
site commission payments only to the extent, if any, that they
compensate facilities for used and useful costs that the facilities
themselves incur.'' Second, the Commission requested comment on how the
dual requirements of section 276(b)(1)(A) to ensure just and reasonable
rates and charges for IPCS consumers and providers and fair
compensation for IPCS providers should affect its treatment of site
commission payments including any decision on whether to preempt state
and local laws and regulations that impose site commissions. And third,
the Commission invited comment ``on the relationship, if any, between
safety and security measures and site commission payments.''
(v) Other Trends in the Treatment of Site Commissions
266. Broadly, the ``structure of the market for providing
communications services to incarcerated persons has changed and
continues to change.'' This is particularly true in the case of site
commissions. Indeed, ``[t]here is already a growing trend to eliminate
the use of site commissions.'' One IPCS provider explains that it
offers ``commission-less options in its proposals to correctional
authorities'' to ``improve affordability for consumers.'' In addition
to provider-led efforts, ``a number of states have banned site
commissions'' or have made IPCS free to end users driven, at least in
part, by the goal of protecting incarcerated people and their loved
ones ``from detrimental practices by private corporations providing
goods and services to people confined in carceral facilities.'' States
that have eliminated site commissions include California, Michigan,
Missouri, Nebraska, New Mexico, New York, Rhode Island, and South
Carolina. And five states--Massachusetts, Connecticut, California,
Minnesota, and Colorado have now enacted legislation providing for free
communications services for incarcerated people, meaning that IPCS
consumers now pay nothing for IPCS site commissions. More recently,
other states have introduced legislation requiring IPCS to be provided
free of charge to incarcerated people and their loved ones or have
eliminated site commission payments. This is also true for some
municipalities, for example, San Diego and San Francisco. Together,
these trends point to a decreasing
[[Page 77292]]
reliance on site commission payments in providing IPCS.
c. Discussion
(i) Overview of Our Approach to Site Commissions
267. In the Report and Order, we only permit IPCS provider payments
to correctional facilities for costs used and useful in the provision
of IPCS. As Pay Tel explains, facility cost recovery and site
commissions are ``two separate (but currently interrelated) issues.''
Pay Tel emphasizes that ``site commission payments often ultimately
provide facilities with necessary cost recovery for their role in
administering ICS'' but that ``does not mean site commission payments
are necessary for--i.e., the only means of ensuring--facility cost
recovery.'' We agree. Decoupling the conceptually distinct category of
IPCS provider payments to correctional facilities for costs used and
useful in the provision of IPCS from other payments IPCS providers have
been asked--or required--to make to correctional facilities (i.e.,
``site commissions'') illuminates how those markedly different
categories of IPCS provider payments can and should be treated under
our new regulatory approach.
268. We find that our rate caps will allow for IPCS provider
reimbursements to correctional facilities for costs used and useful in
the provision of regulated IPCS. In particular, we enable facilities to
be reimbursed for these costs by including them in our rate caps and
allowing providers to compensate facilities for them. At this time, we
do not see the need to amend the Commission's definition of site
commission to carve out the reimbursement we permit. By adopting a
mechanism that enables correctional facility cost recovery extending
only to used and useful costs reimbursed by IPCS providers, we ensure
that correctional facilities will not be without recourse to recover
their legitimate costs from providers within the bounds of the rate
caps we adopt today. We also ensure that providers' obligations to
reimburse correctional facilities will be limited to the used and
useful costs associated with the provision of IPCS that they actually
incur.
269. We take a different approach with respect to site commissions.
Today we conclude, based on the record and consistent with precedent,
that site commission payments are not used and useful in the provision
of IPCS and must therefore be excluded from the calculation of the
Commission's rate caps. We further prohibit site commission payments to
all facilities to the extent those payments are associated with
intrastate, interstate, international, jurisdictionally mixed, and
jurisdictionally indeterminate audio and video IPCS, including all
monetary and in-kind site commissions. To effectuate this prohibition
we take two actions consistent with 2021 and 2023. First, we preempt
state and local laws and regulations allowing or requiring site
commission payments for IPCS. And second, we prohibit IPCS providers
from entering into contracts allowing or requiring the payment of site
commissions. We emphasize that the actions we take today in eliminating
site commissions apply to all correctional institutions: prisons,
larger jails, smaller jails, and other types of correctional
institutions.
(ii) Site Commissions Are Not Used and Useful in the Provision of IPCS
270. Based on the record and core ratemaking precedent, we find
that site commission payments are not used and useful in the provision
of IPCS and must therefore be excluded from our rate and fee cap
calculations. As discussed below, site commissions, whether legally
mandated or contractually prescribed, do not satisfy any prong of the
used and useful framework as that framework is applied by courts and
the Commission.
271. Securus argues that the used and useful framework ``is
unsuited for the purpose of determining cost recovery for site
commission payments'' and is not an ``appropriate basis'' to restrict
or eliminate site commissions. Securus explains that the used and
useful framework ``potentially leads to unreasonable outcomes where the
entity that sets the requirements for service, the correctional
institution, is different from the ``rate payer.'' In Securus's view,
correctional facilities, not incarcerated people, are the ``direct
customer[s]'' of IPCS and, as such, prescribe the ``features and
functions'' they deem used and useful to provide the service. It is
thus ``untenable,'' Securus argues, to suggest that all features a
correctional facility deems used and useful must ``inure directly to
the benefit of each caller.''
272. While it is true that correctional authorities contract with
IPCS providers for the provision of IPCS in their facilities, we are
not persuaded by Securus's arguments. IPCS are used and paid for by
incarcerated people and their loved ones. In implementing section
276(b)(1)(A)'s just and reasonable and fair compensation standards,
``[t]he Commission's duty is to protect IPCS ratepayers and ensure
reasonable compensation for providers, not to protect the interests and
demands of non-ratepaying stakeholders.'' And it is through the used
and useful framework that the Commission balances the ``equitable
principle that public utilities must be compensated for the use of
their property in providing service to the public'' with the
``[e]qually central . . . equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them.'' It is therefore entirely appropriate
to evaluate site commission payments under the used and useful
framework.
273. To the extent Securus is concerned that applying the used and
useful framework will somehow interfere with the discretion of
correctional officials, we find those concerns overstated. We do not
limit the ability of a correctional authority to ``prescribe[ ] the
features and functions it deems necessary to provide the service in its
facilities.'' Correctional authorities remain free to contract for the
``equipment, network facilities, operations and services'' they deem
appropriate. All we do here is evaluate site commission payments under
long-standing principles the Commission uses in evaluating whether
rates and charges are just and reasonable and conclude, based on the
record developed over many years in these proceedings, that those
payments are not used and useful in the provision of IPCS and must
therefore be excluded from our rate cap calculations. Doing so ensures
that incarcerated people and their loved ones ``bear only legitimate
costs of providing service to them.''
274. Securus also contends that the ``used and useful'' framework
is ``inapplicable to site commissions for the further reason that it is
a feature of rate of return regulation'' that is ``unsuited for the
purpose of determining cost recovery for site commission payments.''
Securus explains that the role of the ``used and useful'' framework
under rate-of-return regulation is ``to determine the rate base,
defined as net investment in plant and equipment'' and ``plays no role
in determining appropriate operating expenses, such as site
commissions,'' which may be recovered ``unless totally unrelated to the
provision of service or excessive.'' Securus claims that because the
Commission has opted to use ``a form of price cap,'' rather than ``rate
of return regulation to set incarcerated communications services rate
caps,'' the used and useful framework should be inapplicable. And even
in the context of rate-of-return regulation, Securus asserts
[[Page 77293]]
that regulators are not required to apply the used and useful framework
and may instead use the prudent investment rule.
275. We find Securus's arguments in this regard unpersuasive.
First, as the Commission has explained, it has ``not only . . . applied
[the used and useful framework] in the context of carriers operating
under rate-of-return regulation, but rates set on that basis were also
used as the foundation for the price caps.'' Indeed, the Commission's
price cap regime for incumbent local exchange carriers started with
rates ``generated by the conventional cost-of-service formula,'' an
approach that has become, over time, the prevailing methodology to
determine the rate base and allowable expenses under rate-of-return
regulation. Setting price caps therefore involves some measure of the
cost of service that is the hallmark of rate-of-return regulation.
Fundamentally, setting IPCS rates is an ``exercise in cost-based
ratemaking'' that ``requires a determination of the costs providers
incur in providing those services.'' And the used and useful framework
is the standard the Commission has historically applied to ``exclude[ ]
certain impermissible costs from any rate methodology.'' Accordingly,
we conclude that we may apply the used and useful framework to
providers' site commission payments.
276. Second, the used and useful standard, and the just and
reasonable ratemaking standard more broadly, are fundamentally
concerned with balancing the interests of ratepayers with the need to
compensate public utilities for the use of their property. The policy
of allowing only investments and expenses which are ``used and useful''
to be recovered from ratepayers ``is intended to ensure that current
ratepayers bear only legitimate costs of providing service to them.''
The concept thus is not inherently limited to physical plant owned by
the provider and irrelevant to expenses. The Commission's previous
employment of the ``used and useful'' framework to evaluate recovery of
site commissions through just and reasonable rates as part of the
regulatory backdrop to the Martha Wright-Reed Act's addition of the
``just and reasonable'' mandate to section 276(b)(1)(A) reinforces our
conclusion that it is reasonable for us to rely on that approach again
here. And the standard is necessarily flexible, allowing the Commission
to analyze ``[t]he particular facts of each case . . . in order to
determine what part of a utility's investment is used and useful.'' We
rely on this flexibility to ensure that IPCS consumers bear ``only
legitimate costs of providing service to them.'' Importantly, however,
we do not rely solely on the used and useful framework to eliminate
site commissions. Instead, our actions stem principally from the
requirements of section 276(b)(1)(A), as amended by the Martha Wright-
Reed Act, that we ensure just and reasonable rates and charges for
consumers and providers and fair compensation for providers. In doing
so, we do as Securus requests, which is to exercise ``the full degree
of [our] authority'' to prohibit site commission payments entirely.
(a) Used and Useful Assessment
277. In the 2021 ICS Order, the Commission conducted a used and
useful analysis applying a prudent investment standard and ultimately
permitted providers to pass through to consumers, on an interim basis,
the full amount of their legally mandated site commission payments up
to a total interstate rate cap of $0.21 per minute and no more than
$0.02 per minute for their contractually prescribed site commission
payments for prisons and larger jails. In conducting its cost recovery
analysis under the used and useful framework, the Commission explained
that it did not consider site commission payments of any kind to
``involve[e] the use of provider property and investment in a manner
analogous to the circumstances addressed in [its] provider-based rate
caps.'' The Commission reasoned that the site commission payments, or
the portions thereof, that it allowed providers to recover on an
interim basis were ``akin to exogenous costs.'' Separately, the
Commission independently justified its decision ``as a matter of the
flexibility provided by the `just and reasonable' framework of section
201(b) of the [Communications] Act under the particular
circumstances.'' The Commission concluded that allowing only a pass-
through of site commission expenses it found to be prudently incurred
and used and useful ``adequately accounts for the use of providers'
property . . . balanced with the equitable interest of customers of
interstate and international inmate calling services.''
278. Our approach here differs from the Commission's 2021 interim
reforms in which the Commission concluded that a portion of some site
commission payments was used and useful in the provision of calling
services, and therefore compensable for purposes of the used and useful
analysis. For one, we separate out from our definition of ``site
commissions'' the reimbursement IPCS providers make to correctional
facilities for costs those facilities incur that we have already found
to be used and useful in the provision of IPCS under our analysis
above. The question then turns to whether site commissions as defined
here separately are used and useful in the provision of IPCS and thus
separately compensable under the just and reasonable standard. We
conclude that they are not. Thus, in developing the IPCS rate caps we
adopt today, we have identified, based on the record, all of the used
and useful costs and expenses in the provision of intrastate,
interstate, international, and jurisdictionally mixed audio and video
IPCS, regardless of whether those costs are incurred by IPCS providers
or correctional facilities. Accordingly, we have considered, consistent
with this element of the used and useful framework, what is required to
compensate IPCS providers for offering IPCS while safeguarding the
interests of incarcerated people and their loved ones under the just
and reasonable mandate.
279. On the record now before us and considering the requirements
of section 276(b)(1)(A), as amended by the Martha Wright-Reed Act, we
find that, to the extent they exceed the costs correctional
institutions prudently incur in the provision of IPCS, site
commissions, whether contractually prescribed or legally mandated, are
not used and useful in the provision of IPCS because there is no
indication that such payments benefit IPCS consumers. To begin with,
the Commission predicated its 2021 interim reforms on the assumption
that a portion of providers' site commission payments provided a
benefit to IPCS consumers and was thus recoverable ``at least as long
as the Commission continues to permit providers . . . to make site
commission payments.'' That is, the Commission assumed, on the record
before it, that some portion of providers' site commission payments
compensated correctional facilities for the costs they incurred in
enabling the provision of ICS. But even in the 2021 ICS Order, the
Commission concluded that site commission payments above that level
were not used and useful and/or not prudently incurred and should not
be subject to recovery in order to ensure just and reasonable rates.
Nothing in the record here persuades us to change our mind in that
respect, and we thus again conclude that such costs are not used and
useful and/or prudently incurred, and thus not recoverable through just
and reasonable rates. And, as discussed below, absent any viable data
that demonstrate any portion of a site commission in this context
provides compensable costs, we find that site
[[Page 77294]]
commissions are in their entirety not recoverable.
280. As to those site commission payments the Commission did allow
to be recovered under its used and useful and prudent investment
analysis in the 2021 ICS Order, the Commission relied, in part, on the
National Sheriffs' Association 2015 survey as the best available proxy
for those costs and limited recovery for contractually prescribed site
commission payments to no more than $0.02 per minute at prisons and
larger jails, even though the Commission's independent estimates of the
portion of site commissions that were legitimately related to inmate
calling services supported ``even lower potential estimates for
legitimate facility costs.'' With respect to legally mandated site
commission payments, the Commission assumed, on the record before it at
that time, that legally mandated site commission payments at the level
required by the relevant statute or regulation were used and useful. We
address certain particularities with respect to legally mandated site
commissions below. The Commission chose to rely on the National
Sheriffs' Association data--despite significant reservations about
their accuracy--in large part due to ``the absence of any other
facility-provided data'' in the record. Rather than delay much-needed
relief, the Commission chose to rely on the ``best data available'' to
estimate facility costs used and useful in the provision of
communications services ``until more updated facility-related data are
submitted into the record.'' As discussed above, however, no commenter
or other stakeholder has provided updated facility-related cost data
sufficient to enable the Commission to isolate the portions of
providers' site commission payments, if any, that actually compensate
correctional facilities for the costs they incur in the provision of
IPCS. Accordingly, we decline to rely on those data here to allow
additional recovery for providers' site commission payments.
281. Putting aside the lack of reliable data, the record persuades
us that site commission payments primarily compensate correctional
facilities for the transfer of their market power over IPCS at a given
facility or are used by providers to ``overcome . . . competitors to
become the exclusive provider of multiple services, including
nonregulated services at a correctional facility'' while providing no
clear benefit to IPCS consumers. In the 2021 ICS Order, the Commission
identified a collective action problem ``that makes providers, as a
group, reluctant to limit or omit site commission payments in their
bids for fear that competitors fail to do so, and that correctional
institutions will select competitors that do offer site commissions (or
offer higher site commissions) instead.'' Securus confirms that ``[t]he
problem identified by the Commission is real,'' suggesting that
providers cannot ``unilaterally end the established practice of many
local governments in seeking site commission payments in their
negotiations with providers.'' Thus, it appears that ``when providers
offer site commission payments as part of their bids, they do so to
gain a benefit for themselves, rather than to satisfy a formal
precondition of access to a correctional facility.''
282. Consider, for example, monetary site commission payments. In
certain cases, contract language requiring the payment of monetary site
commissions demonstrates that such payments compensate correctional
facilities ``for the transfer of their market power over [IPCS] to the
[IPCS] provider'' and cannot be shown to directly benefit consumers of
incarcerated people's communications services. For example, the
language in a contract between CenturyLink Public Communications, Inc.,
a former provider of incarcerated people's communications services, and
Milwaukee County, Wisconsin, explains that ``[i]n consideration of
being granted the right and obligation to operate the Inmate Pay
Telephone Concession at the Correctional Facilities, CenturyLink shall
pay County a commission rate equal to 70.1% of the Gross Revenue
generated from completed or accepted calls made at the CenturyLink pay
phones covered by this agreement.'' In another case, the contract calls
for the payment of a percentage of gross revenue ``in return for the
exclusive right to install and operate the [p]hones in the premises.''
283. Provisions like these illustrate that the site commission
payments benefit the facilities insofar as they receive compensation
for allowing the provider (instead of the correctional authority) to
offer communications services at the facility or facilities covered by
the contract. And, the site commission payments benefit the providers,
which receive the exclusive right to offer communication services for
the duration of the contract. There is nothing in these contracts, or
the record generally, suggesting that such site commission payments are
conditioned on, for example, improved service quality or lower prices
for consumers of calling services or compensating the correctional
facility for any costs it incurs in allowing IPCS. Thus, the benefits
flow first to the facility and then to the provider, ``all to the
detriment of [IPCS] customers.''
284. Record evidence submitted by Pay Tel also demonstrates the way
in which site commissions may be used by IPCS providers to ``increase
the probability with which they win [a] contract.'' Pay Tel provides
documentation relating to recent requests for proposals ``in which Pay
Tel competed but ultimately lost due to site commission payment
amounts.'' Pay Tel notes that, in two instances, it ranked higher in
each scoring category except for the site commission category but still
lost the bids. Indeed, the winning bidders had proposed to pay site
commissions of 90% and 88.8% on all calls. Thus, Pay Tel at least
plausibly lost those bids on the basis of its site commission offerings
indicating that ``providers may feel compelled to offer site
commissions in order to remain competitive'' rather than to compensate
correctional facilities for the costs, if any, they incur in making
IPCS available. To the extent these site commissions were, in fact,
related to any legitimate IPCS costs, we would have expected to see
similar offers from the other bidders. But we do not. Instead, it
appears that the winning bidder used its site commission offerings in
this context ``to overcome its competitors'' in the bidding process.
285. The National Sheriffs' Association offers a different
explanation of Pay Tel's data. It claims that a high site commission
percentage does not ``necessarily mean the commission payment exceeds
the cost to the facility of allowing ICS or that the rate charged for
ICS service at the facility is unreasonable.'' In its view, Pay Tel's
experience ``may show that the cost to serve the specific facility is
below the Commission's nationwide average rate and the dollar amount of
the revenues is significant enough that ICS providers are willing to
offer a greater percentage of their profits to capture that specific
contract.'' Or, it ``may also reflect the fact that ICS providers are
not required to bid on facility contracts or provide ICS at all
facilities and . . . can boost profit by declining to provide service
in higher cost facilities.'' These alternative explanations are
speculative and otherwise unsupported by record evidence. In contrast,
Pay Tel provides concrete evidence, including bid evaluation forms used
by the correctional authorities, that portrays a compelling, first-hand
account of how site commissions factored into the bid evaluation
processes. We find it highly persuasive that Pay Tel obtained higher
[[Page 77295]]
scores across all bid scoring categories except site commissions but
still lost those contracts. We believe these outcomes clearly
illustrate ``the current incentive for facilities to award contracts
based primarily (or, at times, exclusively) on site commission
offerings'' rather than on the basis of price or quality of service, to
the detriment of IPCS consumers.
286. In-kind payments also demonstrate that site commissions
primarily benefit correctional authorities and IPCS providers but not
IPCS consumers, as they are often wholly unrelated to the provision of
IPCS. This is because in-kind payments from the IPCS provider can take
varied forms, including software packages, {[REDACTED]{time} campaign
contributions, ``payments to influential sheriff-led associations,'' or
anything else of value to the correctional authority. One provider
describes the fluid nature of in-kind site commissions noting that they
``{[REDACTED]{time} .'' For example, Smart Communications offered,
among other inducements, an ``Annual Technology Training Summit
Cruise'' as part of its proposal to a sheriff's office. Those cruises
had a value of over $84,000 over the contract term. Because these in-
kind contributions are often offered at low or no cost to the
correctional authority, they clearly benefit the correctional
authority, which receives something of value from the IPCS provider.
And such inducements also benefit the IPCS provider to the extent they
allow that provider to surpass its competitors in the bidding process.
In contrast, there is nothing in the record showing the extent, if any,
to which these types of in-kind site commissions, whatever form they
may take, are used and useful in the provision of IPCS and thus benefit
incarcerated people and other ratepayers. Indeed, no commenter has
suggested as such. Rather, such payments are more accurately understood
as inducements ``designed to influence a correctional authority's
selection of its monopoly service provider.'' This is the kind of
``excess investment'' that should not be recoverable from ratepayers
under the used and useful framework.
287. We acknowledge, however, that some portion of providers' site
commission payments, whether contractually prescribed or legally
mandated, may be used for socially beneficial purposes when viewed from
a broader perspective. These may include ``inmate health and welfare
programs such as rehabilitation and educational programs; programs to
assist inmates once they are released; law libraries; recreation
supplies; alcohol and drug treatment programs; transportation vouchers
for inmates being released from custody; or other activities.'' These
causes, while worthy, are unrelated to the provision of IPCS and as
such IPCS consumers do not bear the responsibility to bear their costs
under the Communications Act. As commenters have observed, such
programs could instead ``be paid for from general revenue sources'' or
other state or local funding, enabling state and local governments to
continue to advance the objectives of ``reducing recidivism and
providing basic care'' consistent with their existing efforts in those
areas. We agree. And as the Commission has observed, the Communications
Act ``does not provide a mechanism for funding social welfare programs
or other costs unrelated to the provision of ICS, no matter how
successful or worthy.'' As such, we do not dispute the notion that
``there are many factors that may be indicative of a legitimate
penological interest'' such as ``crime interdiction, deterrence, inmate
management and . . . revenue generation'' but the costs associated with
pursuing these interests are not costs used and useful in the provision
of communications services for incarcerated people under the
Communications Act. Were we to find such non-IPCS costs used and useful
in the provision of IPCS and therefore recoverable from consumers, we
would be unable to ensure just and reasonable IPCS rates and charges
consistent with section 276(b)(1)(A), as amended by the Martha Wright-
Reed Act. We recognize that in GTL v. FCC, the D.C. Circuit concluded
that ``it does not matter that the states may use commissions for
purposes unrelated to the activities of correctional facilities.'' But,
as we explain below, the GTL decision was premised on IPCS providers
actually paying site commissions as a condition of doing business. In
contrast, our actions today prohibit the payment of site commissions,
thus eliminating the concern expressed by the D.C. Circuit about the
use of site commissions as a precondition to providing service in
correctional facilities. We therefore conclude that we may, under these
circumstances, consider how site commissions are used.
288. While we conclude that site commissions, whether legally
mandated or contractually prescribed, are not used and useful because
they do not benefit consumers, some further discussion of legally
mandated site commissions in this context is necessary in light of the
Commission's 2021 interim reforms. In the 2021 ICS Order, the
Commission assumed that legally mandated site commission payments that
``exceed the level that simply compensates a correctional institution
for any costs the institution incurs to enable interstate and
international inmate calling service'' were prudent expenses because
there was ``no evidence that either the provider or the correctional
institution could agree to a lower amount (or no site commissions at
all) based on the current record and current law.'' Thus, the
Commission concluded, on an interim basis, that legally mandated site
commissions ``at the level required by the relevant statute or rule to
be used and useful in the provision of interstate and international
inmate calling services at least as long as the Commission continues to
permit providers . . . to continue to make these site commission
payments.'' The Commission made no determination regarding how legally
mandated site commissions may ``impact [the Commission's] ability to
ensure just and reasonable . . . rates.'' The Commission also
emphasized that ``this [was] a close question'' and that the record
developed in response to 2021 ``may persuade [the Commission] to reach
a different conclusion'' in addressing site commissions on a permanent
basis. The Commission's interim approach to legally mandated site
commission payments in the 2021 ICS Order thus turned in significant
part on the legal backdrop that the Commission took as given at that
time, namely: (1) legally mandated site commissions could not be
avoided; and (2) IPCS providers were allowed to make those payments.
289. We no longer believe our used and useful analysis should
proceed based on those assumptions. For one, the Martha Wright-Reed Act
added to section 276(b)(1)(A) the requirement that the Commission's
compensation plan ``ensure that . . . all rates and charges'' for
intrastate and interstate IPCS are ``just and reasonable,'' putting
that legal mandate on equal footing with the preexisting ``fair
compensation'' requirement and bringing it within the purview of the
express preemption provision in section 276(c). In addition, the
Commission sought comment and developed a record on whether to prohibit
site commission payments and preempt contrary state and local laws and
regulations in light of that updated legal authority. Because we
conclude that we are substantively and procedurally in a position to
prohibit site commission payments and preempt contrary state and local
laws and regulations, the better course is to approach the used and
useful analysis
[[Page 77296]]
without the presumption of inevitability that so significantly
influenced the Commission's prior assessment of legally mandated site
commission payments.
290. Nothing in the record persuades us that legally mandated site
commissions ``reflect[ ] the actual costs associated with the provision
of [IPCS], separate and apart from the legal compulsion for facilities
to collect it.'' Particularly given that we no longer find it warranted
to assume the existence or continuation of such a legal requirement, we
agree that ``[t]here is nothing with respect to [a] statutory
obligation that makes such a charge `used and useful' under the
Commission's obligation to ensure rates are just and reasonable.'' We
also see no evidence or support for the notion that legally mandated
site commissions flow through to benefits in IPCS such that users of
those services should be expected to bear those costs under a used and
useful analysis. This is particularly true where state or local law or
regulation requires site commission payments as a percentage of gross
(i.e., total) revenue for a group of services that is not restricted to
IPCS. It is difficult to see how a site commission based on such a
formula reflects any relation to the underlying costs of providing
IPCS. But, on the record before us, it is similarly difficult to tie
other types of site commissions, such as those framed as per-call
charges, to any legitimate IPCS costs. In sum, the record is devoid of
any indication that legally mandated site commissions are set at levels
that are designed simply to reimburse correctional facilities for the
costs they incur in making IPCS available such that their payment would
affect the provision of IPCS and that IPCS customers reasonably should
bear those costs.
291. If anything, the record suggests that legally mandated site
commission payments support activities that quite clearly do not enable
the provision of the underlying communication services that IPCS
consumers pay for. In Tennessee, for example, per-call fees are
required to be remitted by the provider to the state treasurer on a
quarterly basis ``and credited to a special account in the state
general fund designated as the local correctional officer training fund
to be used exclusively to fund certification training provided through
the institute for local correctional personnel within the state.'' It
is difficult to see how funding officer certification training enables
or improves the communications services incarcerated people and their
loved ones use. Indeed, the training of correctional officials is
plainly necessary to the general operation of a correctional
institution separate and apart from the presence or absence of IPCS.
And yet, at least under Tennessee law, IPCS consumers are subsidizing
these efforts. To allow such costs to be recovered from those consumers
would be ``at odds with well-established principles of ratemaking'' and
directly ``impact our ability to ensure just and reasonable . . .
rates.'' Thus, given the state of the record and the requirements of
the Martha Wright-Reed Act, we conclude that because there is no
indication that legally mandated site commission payments provide any
benefit to incarcerated people and their loved ones who are the
customers of IPCS, they are not used and useful in the provision of
IPCS.
292. In concluding that legally mandated site commissions are not
used and useful in the provision of IPCS, we are mindful of the
Commission's observations in the 2021 ICS Order, that in jurisdictions
that require legally mandated site commission payments, ``facilities
have no immediate ability to entertain offers from providers that wish
to supply a facility without paying the site commission demanded'' and
that ``absent further legislative process to amend the government
statute, facilities would appear to have to forgo making
[communication] services available.'' Rather than taking that as a
given, today we exercise our authority to preempt state and local laws
and regulations that require IPCS providers to pay site commissions
associated with IPCS. Such preemption will alleviate the concerns the
Commission expressed in the 2021 ICS Order as to both IPCS providers
and the correctional facilities themselves. Thus, both providers and
correctional facilities may pursue commission-free contracts without
running afoul of contrary legal mandates.
(b) Prudent Expenditure Analysis
293. Finally, because the forgoing analysis demonstrates that site
commissions are not used and useful in the provision of IPCS, that is
sufficient to exclude them from just and reasonable rates. At times,
the Commission might elect to consider the prudence of investments and
expenses as an independent alternative to its decision that particular
costs are not used and useful. But the prudent investment inquiry does
not provide an alternative ground for including costs in provider rates
when they are not used and useful. In other words, once we have
determined that site commissions are not used and useful, any provider
payment of site commissions is necessarily imprudent.
(iii) Prohibiting Site Commission Payments Associated With IPCS
294. Having found that site commissions do not recover costs or
expenses used and useful in the provision of IPCS, we now evaluate the
interplay between that determination and the broader regulatory
framework specified by the Communications Act. We conclude that the
payment of site commissions, whether legally mandated or contractually
prescribed, would create a conflict between the dual statutory
requirements of ensuring fair compensation for providers and just and
reasonable IPCS rates and charges for consumers and providers.
Accordingly, pursuant to sections 276(b)(1)(A), 276(c), and 201(b) of
the Communications Act, we reconcile these statutory objectives by
prohibiting site commissions associated with intrastate, interstate,
international, jurisdictionally mixed, and jurisdictionally
indeterminate audio and video IPCS.
295. Our Approach Best Reconciles Our Statutory Duties In Light of
the Harms of Site Commissions. The Martha Wright-Reed Act added to
section 276(b)(1)(A) the requirement that the Commission's compensation
plan ``ensure that . . . all rates and charges'' for intrastate and
interstate IPCS are ``just and reasonable.'' Thus, section
276(b)(1)(A), as amended by the Martha Wright-Reed Act, requires the
Commission to establish a compensation plan to ensure that all IPCS
providers are ``fairly compensated'' and that ``all [IPCS] rates and
charges are just and reasonable.'' As stated above, we view the ``just
and reasonable'' and ``fairly compensated'' requirements as
interdependent and complementary statutory mandates, which we must
fully implement. Section 201(b) of the Communications Act also requires
just and reasonable rates and charges for interstate and international
IPCS.
296. Site commissions interfere with the Commission's ability to
implement these dual requirements of determining ``just and
reasonable'' rates and charges and ``fair[ ] compensat[ion]'' for IPCS
providers. To the extent that IPCS providers face a legal necessity to
pay site commissions, the D.C. Circuit's decision in GTL v. FCC
suggests that the fair compensation requirement in section 276(b)(1)(A)
requires that IPCS providers be able to recover those payments through
IPCS rates and charges. We thus reject the argument that a prohibition
on site commissions
[[Page 77297]]
is beyond the scope of the Commission's authority. As we explain, the
prohibition on site commissions best reconciles our statutory duties to
ensure both just and reasonable rates and charges for IPCS consumers
and providers and fair compensation for IPCS providers. Yet, allowing
that recovery would lead to unjust and unreasonable IPCS rates and
charges given our finding that providers' site commission payments are
expenditures that are not used and useful in the provision of IPCS.
Even beyond that, payment of site commissions introduces competitive
distortions in the bidding market for IPCS. Thus, site commissions
create conflict between the fair compensation and the just and
reasonable requirements in section 276(b)(1)(A). The policy harms
arising from site commissions likewise frustrate the Commission's
ability to alleviate competitive distortions and foster greater
competition in the IPCS marketplace.
297. Site commissions historically have been a major driver of
excessive IPCS rates. As discussed above, site commissions have exerted
``upward pressure'' on IPCS rates because by proposing higher rates,
IPCS providers can afford to pay more in site commissions to
correctional authorities. Site commission payments, however, are used
to fund a ``wide and disparate'' range of activities, including
educational and welfare programs, the state or local government's
general revenue fund, the costs of maintaining correctional
institutions, and, in extreme cases, campaign contributions or
entertainment for correctional officials. And ``most or all'' of these
functions ``have no reasonable and direct relation to the provision of
ICS--a historical assessment confirmed by our used and useful analysis
above. Because IPCS consumers ``are forced to absorb . . . site
commissions in the rates they pay,'' they ``subsidize everything from
inmate welfare programs, to salaries and benefits of correctional
facilities, states' general revenue funds, and personnel training.'' As
the Commission has observed, ``[p]assing the non-ICS-related costs that
comprise site commission payments . . . onto inmates and their families
. . . result[s] in rates . . . that are not just and reasonable.''
298. Site commissions also historically have distorted the IPCS
marketplace. Commenters and the Commission have long recognized that
site commissions undermine the integrity of the bidding process for
IPCS. In a properly functioning marketplace, correctional institutions
would select an IPCS provider based on the quality of service the
provider offered and on the rates the provider would charge. But the
interests of correctional institutions diverge from the interests of
consumers using IPCS. While IPCS consumers are interested in lower
prices for IPCS, correctional institutions have an incentive to
maximize the revenues they receive from providing access to the
correctional facility to an IPCS provider. IPCS providers historically
responded to this state of affairs in the marketplace by increasing
IPCS rates, thereby enabling them to offer higher site commissions and
increasing the likelihood they would be chosen as the monopoly provider
for a facility for the term of a multi-year contract. This market
distortion results in higher IPCS rates for consumers, providing an
additional, independent basis for concluding that site commissions are
unjust and unreasonable.
299. Securus acknowledges that ``[t]here is no question that site
commissions continue to play a role in the bidding process'' but argues
that the Commission ``overstates the case . . . to the extent it claims
that awards always go to the provider offering the highest site
commissions.'' Securus provides a study based on data analyzing ``the
contribution of price and site commissions to the scoring criteria
utilized'' by facilities. The study finds that ``[c]ontrary to what we
may expect based on suggestions that the entity bidding the highest
site commission payment always or generally wins, the bid evaluation
criteria used by most RFP issuers reflect a strong preference for bids
with high levels of performance on the qualitative aspects of a bid,
not necessarily based on price or site commission proposals.'' Securus
also argues that site commissions ``may actually play some role in
fostering competition by enabling smaller providers to successfully
compete against larger providers, particularly for smaller facilities
that may rely more on site commission revenue.''
300. At the same time, however, Securus argues that ``[t]o the
extent site commissions continue to distort competition in the bidding
market, the solution is to further regulate site commissions.'' We
agree. Even if site commissions do not always or exclusively result in
problematic distortions in the IPCS marketplace, the record confirms
that site commissions create incentives ``for facilities to award
contracts based primarily (or at times, exclusively) on site commission
offerings.'' Even if some correctional facilities do not fully act on
those incentives at given points in time, as long as those incentives
remain the risk of marketplace distortions will persist based on
factors--i.e., correctional facility decision-making preferences--that
are outside the control of the Commission and IPCS consumers. And where
facilities do act on those financial incentives, even assuming there
was perfect competition in the IPCS bidding market, ``[t]he benefit
would be to . . . providers and to facilities offering the contracts,
not to the people paying.'' The solution, then, is to remove the
incentive to award contracts ``based in whole or in part on site
commissions.'' That is what we do today. Doing so ``leave[s] facilities
with only service-based, competitive market factors [to consider] when
awarding contracts.'' This, in turn, pushes providers to ``compete to
provide the best service for the lowest consumer cost as the only way
to distinguish themselves and win bids.'' Our action to alleviate
competitive distortions in the IPCS market through the elimination of
site commission payments thus advances the purpose of section 276 to
``promote competition among payphone service providers and promote
widespread deployment of payphone services to the benefit of the
general public.'' Securus argues that the Commission has not accounted
for the market effects of eliminating site commissions. Securus
explains that ``the Commission has pointed to the existence of site
commissions and their alleged impact on the IPCS market as creating the
conditions that require additional regulation.'' In eliminating site
commissions, Securus contends that the Commission ``removes the
condition purportedly justifying regulation over the IPCS market and
then proceeds to continue and expand upon the regulation that is
allegedly justified by the existence of site commissions that are now
removed.'' Securus argues that the Commission ``should at least proffer
some justification why permanent, highly prescriptive rate regulation
must continue even though it believes it has created the conditions for
a properly functioning, competitive marketplace.'' While the Commission
has identified site commissions as ``the primary reason'' IPCS rates
can be unjust and unreasonable, the Commission has never stated that
they are the only reason that IPCS rates can be unjust and
unreasonable. Indeed, the Commission has specifically recognized that
rate regulation is needed because ``no competitive forces within the
[correctional] facility constrain providers from charging rates that
far exceed the costs . . . providers incur in
[[Page 77298]]
offering service.'' Rate regulation is thus clearly necessary to, for
example, prevent IPCS providers from overcharging consumers even in the
absence of site commission payments. To suggest that the elimination of
site commissions should be the basis for reduced rate regulation also
ignores abusive ancillary service charging practices that have
historically plagued the industry.
301. There is significant support in the record for our approach.
In 2021, recognizing ``the difficulties and complexities . . . in
accounting for and isolating what portion of site commission payments
may be related to legitimate facility costs,'' the Commission sought
comment on prohibiting providers from entering contracts requiring the
payment of site commissions and preempting state and local laws and
regulations requiring providers to pay site commissions. A variety of
commenters support a prohibition, primarily based on their view that a
rule against site commissions is needed to ensure just and reasonable
IPCS rates and charges. As Securus observes, ``the use of site
commissions is inimical to the shared goals of all stakeholders of
improving access to, and affordability of, communications services for
incarcerated persons and their families.'' Many of these same
commenters support the Commission's identification of options in 2021
to prohibit IPCS providers from entering into contracts requiring the
payment of site commissions and preempting state and local laws and
regulations requiring site commissions.
302. Consistent with the record and the Martha Wright-Reed Act, we
prohibit all site commission payments associated with IPCS. To
effectuate this prohibition we take two actions consistent with 2023
and 2021. First, we preempt state and local laws and regulations
allowing or requiring site commission payments for IPCS. And second, we
prohibit IPCS providers from entering into contracts allowing or
requiring the payment of site commissions. The scope of site
commissions subject to the prohibition and preemption include all
monetary payments, including lump-sum or upfront payments, payments
based on percentage of revenue, and per-call payments associated with
IPCS or associated ancillary services. It also includes all in-kind
payments and contributions providers may offer associated with IPCS or
associated ancillary services, including technology grants, equipment,
training programs, or any other payment, gift, or donation offered by
an IPCS provider to a correctional institution or a representative of a
correctional institution.
303. In contrast, a minority of commenters oppose further site
commission reforms. Praeses and NCIC argue that rate caps sufficiently
protect consumers against unjust and unreasonable rates while also
allowing facilities to recover the costs they incur in providing IPCS.
Praeses contends that the Commission should continue to adhere to its
historically ``permissive position'' towards site commissions in which
it concluded that it did not need to prohibit or otherwise regulate
site commissions. NCIC and Praeses further assert that the continued
use of rate caps ``will necessarily lead to fair and reasonable site
commissions'' and will protect consumers from unjust and unreasonable
rates and charges. And the National Sheriffs' Association asserts that
preempting laws requiring site commissions and prohibiting providers
from entering into contracts requiring the payment of site commissions
is not ``appropriate'' because ``facilities incur costs to allow ICS in
jails and . . . jails require commission payments in connection with
allowing ICS in jails.''
304. Restricting the recovery of IPCS provider payments to
correctional facilities through regulated rates is at best a highly
imperfect tool so long as site commissions are allowed to be paid. For
one, as discussed above, if IPCS providers face a legal obligation to
pay site commissions, the D.C. Circuit's decision in GTL v. FCC
suggests that the fair compensation requirement in section 276(b)(1)(A)
requires that IPCS providers be able to recover those payments through
IPCS rates and charges. That scenario leaves the door open to the full
panoply of excessive rates and charges along with the marketplace
distortions that historically have plagued IPCS.
305. Marketplace distortions also are likely to remain so long as
site commissions are permissible. Rate caps set based on industry-wide
average costs are likely to leave headroom for additional profit by
providers with below-average costs. As long as site commissions remain
permissible, such providers can use that headroom to, in effect, pay
higher site commissions by using excess revenues earned from regulated
rates. This is likely to result in marketplace distortions similar to
those historically experienced in the IPCS marketplace, as discussed
above--i.e., correctional facilities choosing providers for paying
higher site commissions, and the benefits of efficiency improvements
and cost savings thus flowing to correctional facilities and winning
bidders but not IPCS consumers. These harmful effects would be even
more extreme if, rather than relying on industry-wide average costs,
the Commission relied on costs just from higher-cost or highest-cost
providers. These effects could be mitigated to some degree by the use
of more granular categories of providers when averaging costs and
setting rates if that resulted in less disparity in the range between
the highest- and lowest-cost providers included in the category. But to
go further in mitigating those concerns would require a shift to
provider-by-provider, ongoing rate-of-return rate regulation. However,
the Commission has previously disavowed any willingness to conduct
full-blown rate regulation for individual IPCS providers, nor is it
clear how viable provider-by-provider rate-of-return regulation even
would be in a context where rates typically are specified in multi-year
RFPs rather than biennial (or more frequent) tariff filings. Thus, we
think it is all too likely that, despite our best efforts, distortions
in the IPCS marketplace would remain as long as the traditional array
of site commission payments are allowed.
306. We also disagree with Praeses that the Commission should
continue to decline to prohibit site commissions as it has in the past.
Praeses contends that the Commission has ``repeatedly and expressly
declined to interfere with the often complex and multi-faceted private
contractual negotiations between Providers and Facilities.'' It relies
on statements in the 2013 ICS Order, 2015 ICS Order, and the 2016 ICS
Reconsideration Order, in which the Commission concluded that it did
not need to prohibit or otherwise directly regulate site commissions.
But those decisions were a function of the circumstances and limited
record before the Commission during that period. The Commission's
previous decisions not to prohibit site commissions do not foreclose it
from doing so on the basis of the circumstances and the record before
it now, particularly in light of the requirements of the Martha Wright-
Reed Act to ensure that IPCS providers are fairly compensated and that
all rates and charges are just and reasonable. As our analysis above
indicates, we now are persuaded that simply regulating recovery of site
commission payments through regulated rates to the extent permitted by
the ``fair compensation'' standard--while leaving IPCS providers free
to pay site commission as a general matter--would not be ``just and
reasonable.'' Nor are we persuaded that
[[Page 77299]]
it would be workable to address such concerns through case-by-case
evaluations. Our analysis indicates that legally-mandated site
commissions lead to the full array of harms historically experienced in
this context. And even in the case of contractually-prescribed site
commissions, case-by-case evaluations would be burdensome for everyone
involved--including the Commission and private parties. Further, it is
not clear how such case-by-case evaluations could be sufficiently
timely to avoid delaying the typical RFP process yet still guard
against the risk of marketplace distortions before they occur. Thus, we
conclude that our bright-line prohibition on site commissions reflects
the best way of dealing with these problems.
307. Our Approach Is Consistent with GTL v. FCC. Some commenters
argue that the Commission's actions today conflict with GTL v. FCC.
These commenters contend that the D.C. Circuit ``expressly recognized
that site commissions are legitimate costs of ICS providers'' and thus
the Commission could not categorically exclude them from its rate
methodology. This has led some to argue that ``[t]he Commission must .
. . ensure its rate caps allow ICS providers to recover all of their
costs associated with the payment of site commissions.'' But, as the
Wright Petitioners explain, the decision in GTL v. FCC ``was made
against background conditions in which ICS providers were actually
paying those site commissions pursuant to negotiated agreements to
provide ICS at facilities or in compliance with legal mandates'' and
not in a regulatory environment in which site commissions were
prohibited. The court had ``no occasion to consider the Commission's
authority to prohibit negotiated agreements . . . or its authority to
preempt state and local requirements.'' And the court ``never suggested
that the Commission lacked authority to take such actions to fulfill
its statutory mandate.'' By precluding providers from paying site
commissions altogether, we eliminate the factual predicate--the payment
of site commissions as a condition precedent to providing IPCS--which
led the court in GTL to hold that site commissions could not be wholly
excluded from the Commission's ratemaking calculus. Thus, we conclude
that GTL v. FCC is no bar to our actions today, particularly since our
rate cap calculations incorporate, to the extent the record permits,
the costs facilities incur that are used and useful and/or necessary in
providing IPCS. And, in any event, the Martha Wright-Reed Act is an
intervening development that reinforces the Commission's mandate to
ensure just and reasonable rates and charges for IPCS that also afford
fair compensation.
308. Our Approach Accounts For Legitimate Interests of Correctional
Facilities Associated with IPCS. Separate from the issue of site
commission payments, the rate caps we adopt today recognize, consistent
with the record, that correctional facilities may incur some used and
useful costs in their provision of IPCS. Because we allow providers to
reimburse correctional facilities for the used and useful costs, if
any, they incur, we have thus afforded correctional facilities an
avenue to facilitate recovery of their used and useful costs associated
with allowing access to IPCS in their facilities.
309. We emphasize that the actions we take today in eliminating
site commissions apply to all correctional institutions: prisons,
larger and smaller jails, and other correctional institutions. The
facility-related rate components that the Commission adopted in the
2021 ICS Order apply only to prisons and jails with average daily
populations of 1,000 or more incarcerated people. Because of the
``concern raised in the record about facility size variations in
facility-related costs for [smaller] jails'' the Commission left the
existing $0.21 per-minute rate cap in effect for facilities whose
average daily populations were below 1,000 incarcerated people. Thus,
providers serving these relatively small jails could continue to
recover site commissions as long as they did not exceed the $0.21 cap
applicable to those jails. The Commission, however, sought comment in
2021 on facility costs for jails with average daily populations below
1,000, and asked commenters to ``provide detailed descriptions and
analyses of the cost drivers'' for these facilities. The National
Sheriffs' Association and Pay Tel assert that facility costs per
incarcerated person are higher for smaller jails than for larger jails.
They urge continued reliance on the National Sheriffs' Association 2015
survey to justify higher facility-related cost recovery for smaller
jails, but otherwise provide no responsive data. For the reasons
discussed above, we reject continued reliance on the National Sheriffs'
Association 2015 survey. Because we now can accommodate smaller jails
in the same overall regulatory approach as prisons and larger jails, it
best advances our statutory mandates of ensuring just and reasonable
rates and charges consistent with fair compensation for IPCS providers
for us to do so.
310. To the extent commenters' arguments against the elimination of
site commissions are premised on the loss or depletion of state
programs currently funded by site commission payments, the ``just and
reasonable'' standard of the Communications Act does not contemplate
funding such programs that are unrelated to the provision of IPCS
through regulated rates, regardless of how worthy those programs may
be. In support of site commissions, ViaPath contends that ``IPCS
`providers who are required to pay site commissions as a condition of
doing business have no control over the funds once they are paid,'
which does not change the record evidence that site commissions are a
cost of providing IPCS.'' ViaPath has not articulated why provider-
control over such funds after payment has been made has any bearing on
why the practice is beneficial, nor why the practice should continue.
We find this argument unpersuasive. And, in any event, we expect that
the implementation period applicable to the reforms we adopt today will
be sufficient to allow state and local governments time to adjust to an
environment without site commissions.
311. Given the availability of reimbursement from IPCS providers
for costs that are used and useful in the provision of IPCS, consistent
with our statutory duties, we see no reason to believe that
correctional institutions will decrease or limit access to IPCS as some
commenters assert. Some commenters allege that ``if compensation for .
. . providers and Sheriffs is not adequate, access to ICS is likely to
decrease'' or be disallowed. In NCIC's view, ``there is almost no
scenario in which a correctional agency could lose site commission
revenue and continue to provide the critical services and programs
funded by that revenue.''
312. We find it highly unlikely that correctional facilities would
limit or deny access to IPCS as a result of the elimination of site
commission payments. As the Commission has observed, there are ``well-
documented benefits, for communities and correctional institutions
alike, in allowing incarcerated people access to'' IPCS. Further, the
record contains no indication that IPCS deployment has decreased or
been eliminated in states that have eliminated site commissions. And,
as the Commission has previously noted, arguments premised on a denial
or reduction of access to IPCS are likely to elicit an ``intensely
negative backlash.'' Thus, we see no reason to believe that
correctional institutions
[[Page 77300]]
will curtail or eliminate access to IPCS simply because they no longer
receive site commission payments. In fact, given the generally lower
rates we adopt in the Report and Order, it is reasonable for us to
anticipate increased usage of IPCS once the Report and Order takes
effect.
(a) Preempting State and Local Laws and Regulations Requiring or
Allowing Site Commissions Associated With IPCS
313. As part of the overall prohibition on site commissions we
adopt today, we preempt state and local laws and regulations allowing
or requiring the payment of monetary site commissions or the provision
of in-kind site commissions associated with the provision of IPCS
regulated pursuant to sections 201(b) and 276(c) of the Communications
Act and consistent with 2023 and 2021. As explained above, our actions
preempting state and local laws and regulations allowing or requiring
the payment of monetary site commissions or the provision of in-kind
site commissions associated with the provision of IPCS and prohibiting
IPCS providers from entering into contracts requiring or allowing them
to pay site commissions are necessary because they best ensure the
harmonization of both the ``just and reasonable'' and ``fair
compensation'' mandates of section 276(b)(1)(A). Our actions not only
benefit individual ratepayers, but also the public and the IPCS
marketplace more generally. As an additional matter, we note that our
actions also give timely effect to our findings under section
276(b)(1)(A), consistent with Congress' objective as revealed by its
establishment of a statutory deadline for the Commission to
``promulgate any regulations necessary to implement this Act and any
amendments made by this Act.'' It is well established that ``a federal
agency may pre-empt state law only when and if it is acting within the
scope of its congressionally delegated authority.'' Section 201(b) of
the Communications Act gives the Commission authority over interstate
and international IPCS. And as explained above, the Martha Wright-Reed
Act amended section 276(b)(1)(A) to clearly establish the Commission's
authority to ensure just and reasonable rates for intrastate as well as
other jurisdictional inmate communications. The Martha Wright-Reed Act
also expanded the Commission's section 276 authority over ``payphone
service'' in correctional institutions to include ``advanced
communications services,'' as defined in sections 3(1)(A), 3(1)(B),
3(1)(D), and new (3)(1)(E) of the Communications Act. Furthermore,
while the Martha Wright-Reed Act decisively expands the scope of the
Commission's authority over IPCS, it retained section 276(c), which
provides 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.''
Further, the record also reflects that a variety of stakeholders
believe the Commission should preempt state and local laws that require
or allow site commissions.
314. We find that state and local laws and regulations authorizing
or requiring site commissions conflict with the Commission's
regulations adopted in the Report and Order to ensure just and
reasonable rates and charges for IPCS and fair compensation for IPCS
providers under section 276(b)(1)(A) and to ensure just and reasonable
rates and charges for interstate and international IPCS under section
201(b) of the Communications Act. In particular, state and local laws
and regulations requiring or allowing providers to pay site commissions
associated with IPCS lead to unjust and unreasonable rates and charges
insofar as consumers are being charged for non-IPCS costs where
providers pay site commissions. Those laws and regulations also lead to
unjust and unreasonable rates and charges through the resulting
marketplace distortions. Such laws and regulations are therefore in
conflict with the ``just and reasonable'' requirement in section
276(b)(1)(A) of the Communications Act and our implementation of those
mandates through regulations adopted in the Report and Order.
Precluding providers from paying site commissions pursuant to state and
local law will enable us to address one of the ``primary reason[s]
[IPCS] rates are unjust and unreasonable.'' We therefore agree with
those commenters arguing that the Commission should exercise its
authority to preempt laws and regulations that require providers to pay
site commissions associated with IPCS.
315. At the same time, commenters point out that preemption is
relevant to ensuring that IPCS providers are fairly compensated as
required by section 276(b)(1)(A), as interpreted by the D.C. Circuit in
GTL v. FCC. Commenters explain that ``[a]s long as local governments
are allowed to require site commissions as a condition of providing
service . . . GTL teaches that section 276 and section 201 require that
they be recoverable.'' Separately, experience has shown that when
recovery of site commissions associated with IPCS is constrained by
regulation, correctional facilities can attempt to maintain those
revenue streams by shifting the nature of site commission arrangements.
Absent a prohibition on site commissions, we anticipate correctional
facilities seeking increasingly creative ways to maintain monetary or
in-kind payments, with the Commission (and IPCS providers) playing an
endless game of `whack-a-mole' in an effort to enforce section
276(b)(1)(A)'s fair compensation mandate. Thus, preemption is
``preferable to the Commission's efforts to regulate . . . site
commissions through regulation of provider rates'' alone. Indeed,
according to Securus ``[d]irectly addressing site commissions through
preemption is . . . consistent with GTL.'' We agree.
316. Commenters have extensively reviewed the Commission's
authority to preempt site commissions in these proceedings. Prior to
the enactment of the Martha Wright-Reed Act, arguments regarding the
Commission's preemption authority focused on the Commission's
jurisdiction over interstate and international communications under
section 2(a) of the Communications Act. Other commenters have argued
that section 276(c) gives the Commission ``express authority'' to
preempt inconsistent state requirements. The Wright Petitioners explain
that ``[s]ection 276 of the Communications Act gives the Commission the
authority to preempt state requirements that are `inconsistent with the
Commission's regulations.' '' As explained below, we are persuaded that
the Communications Act provides the Commission the necessary authority
to adopt regulations addressing the problems caused by site commissions
in the IPCS marketplace, which requires preemption of state and local
laws and regulations requiring or authorizing the site commission
payments.
317. Preemption of State Requirements. Section 276(c) contains an
express preemption provision upon which we rely to preempt state laws
and regulations that allow or require the payment of site commissions
associated with IPCS. Because we conclude that section 276(c) provides
the Commission the necessary preemption authority, we decline to invoke
the Commission's authority under section 253, including the preemption
provision of section 253(d). Section 276(c) states 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.'' As part of the reforms we
adopt today, we adopt a rule prohibiting the payment of site
commissions as set forth in the
[[Page 77301]]
Report and Order. When a federal law contains an express preemption
clause, the courts ``focus on the plain wording of the clause, which
necessarily contains the best evidence of Congress' preemptive
intent.'' The Supreme Court has explained that where a ``statute
`contains an express pre-emption clause,' we do not invoke any
presumption against pre-emption but instead `focus on the plain wording
of the clause, which necessarily contains the best evidence of
Congress' pre-emptive intent.' '' Independently, even assuming arguendo
that any preemption analysis should begin ``with the assumption that
the historic police powers of the States [are] not to be superseded by
the Federal Act unless that was the clear and manifest purpose of
Congress''--particularly where ``Congress has `legislated . . . in a
field which the States have traditionally occupied' ''--it nonetheless
remains the case that ``Congress' intent, of course, primarily is
discerned from the language of the pre-emption statute and the
`statutory framework' surrounding it.''
318. Here, the express preemption clause in section 276(c) applies
to ``State requirements'' to the extent they are ``inconsistent with
the Commission's regulations.'' This is consistent with how the
Commission has applied section 276(c) in the past. The term ``state
requirements'' in express preemption provisions has been interpreted by
the Supreme Court more broadly than terms like ``laws or regulations.''
For example, the Court has concluded that ``[a]bsent other indication,
reference to a State's `requirements' in an express preemption
provision includes its common-law duties.'' By contrast, the Court has
found that references to state ``laws or regulations'' preempt only
``positive enactments.'' Consistent with this precedent, we find that
the reference to ``state requirements'' in section 276(c) is broad
enough to reach state laws and regulations requiring or allowing the
payment of site commissions associated with IPCS.
319. The surrounding statutory framework also demonstrates that
preemption of laws and regulations requiring or allowing site
commissions is authorized by section 276(c). Section 276(b)(1)(A)
always has been clear that the Commission has authority to establish
compensation plans for ``intrastate and interstate'' payphone calls,
and as explained above, the Martha Wright-Reed Act amended that
provision to clearly establish the Commission's authority to ensure
just and reasonable rates for all communications now encompassed by
section 276(d). And as we have found, the regulations authorized under
section 276(b)(1)(A) to ``establish a compensation plan'' to achieve
the goals of fair compensation for providers and just and reasonable
rates and charges for consumers and providers requires more of the
Commission than the simple act of capping rates and charges. In
amending section 276, Congress left the express preemption provision in
section 276(c) unaltered, revealing Congress' understanding that
Commission regulations implementing the full scope of amended section
276(b)(1)(A) would be subject to that express preemption provision.
320. This point was further emphasized by the amendment of section
2(b) of the Communications Act to expressly exempt section 276 from the
preservation of state authority over intrastate communications under
that provision. In the Martha Wright-Reed Act, Congress expressly
considered the potential effect of that statute on other laws, and only
disclaimed the intent to ``modify or affect any'' state or local law
``to require telephone service or advanced communications services at a
State or local prison, jail, or detention facility or prohibit the
implementation of any safety and security measures related to such
services at such facilities.'' That narrow express preservation of
existing law--which is not implicated by our preemption here--came
against the backdrop of Commission and judicial grappling with the
interplay between site commission payments and IPCS rates and charges,
as well as longstanding Commission consideration of whether and when to
prohibit and preempt site commissions. The statutory context provided
by section 276 as a whole, coupled with the Martha Wright-Reed Act,
thus reinforces our understanding of the scope of preemption
encompassed by section 276(c).
321. Relatedly, we conclude that preemption is consistent with
section 4 of the Martha Wright-Reed Act, which states that nothing in
that Act ``shall be construed to modify or affect any Federal, State,
or local law to require telephone service or advanced communications
services at a State or local prison, jail, or detention facility or
prohibit the implementation of any safety and security measures related
to such services at such facilities.'' We preempt only those state laws
and regulations that require or permit the payment of monetary site
commissions or the provision of in-kind site commissions associated
with IPCS. To the extent federal, state, or local laws or regulations
require IPCS to be provided to incarcerated people at state or local
correctional facilities, such laws and regulations are not preempted by
our actions here. Similarly, we do not prohibit the implementation of
any safety and security measures related to IPCS at any state or local
correctional facility. As we explain above, section 4 of the Martha
Wright-Reed Act is ``not intended to interfere with any correctional
official's decision on whether to implement any type of safety and
security measure that the official desires in conjunction with audio or
video communications services.'' Consistent with that interpretation,
here we preempt state laws and regulations requiring or allowing the
payment of site commissions associated with IPCS, a pre-emption that we
conclude is necessary to achieve the statutory requirements of section
276(b)(1)(A) to ensure just and reasonable rates and charges for IPCS
consumers and fair compensation for providers. Correctional officials
remain free to implement desired safety and security measures.
322. The conflict between IPCS providers' payment of site
commissions and the ``just and reasonable'' mandate implicates the
Commission's oversight of interstate and international IPCS under
section 201(b), as well. The Supreme Court has explained that ``[e]ven
where Congress has not completely displaced state regulation in a
specific area, state law is nullified to the extent that it actually
conflicts with federal law.'' Such a conflict can arise when a law
``stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.'' While there are no ``precise
guidelines'' governing when state law creates such an obstacle, the
Supreme Court has acknowledged that federal agencies ``have a unique
understanding of the statutes they administer and an attendant ability
to make informed determinations about how state requirements may pose''
such an obstacle. Additionally, the Supreme Court has found that the
inquiry into whether state law poses an obstacle sufficient to allow
preemption requires consideration of ``the relationship between state
and federal laws as they are interpreted and applied, not merely as
they are written.'' One situation in which the Supreme Court has
determined that state law can interfere with federal goals is when such
a law is at odds with Congress's intent to create a uniform system of
federal regulation.
323. Furthermore, a federal agency acting within the scope of its
authority may preempt state law. ``[I]n a situation
[[Page 77302]]
where state law is claimed to be pre-empted by federal regulation, a
`narrow focus on Congress' intent to supersede state law [is]
misdirected,' for `[a] pre-emptive regulation's force does not depend
on express congressional authorization to displace state law.' ''
Instead, the question is whether Congress has delegated the authority
to act in a sphere, and whether the agency has exercised that authority
in a manner that preempts state law. The Supreme Court also has
explained that ``an `assumption' of nonpre-emption [sic] is not
triggered when the State regulates in an area where there has been a
history of significant federal presence.''
324. The Commission undoubtedly has authority under section 201(b)
to ensure that rates and practices for and in connection with certain
interstate and international incarcerated people's communications
services are just and reasonable. The Commission's actions in this
regard also involve an area that has long been subject to extensive
federal regulation. Since the original enactment of the Communications
Act, section 2(a) has made clear that the Communications Act applies to
``all interstate and foreign communication by wire or radio,'' and
section 201(b) has directed the Commission to ensure that rates and
practices for and in connection with interstate and foreign
communication services are just and reasonable. We thus find that
section 201(b) provides us with independent authority, alternative to
section 276, to preempt laws and regulations allowing or requiring site
commissions associated with interstate and international
telecommunications for incarcerated people.
325. Preemption of Local Requirements. Our analysis of our
preemptive authority is somewhat different when it comes to local
requirements that may permit or require the payment of site commissions
because section 276(c) does not expressly reference ``local'' laws or
regulations. Nonetheless, we conclude that principles of conflict
preemption allow us to also preempt local laws and regulations
requiring or authorizing IPCS providers to pay site commissions
associated with IPCS. As an initial matter, we note that ``for purposes
of the Supremacy Clause, the constitutionality of local ordinances is
analyzed in the same way as that of statewide laws.'' Thus, relevant
precedent concerning state law is equally applicable to local law.
326. As a threshold matter, we find that local laws and regulations
requiring or authorizing site commissions stand as an obstacle to our
regulation of IPCS. We explained above the conflict that occurs as a
result of state requirements, and that conclusion is not altered if the
requirements originate instead at the local level. Consequently, under
sections 276(b)(1)(A) and 201(b)--coupled with standard conflict
preemption principles--we preempt local laws and regulations that
permit or require site commissions.
327. Our conflict preemption determination is bolstered by the
enactment of the Martha Wright-Reed Act, which modified the
Communications Act in a manner that we see as intended to establish a
uniform system of federal regulation for all IPCS under section
276(b)(1)(A). As explained above, the Martha Wright-Reed Act was
enacted against the regulatory backdrop of--and in response to--the GTL
v. FCC decision, where the D.C. Circuit found that the Commission had
unreasonably relied on the ``just and reasonable'' standard of section
201(b) when implementing the differently-worded language of section
276. Insofar as that left the Commission to rely on section 201(b) to
ensure IPCS rates and charges were not too high, it generally precluded
the Commission from addressing excessive intrastate IPCS rates. The
Martha Wright-Reed Act's amendment of section 276(b)(1)(A) gave the
Commission clear authority to ensure just and reasonable rates under
that provision, which always has encompassed both intrastate and
interstate services. Given the legal and regulatory backdrop, that
persuades us that Congress envisioned a uniform system of federal
regulation as far as IPCS rates and charges are concerned.
328. Scope of Preemption. At this time, our preemption extends only
to those state and local laws and regulations that permit or require
IPCS providers to pay site commissions associated with IPCS, and does
not extend to site commissions associated with other services or
activities insofar as the effect of those site commissions can be
segregated from the IPCS subject to Commission regulation. To the
extent there are laws and regulations that permit or require the
payment of site commissions associated with non-IPCS services,
including nonregulated services, we do not preempt those laws or
regulations, provided that neither the costs of such services nor any
site commissions associated with them are passed on to IPCS consumers
through IPCS rates or charges, and that the offering of non-IPCS
services is not a precondition to offering IPCS at a correctional
institution. Consistent with this policy, if there are state
requirements that encompass both IPCS and non-IPCS services, our
preemption actions extend only to the part of such requirements
implicating IPCS. At this time, we are not persuaded that site
commissions in those scenarios are likely to directly affect the
reasonableness of rates and charges and fairness of compensation for
the IPCS we regulate, either directly (through inflated IPCS rates and
charges) or indirectly (through competitive distortions in the IPCS
marketplace). Our approach flows from the conditions we adopt to ensure
that such site commissions do not implicate IPCS. And it also flows in
part from the broad scope of IPCS subject to our regulation, which, at
this time, leaves a much smaller universe of services or activity
potentially subject to site commissions, which we currently expect to
have minimal potential to distort the IPCS marketplace, particularly
given the segregation from IPCS that we adopt. Should circumstances
warrant, we can revisit this issue in the future.
329. Additionally, as explained above, today we adopt IPCS rate
caps that account for all used and useful IPCS costs, whether they are
incurred by providers or correctional facilities. To facilitate the
ability of correctional facilities to recover used and useful IPCS
costs they may incur, we permit IPCS providers to reimburse
correctional facilities for the used and useful costs they prudently
incur in the provision of IPCS, as calculated in accordance with the
standards set forth in the Report and Order. Such reimbursements fall
outside the scope of what we describe as ``site commissions'' under the
regulatory framework of the Report and Order. To the extent state laws
or regulations allow or require correctional facilities to obtain
reimbursement from providers for those costs that fall outside the
scope of our understanding of ``site commissions'' (whatever
terminology the state law or regulation might use), we do not preempt
such laws or regulations.
(b) Prohibiting IPCS Providers From Entering Into Contracts Allowing or
Requiring Them To Pay Site Commissions Associated With IPCS
330. As part of the prohibition against paying site commissions we
adopt today, we also prohibit providers from entering into contracts
allowing or requiring them to pay site commissions associated with
IPCS, consistent with 2021. We agree with the Wright Petitioners that
doing so is ``the simplest and most-wide ranging method to ensure IPCS
rates are just and reasonable and fairly compensate providers.'' As
discussed above, we
[[Page 77303]]
have concluded that the Martha Wright-Reed Act provides us with limited
authority to regulate IPCS providers' practices, classifications, and
regulations (collectively, ``practices'') associated with IPCS as a
necessary part of our obligation to establish a compensation plan to
ensure fair compensation to providers and just and reasonable rates and
charges for consumers. This authority derives from section
276(b)(1)(A)'s mandate that we establish a compensation plan addressing
IPCS and, in certain circumstances, we also exercise section 201(b)'s
grant of authority over practices associated with interstate and
international IPCS. We address these two sources of authority below.
331. In defining the contours of the prohibition on paying site
commissions, we mirror the carve-outs specified in the case of our
preemption of laws and regulations permitting or requiring site
commissions. In particular, IPCS providers remain free to contract for
the provision of non-IPCS services with correctional institutions
following our actions today. However, under no circumstances may
providers enter into a contract with a correctional facility for the
provision of IPCS where, as a condition precedent to providing IPCS,
the provider must agree to pay a site commission of any kind. To the
extent IPCS providers contract with correctional institutions for the
provision of non-IPCS services, neither the costs of those services nor
any site commissions associated with them may be passed on to consumers
through IPCS rates or charges. Such limitations are necessary to
protect IPCS consumers from unjust and unreasonable IPCS rates and to
ensure that providers receive fair compensation, consistent with
section 276(b)(1)(A) as amended by the Martha Wright-Reed Act, as well
as our obligation to ensure just and reasonable rates under section
201(b). Finally, consistent with our policy of allowing IPCS providers
to reimburse correctional facilities for their used and useful costs
consistent with the standards in the Report and Order, we do not bar
contractual provisions that require such reimbursement.
(i) Section 276(b)(1)(A)
332. We conclude that the practice of paying site commissions
undermines the Commission's ability to establish just and reasonable
rates for IPCS consumers and providers and ensure fair compensation for
providers. To best ensure fair compensation and just and reasonable
rates and charges for IPCS, we thus adopt a compensation plan under
section 276(b)(1)(A) that precludes IPCS providers from paying site
commissions associated with IPCS subject to that provision. As we
explain above, the section 276 requirement that the Commission
establish a compensation plan to ensure fair compensation for IPCS
providers and just and reasonable rates and charges for consumers
necessarily carries with it the authority to prescribe regulations
governing providers' practices to the extent those practices relate to
the rates and charges applied to consumers. This authority not only
allows us to preclude practices that work to undermine the rate and fee
caps we set but also allows us to adopt affirmative requirements that
help ensure that rates and charges as implemented are just and
reasonable as applied to consumers. Accordingly, in specifying a
compensation plan to implement section 276(b)(1)(A), as amended by the
Martha Wright-Reed Act, we find it necessary to preclude providers from
entering into contracts that require or allow them to pay site
commissions associated with IPCS.
333. Commenters highlight that the Commission ``has exercised
similar authority over telecommunications service providers by barring
their entry into contracts, or enforcing existing contracts, with
entities over whom the Commission has no direct jurisdiction in order
to promote the Commission's regulatory objectives.'' In the context of
multiple tenant environments, the Commission has long prohibited
providers of certain communications services from entering or enforcing
agreements with property owners that grant the provider exclusive
access and rights to provide service to the multiple tenant
environment. Multiple tenant environments are ``commercial or
residential premises such as apartment buildings, condominium
buildings, shopping malls, or cooperatives that are occupied by
multiple entities.'' The Commission has also adopted rules prohibiting
telecommunications carriers and multichannel video programming
distributors from entering into or enforcing certain types of revenue
sharing agreements with the owners or multiple tenant environments.
And, in the international settlements context, the Commission has
limited the settlement rates that U.S. carriers may pay foreign
carriers to terminate international traffic originating in the United
States. In each of these cases, the Commission's regulation of the
entities subject to its jurisdiction has affected entities over which
the Commission has no direct jurisdiction. More importantly, where
challenged by parties claiming that the Commission was impermissibly
regulating parties over which it has no jurisdiction, the D.C. Circuit
has upheld the Commission's actions.
334. While we prohibit IPCS providers from entering into contracts
requiring or allowing them to pay site commissions associated with
IPCS, we recognize that there are likely enforceable contracts that
currently require the payment of site commissions. In such
circumstances, we rely on contractual change of law provisions.
Commenters and the Commission have noted that IPCS contracts
``typically include change of law provisions.'' We expect that our site
commission reforms adopted in the Report and Order ``constitute
regulatory changes sufficient to trigger contractual change-in-law
provisions that will allow [IPCS] providers to void, modify or
renegotiate aspects of their existing contract to the extent necessary
to comply'' with our reforms today. As we explain, providers and
correctional authorities have long been on notice that the Commission
might act to prohibit site commissions. To the extent, however, that
providers ``have entered into contracts without change-of-law
provisions,'' those providers ``did so with full knowledge'' that the
Commission might act to prohibit site commissions, and have been on
notice that the Commission could act in this regard, particularly in
light of 2021. Thus, we believe that relevant change-of-law provisions
will enable parties to amend their contracts to the extent necessary
and we strongly encourage parties to work cooperatively to resolve any
issues. To the extent contractual disputes arise, including in
circumstances where contracts do not have change-of-law provisions,
parties may seek resolution of those disputes in court. We reject
NCIC's suggestion that our actions ``abrogate'' contracts. To the
contrary, even for contracts that lack change-of-law provisions, the
failure to pay a site commission required by a still-valid contract
term is an issue to be resolved through a breach of contract action in
court if the parties cannot negotiate a resolution on their own. In
addition, since 2013, the Commission has proceeded with IPCS reforms
notwithstanding the potential interplay with existing IPCS agreements.
Continuing to do so here is consistent with Commission precedent,
including our decision to defer to change-of-law provisions or
otherwise-applicable legal frameworks governing the enforcement of
existing contracts.
335. Praeses contends that section 276(b)(1)(A) does not give the
Commission authority over ``private contractual payments'' by IPCS
[[Page 77304]]
providers and correctional institutions. Praeses focuses on statements
from GTL v. FCC in which the D.C. Circuit explained that section 276
``merely'' directs the Commission ensure that providers are fairly
compensated. Praeses' comments, however, do not account for the
amendments to section 276(b)(1)(A) made by the Martha Wright-Reed Act.
Rather than focusing solely on fair compensation, the Martha Wright-
Reed Act added the requirement that the Commission ensure that all
rates and charges are just and reasonable. We find that the best way to
reconcile both requirements is to prohibit site commission payments as
part of our compensation plan implementing section 276(b)(1)(A). This
persuades us that we have authority to prohibit providers from entering
into contracts requiring or permitting the payment of site commissions.
Separately, however, we are unpersuaded by Praeses' argument given the
Commission's history, detailed above, of exercising similar authority
over providers in the past.
(ii) Section 201(b)
336. Separately, we conclude that paying site commissions is an
unjust and unreasonable practice pursuant to our authority under
section 201(b) and the impossibility exception. Section 201(b) of the
Communications Act provides an independent statutory basis for
regulating providers' practices for or in connection with the
interstate and international telecommunications services that are
within our section 201(b) authority. Acting pursuant to section 201(b)
of the Communications Act, the Commission has generally found carrier
practices unjust and unreasonable where necessary to protect
competition and consumers against carrier practices for which there was
either no cognizable justification or where the public interest in
banning the practice outweighed any countervailing policy concerns. As
explained above, allowing recovery of site commissions would lead to
unjust and unreasonable IPCS rates and charges given our finding that
the providers' site commission payments are expenditures that are not
used and useful in the provision of IPCS. Even beyond that, payment of
site commissions introduces competitive distortions in the bidding
market for IPCS. Although some commenters argue that site commissions
may enable correctional facilities to recover the costs they incur in
making IPCS available, as we have discussed above, these commenters
have not been able to precisely articulate these costs to the
Commission. Over the course of the many years that the Commission has
been examining this issue, commenters have failed to come forward with
meaningful data regarding the portions of providers' site commission
payments that may be used and useful. Under these circumstances, we
find no countervailing policy concerns or cognizable justification for
the practice of paying site commissions given their detrimental effects
on consumers and on the IPCS market in general. For these reasons, we
conclude that the practice of paying site commissions associated with
interstate and international telecommunications services is an unjust
and unreasonable practice and prohibit it.
337. Our section 201(b) authority also enables us to regulate
practices associated with other IPCS services within our section 276
authority to the extent those practices cannot be practicably separated
from practices applicable to services within our section 201(b)
authority, pursuant to the impossibility exception. For example, when
the Commission exercised its section 201(b) authority to prohibit
carriers from entering or enforcing exclusivity provisions in contracts
with residential building owners, the Commission applied that ban even
where agreements affected the viability of competitors offering bundles
of services--of which telecommunications services were only one part--
in order to fully address practices for or in connection with the
telecommunications services directly subject to section 201(b). Thus,
the Commission's section 201(b) authority extends to the full range of
``payphone service[s],'' as defined in section 276(d), to the extent
the practices for or in connection with the payphone services outside
of our separate section 201(b) authority cannot be separated from
practices for or in connection with the payphone services within this
authority.
338. The record contains no evidence that IPCS providers can
practicably separate the practice of paying site commissions in
connection with the interstate and international payphone services
within our section 201(b) authority from the practice of paying site
commissions for or in connection with the other payphone services
within the Commission's section 276(d) authority, including advanced
communications services, in order to isolate the harms of such
practices. As explained above, payment of site commissions undermines
just and reasonable rates not only when providers directly increase
IPCS rates to pass through site commission payments, but also through
the marketplace distortions that result. There is no evidence that the
marketplace distortions arising from the practice of paying site
commissions can practicably be separated into interstate, intrastate,
international or non-section 201(b) regulated services components.
Indeed, as the Wright Petitioners explain, ``IPCS providers cannot
practicably separate the general practices that may apply broadly to
IPCS providers, which all offer both interstate and intrastate
services, themselves into interstate and intrastate components.''
Further, we anticipate that enough aggregate revenues are potentially
at stake for those services outside of our direct authority under
section 201(b) that even allowing carriers' continued payments of site
commissions only associated with those services is likely to lead to
marketplace distortions that undermine our ability to ensure just and
reasonable interstate and international IPCS rates. Thus, consistent
with the precedent discussed above, we conclude that this
inseverability allows us to prohibit the practice of paying site
commissions in connection with intrastate, interstate, international,
jurisdictionally mixed, or jurisdictionally indeterminate audio or
video IPCS under section 201(b).
7. Safety and Security Costs
339. Historically, the Commission has recognized that
communications services for incarcerated people are different than
communications services offered to the general public due, in part, to
certain safety and security measures needed to adapt communications
services to the carceral context. The Martha Wright-Reed Act not only
requires that the Commission adopt a compensation plan ensuring that
IPCS rates and charges are just and reasonable, but also mandates that
in determining those rates the Commission ``shall consider costs
associated with any safety and security measures necessary to provide''
IPCS. We find that, in order to give effect to the requirements of the
Martha Wright-Reed Act, we must apply the Commission's traditional
ratemaking standard, the used and useful standard, to determine whether
any costs of safety and security measures are properly recoverable
through regulated rates. Based on the record and data submitted in
response to the 2023 Mandatory Data Collection, we determine that
safety and security costs related to compliance with CALEA, as well as
those incurred for communications security services, are generally
appropriate for recovery through regulated IPCS rates, consistent with
the Martha Wright-Reed Act. In the instructions to the 2023 Mandatory
Data
[[Page 77305]]
Collection, WCB and OEA divided potential safety and security measures
into seven categories and requested that providers submit data
allocating their safety and security costs among the categories. We
also find that other types of safety and security measures, including
law enforcement support services, communications recording services,
communications monitoring services, and voice biometrics services, are
generally not appropriate for recovery through regulated IPCS rates.
Finally, learning from the 2023 Mandatory Data Collection, we make
modest adjustments in our rate-setting process to ensure that the costs
of all safety and security measures that are properly included in
regulated IPCS rates are, in fact, recoverable.
a. Background
340. Prior to the 1984 breakup of AT&T, pricing for communications
for incarcerated people largely mirrored that of the broader market.
After the breakup, however, former safety and security service
providers began providing communications services, using ``their
security and surveillance services to carve out this niche micro-market
for themselves.'' As Worth Rises explains, since that time, ``the
corrections landscape [has seen] the widespread adoption of an
increasing array of security and surveillance services, with IPCS
consumers bearing the costs.'' As the 2023 Mandatory Data Collection
amply demonstrates, costs broadly understood as reflecting safety and
security measures now represent the largest single component of
reported costs in the IPCS industry.
(i) The Commission's Historical Consideration of Safety and Security
Measures
341. The Commission first began to assess the role safety and
security measures play in the provision of inmate calling services in
the 1990s. In a 1996 declaratory ruling, it determined the proper
regulatory treatment of certain safety and security measures such as
call blocking, restricting called parties, and call tracking under the
then-relevant regulatory framework. The then-relevant regulatory
framework, commonly known as the Computer II framework, distinguished
between two types of computer processing applications offered over
common carrier transmission facilities: ``basic services,'' which were
defined ``as the provision of `pure transmission capability over a
communications path that is virtually transparent in terms of its
interaction with customer supplied information''; and ``enhanced
services,'' which were defined as services that ``employ computer
processing applications that act on the format, content, code, protocol
or similar aspects of the subscriber's transmitted information; provide
the subscriber additional, different, or restructured information; or
involve subscriber interaction with stored information.'' In analyzing
these functionalities, the Commission framed such measures as services
that ``essentially help[ ] corrections officials to determine whether a
transmission path may be established.'' The Commission compared
``screening and blocking features employed by correctional officials to
monitor inmate telephone usage'' to ``services offered in the network
that help customers screen or pre-select callers for acceptance or
rejection do not go beyond providing a basic transmission channel and
facilitating the customer's use of that transmission channel.'' The
Commission viewed these services as contributing to the provision of
the underlying communications service. In that same timeframe, however,
the Commission began to raise concerns about the costs of safety and
security measures when it sought comment on whether it should implement
``rate caps, to remedy high charges to the billed party for collect
calls initiated by prison inmates.'' The Commission described possible
security measures as including call blocking, approved number lists,
call length limitations, and total calls permitted to specific
individuals. It contemplated that ``[p]risons may also need to be able
to monitor calls and even tape them.''
342. A few years later, in the 2002 Pay Telephone Order (67 FR
17009, April 9, 2002), the Commission began to address the increasing
number and type of safety and security measures available to
correctional facilities and their associated costs. While the
Commission considered traditional security measures, such as call
blocking, restrictions on three-way calling, and approved number lists,
the Commission addressed, for the first time, security services that
primarily served basic law enforcement functions such as providing
``detailed, customized reports for correctional facility officials.''
The record then before the Commission showed a shift from selective,
targeted surveillance services to requirements for ``listening and
recording capabilities for all calls.'' The Commission also addressed
the issue of the costs of these measures. While recognizing that ``the
provision of inmate calling services implicates important security
concerns and, therefore, involves costs unique to the prison
environment,'' the Commission nonetheless declined to raise rates
relating to inmate calling services based on safety and security costs,
expressing the hope that lower rates might lead to ``more cost-
effective security protections.'' Raising concerns about the imposition
of ``expensive security costs,'' the Commission sought comment on
``inmate calling service practices that may serve legitimate security
needs but have the unintended, and perhaps unnecessary, effect of
increasing the costs incurred by inmates and their families.'' The
Commission likewise sought comment on ``alternatives to collect calling
in the inmate environment that might result in lower rates for inmate
calls while continuing to satisfy security concerns.''
343. In the 2013 ICS Order, the Commission again acknowledged the
importance of security features in the provision of inmate calling
services, while emphasizing that ``ICS rate reform has not compromised
the security requirements of correctional facilities.'' In establishing
``conservative'' interim ICS rates, the Commission, on the record
before it, took into account ``security needs as part of the ICS rates
as well as the statutory commitment to fair compensation.'' These
interim rates were based on the requirement of fair compensation in the
language of section 276 at the time. Based on data in the record, the
interim rates ``demonstrate[d] the feasibility of providing ICS on an
on-going basis to hundreds of thousands of inmates without compromising
the levels of security.'' The record led the Commission to include in
the rates the costs of ``sophisticated security features--including
biometric caller verification based on voice analysis, and
sophisticated tracking tools for law enforcement.'' While traditional
security measures were still deployed virtually universally, the record
indicated that additional security features had become available and
were primarily designed to assist law enforcement in discharging its
core functions, including investigative work, gathering evidence,
storing call recordings for use in court proceedings, and preparing
reports for facilities. The Commission was cognizant of the ``critical
security needs of correctional facilities,'' particularly used to aid
law enforcement in the successful prosecution of ``hundreds'' of
crimes. The Commission nevertheless added the limiting principle that
security costs must have an appropriate nexus to the provision of ICS
to be recoverable through ICS rates. Such
[[Page 77306]]
costs likely included the costs of security features inherent in the
network, including ``the costs of recording and screening calls, as
well as the blocking mechanisms the ICS provider must employ to ensure
that inmates cannot call prohibited parties.'' The Commission also
referenced ``more sophisticated security features'' such as ``biometric
caller verification based on voice analysis and sophisticated tracking
tools for law enforcement.'' While the Commission ultimately included
the costs of advanced security features such as continuous voice
biometric identification in the interim rates it adopted, it did so on
the basis of limited data on industry costs since the Commission had
not yet conducted a data collection to obtain comprehensive industry
data. Contrary to what Securus claims, we do not improperly reverse
findings in the 2013 ICS Order regarding safety and security costs with
our actions today. Given the nature of the highly circumscribed record
at the time of the 2013 ICS Order, it does not follow--and the Martha
Wright-Reed Act does not say--that the Commission must include safety
and security costs it has previously included in the rates in the rate
caps it adopts today pursuant to the Martha Wright-Reed Act. In any
event, as set forth in the analysis that follows, the record now before
us, which is far more robust than the record that existed at the time
of the 2013 ICS Order, persuades us to reach a different conclusion
regarding certain safety and security measures than the Commission may
have reached previously.
344. By 2020, the Commission had begun to give increased scrutiny
to the role safety and security measures played in the provision of
IPCS and the extent to which cost recovery for the increasing array of
security and surveillance measures was appropriate through inmate
calling services rates. In the 2020 ICS Notice, the Commission sought
comment on whether ``safety and surveillance costs in connection with
inmate calling services should be recovered through inmate calling
service rates.'' It noted that ``[a]s public interest groups [had]
pointed out, correctional facilities did not pass on the costs of other
security measures, such as scrutinizing physical mail, to incarcerated
people and their families.''
345. In the 2021 ICS Order, the Commission observed that the record
provided in response to the 2020 ICS Notice did not allow it to
determine ``whether security and surveillance costs that correctional
facilities claim to incur in providing inmate calling services are
`legitimate' inmate calling services costs that should be
recoverable.'' Some commenters encouraged the Commission to exclude all
such costs, arguing that security services were ``not related to the
provision of communication service and provide[d] no benefit to
consumers'' and ``not related to [the] `communications functions' '' of
ICS. Certain providers and the National Sheriffs' Association called
for the opposite, arguing that ``correctional facilities incur
administrative and security costs to provide incarcerated people with
access to [inmate calling services]'' and that these costs should be
recovered through calling rates. The Commission found, however, that
the data provided in support of this position did not allow it to
``isolate legitimate telephone calling-related'' costs from ``general
security and surveillance costs in correctional facilities that would
exist regardless of inmate calling services.'' Based on the
unreliability of the data provided, the Commission found that it had no
``plausible method'' for determining recoverable security and
surveillance costs.
346. At the same time, in 2021, the Commission sought comment on
security and surveillance costs and specifically whether some security-
related costs should ``more appropriately be deemed to be general
security services that are added on to inmate calling services but not
actually necessary to the provision of the calling service itself.''
The Commission asked whether providers are in fact providing ``two
different services,'' including ``a communication service that enables
incarcerated people to make telephone calls'' and ``a separate security
service that aids the facility's general security efforts but would
more appropriately be paid for directly by the facility rather than by
the users of the communications service who receive no benefit from
these security features that are unnecessary to enable them to use the
calling service.'' The Commission also referenced a representation made
by one provider listing the basic security measures required to provide
service and acknowledging that ``anything more than this is not
required for secure calling and that additional products are `gold-
plated offerings.'' The provider suggested that ``a basic phone system
requires security related to identifying the incarcerated individual
placing a call, restricting who that individual can and cannot call,
providing the called party with the ability to accept, reject, or block
the caller, and providing the facility with the ability to monitor and
record calls.'' As a result, the Commission sought comment on
``legitimate'' security features, how to distinguish such features from
security relating to the facility as a whole, and how to isolate and
quantify such costs. In 2022, the Commission reiterated these requests
for comment and asked about the extent to which ``the security and
surveillance costs that providers [had] included'' in their responses
to the Third Mandatory Data Collection ``relate[d] to functions that
meet the used and useful standard.''
(ii) The Martha Wright-Reed Act and Safety and Security
347. Section 3(b)(2) of the Martha Wright-Reed Act requires that
the Commission, in implementing the Act including promulgating
regulations and determining just and reasonable rates, ``consider costs
associated with any safety and security measures necessary to provide''
IPCS. As a result, in 2023, the Commission sought comment on this
directive. It requested comment on how the term ``necessary'' should be
interpreted, particularly asking whether it should follow D.C. Circuit
precedent finding that ``necessary'' ``must be construed in a fashion
that is consistent with the ordinary and fair meaning of the word,
i.e., so as to limit `necessary' to that which is required to achieve a
desired goal.'' The Commission also asked for detailed, specific
comment on which safety and security measures are ``necessary,'' as
contemplated by the Act, to the provision of IPCS and why those
measures are ``necessary.'' Finally, it sought comment on whether it
``should interpret the Martha Wright-Reed Act's use of the term `safety
and security' as having the same or different meaning as the term
`security and surveillance' previously used in this proceeding.''
(iii) 2023 Mandatory Data Collection
348. Pursuant to a delegation of authority from the Commission, WCB
and OEA gathered data to attempt to understand what safety and security
measures were offered by IPCS providers, as well as their functions and
costs, among other purposes. The data collection required that the
providers isolate the costs they incur in providing safety and security
measures from their other costs, and then allocate their safety and
security measure costs into seven categories on a company-wide level,
with an accompanying narrative description of the services included in
each category. Providers were required ``to allocate the annual total
expenses they incurred in providing safety and security measures among
seven categories using the provider's best
[[Page 77307]]
estimate of the percentage of those expenses attributable to each
category.'' The providers were then required to allocate all reported
safety and security costs at the facility level. Additionally, they
were required to allocate the expenses in each category to four types
of services--audio IPCS, video IPCS, ancillary services, and other
products and services.
349. These seven categories were designed to ``provide a
comprehensive and workable framework for dividing safety and security
measure costs into reasonably homogenous groupings that `should capture
all [safety and] security costs,' particularly with the addition of
multiple examples of costs for each category.'' A catch-all category
for any costs that did not fit within the other categories was also
added to ensure completeness. The categories are: (1) CALEA compliance
measures, (2) law enforcement support services, (3) communications
security services, (4) communication recording services, (5)
communication monitoring services, (6) voice biometrics services, and
(7) other safety and security measures.
350. Providers were required to submit information regarding safety
and security measures in both cost data format and narrative responses
to an excel and word template. For purposes of the collection, ``safety
and security measures'' were defined as:
[A]ny safety or security surveillance system, product, or service,
including any such system, product, or service that helps the Facility
ensure that Incarcerated People do not communicate with persons they
are not allowed to communicate with; helps monitor and record on-going
communications; or inspects and analyzes recorded communications.
Safety and Security Measures also include other related systems,
products, and services, such as a voice biometrics system, a personal
identification number system, or a system concerning the administration
of subpoenas concerning communications. The classification of a system,
product, or service as a Safety and Security Measure does not mean that
it is part of a Provider's IPCS-Related Operations.
351. Providers were then instructed to provide a variety of
information, including whether safety and security measures differed
among facilities, contracts, audio/video services, or other factors.
Total annual expenses, billed revenues, company-wide financial
information, and service-specific financial information were requested,
as well as allocations of such data among the seven safety and security
categories. Providers were instructed ``to report in the Excel
template, for each category, the Company's best estimate of the
percentage of its total Annual Total Expenses for Safety and Security
Measures that is attributable to the measures within that category.''
Safety and security measures were to be identified and described based
on these categories.
352. Providers' responses give for the first time a comprehensive
picture of the dominant role that the costs of safety and security
measures now play in the IPCS industry's cost structure. Reported
safety and security measure costs now represent the single largest
category of reported costs. The industry reported total safety and
security costs of approximately {[REDACTED]{time} . The providers' data
show that those costs now represent approximately {[REDACTED]{time} of
all reported IPCS costs and that reported safety and security measure
costs significantly exceed the total costs of providing both audio and
video IPCS combined. Audio and video IPCS combined represent
approximately {[REDACTED]{time} of all reported IPCS costs, inclusive
of site commissions. On a total industry cost per-minute basis,
reported safety and security costs are {[REDACTED]{time} , while
reported costs of providing IPCS are {[REDACTED]{time} .
353. The reported data also indicate that different-sized providers
incur markedly different safety and security measure costs on a per-
minute basis. For example, the two largest providers reported incurring
{[REDACTED]{time} per minute in costs for safety and security
measures, whereas the range for the rest of the industry is between
$0.001 and $0.006 per minute for audio IPCS and between $0.0001 and
$0.024 per minute for video IPCS.
(b) Our Approach To Considering Safety and Security Costs Under Section
3(b)(2) of the Martha Wright-Reed Act
354. Before reaching our assessment of providers' separately
reported costs of safety and security measures, we address the
statutory interpretation underlying our consideration of these matters
under the Martha Wright-Reed Act and the Communications Act.
(i) The Directive To ``Consider'' Safety and Security Costs Under
Section 3(b)(2) of the Martha Wright-Reed Act
355. Pursuant to section 3(b)(2) of the Martha Wright-Reed Act, we
will evaluate as part of our ratemaking exercise under section
276(b)(1)(A) of the Communications Act ``costs associated with any
safety and security measures necessary to provide'' IPCS. This is a
familiar task of the sort the Commission has long undertaken when
seeking to ensure just and reasonable rates, where it has evaluated
costs and expenses of various kinds for which providers sought recovery
through regulated rates. The Commission likewise has historical
experience with similar assessments of safety and security measures
raised in the IPCS context specifically. Our conclusion that section
3(b)(2) of the Martha Wright-Reed Act simply informs how we approach
our traditional rate-setting function--rather than establishing some
kind of unique or anomalous approach specific to safety and security--
flows from the statutory text and context, along with the relevant
regulatory history that served as the backdrop to the Martha Wright-
Reed Act.
356. In 2023, the Commission sought comment on the meaning of
``shall consider'' as used in section 3(b)(2) of the Martha Wright-Reed
Act, and on what discretion, if any, that phrase gives the Commission
in its ratemaking determinations. We agree with Pay Tel that the word
``shall,'' is mandatory, not permissive, such that we ``must consider
costs associated with necessary safety and security measures in setting
just and reasonable rates.'' We conclude that the requirement that we
``consider'' the costs of safety and security measures means that we
must ``reach . . . express and reasoned conclusion[s]'' regarding such
costs--as relevant here, as part of the process of determining just and
reasonable rates for IPCS. Consistent with prior interpretations of
similar statutory language, we do not read section 3(b)(2) of the
Martha Wright-Reed Act as a directive mandating the recovery of the
costs of all safety and security measures identified by providers or
facilities; or as inherently requiring the Commission ``to give any
specific weight'' to such costs as a statutory matter. Instead, the
text of that provision merely requires us to examine available evidence
regarding ``costs associated with any safety and security measures
necessary to provide'' IPCS along with the various other cost claims we
review as part of our overall approach to ensuring just and reasonable
rates and charges for IPCS that also yield fair compensation for
providers. Contrary to the National Sheriffs' Association's
characterization of 2023, nowhere in that Notice did we interpret
``consider'' to mean that we are ``required to treat all safety and
security costs identified by providers . . . as costs recoverable
through rates for communications services for incarcerated people.''
Rather, the Commission sought comment on
[[Page 77308]]
whether such an interpretation would be appropriate, or whether
another, contrary interpretation would be correct.
357. Commenters generally support this interpretation. As the
Public Interest Parties explain, Congress did not say that the
Commission `must include' or `shall allow for the recovery of' the
safety and security costs claimed by IPCS providers. Instead, it
deferred to the Commission's expertise and discretion, requiring only
that it consider costs associated with safety and security measures
when developing rate caps. While the Commission must therefore consider
these costs, it is plainly not obligated to pass them through in the
rate caps ultimately adopted.
We agree with these views.
358. Our interpretation of section 3(b)(2) is reinforced by the
broader statutory context. In particular, section 4 of the Martha
Wright-Reed Act provides that nothing in that Act ``shall be construed
to . . . prohibit the implementation of any safety and security
measures related to [IPCS] services at [correctional] facilities.'' As
we explain above, when read together, section 3(b)(2) of the Martha
Wright-Reed Act is best understood as merely requiring the Commission
to evaluate such costs as part of its just and reasonable rate
analysis, while section 4 simply makes clear that, in directing the
Commission to develop a compensation plan to ensure just and reasonable
IPCS rates and charges, Congress did not intend to prohibit
correctional institutions from adopting policies that, in their
judgment, are needed to preserve safety and security.
359. Our understanding of section 3(b)(2) harmonizes it with the
broader regulatory history here, as well. Considering costs associated
with any safety and security measures necessary to provide IPCS as part
of our used and useful analysis reflects a continuation of the sort of
analyses the Commission has long undertaken in the IPCS context. And
even apart from that particular sort of evaluation, the Commission
otherwise also has long been involved in assessing the technological
relationship between communications service and safety and security
measures associated with IPCS. For example, in the 2013 ICS Order, the
Commission explained that it would ``likely'' find it appropriate to
include costs--including some safety and security costs--``that are
closely related to the provision of interstate ICS'' in setting rates.
And, in 2021, to help it determine the extent to which certain security
and surveillance costs may be recovered through calling services rates,
the Commission sought comment on the ``types of security and
surveillance functions, if any, [that] are appropriately and directly
related to inmate calling.'' Thus, the focus of the Commission's
inquiry has been to identify costs associated with safety and security
measures that have a sufficient nexus to IPCS to justify recovery of
the relevant costs or expenses through IPCS rates.
360. The Commission's evaluation of the nexus between safety and
security measures and the provision of IPCS evolved over time as the
industry's use of such measures increased. The Commission also has
grappled with limited data and record comment in attempting these
analyses. For instance, in setting interim rate caps in the 2021 ICS
Order, the Commission recognized that the record then before it made it
impossible to determine the extent to which security and surveillance
costs should be recovered through inmate calling services rates. The
Commission therefore sought comment in 2021 on the extent to which the
services that providers and facilities had identified as security-
related services should ``be deemed to be general security services
that are added onto inmate calling services but not actually necessary
to the provision of the calling service itself.'' The Commission also
sought comment in that Notice on methodologies that would help it
isolate and quantify ``calling-related security and surveillance costs
from general security and surveillance costs'' that providers and
facilities incur. In 2022 the Commission reiterated its requests for
comment that would help it identify, and quantify, the distinction
between safety and security measures directly related to the provision
of communications services in correctional institutions and the general
provision of safety and security in those institutions.
361. In sum, we read section 3(b)(2) simply to direct the
Commission to evaluate the evidence before it regarding the costs
associated with any safety and security measures necessary to provide
IPCS and make a reasoned judgment about whether and to what extent such
costs should be included in just and reasonable IPCS rates, consistent
with fair compensation for providers. This flows from the statutory
text and context, and represents a continuation of the ratemaking role
the Commission long has played in this context (and others).
362. In light of what we see as the best reading of section 3(b)(2)
of the Martha Wright-Reed Act, we are unpersuaded by arguments that, as
a statutory matter, we must allow recovery of all costs associated with
safety and security measures in IPCS rates. Some commenters
misunderstand section 3(b)(2) and argue that all safety and security
measures a facility identifies are automatically necessary and
recoverable through regulated rates by virtue of being selected by
``experts.'' The National Sheriffs' Association argues that ``[t]he
fact that a security or safety measure is implemented in connection
with IPCS service makes it a recoverable cost.'' We disagree with these
contentions. Although section 3(b)(2) requires the Commission to
``consider'' costs associated with safety and security measures
necessary in providing IPCS when determining just and reasonable rates,
commenters do not persuasively demonstrate that, as a textual matter,
this requires more than evaluating the available information in the
record and reaching a reasoned decision. Consequently, we reject
commenters' contrary interpretations insofar as they would, as a
statutory matter, necessarily require recovery through regulated IPCS
rates of all costs of safety and security measures ``necessary'' within
the meaning of section 3(b)(2), irrespective of the specific basis for
that ``necessary'' determination--whether giving preclusive weight to
correctional facilities' judgements, or some other level of weight, or
making the determination on other grounds. And as discussed above, our
reading of section 3(b)(2) best accords with the statutory context and
the relevant regulatory history. Indeed, contrary arguments would
require us to interpret section 3(b)(2) as establishing an anomalous
approach to ratemaking under the Communications Act that would, at
least with respect to the costs of safety and security measures,
effectively eliminate the role Congress intended the Commission to play
in determining just and reasonable rates and, instead, place that role
in the hands of the providers and facilities. While correctional
authorities certainly have expertise on safety and security as a
general matter, Congress has not vested the authority in them to decide
which safety and security costs should be recoverable in IPCS rates--
and a contrary reading of section 3(b)(2) that took the issue of safety
and security cost recovery through regulated IPCS rates out of the
Commission's hands and placed it in the control of providers and
facilities would raise private nondelegation concerns. The Constitution
limits the government's ability to empower a private entity ``to
regulate the affairs'' of other private parties. The Constitution
[[Page 77309]]
permits such an assignment of authority only if the entity
``function[s] subordinately'' to a federal agency and is subject to the
agency's ``authority and surveillance.'' Of course, correctional
authorities remain free to determine and implement whatever safety and
security measures they deem appropriate at the correctional facility.
Contrary to assertions made by FDC, nothing in the Report and Order
prevents facilities from implementing the safety and security measures
of their choice. But under the statutory scheme, it is for the
Commission to determine any extent to which the costs of such measures
are recoverable through regulated IPCS rates. We consequently reject
arguments that section 3(b)(2) of the Martha Wright-Reed Act requires
recovery of all costs associated with safety and security measures in
regulated IPCS rates.
(ii) The Scope of ``Safety and Security Measures'' Under Section
3(b)(2) of the Martha Wright-Reed Act
363. Section 3(b)(2) of the Martha Wright-Reed Act requires us to
consider costs ``associated with any safety and security measures
necessary to provide'' IPCS. In 2023, the Commission sought comment on
whether it ``should interpret the Martha Wright-Reed Act's use of the
term `safety and security' as having the same or different meaning as
the term `security and surveillance' previously used in this
proceeding.'' The Commission has at different times variously referred
to the universe of measures at issue as ``security measures,''
``security features,'' ``monitoring,'' ``security monitoring,'' and
``security and surveillance.'' The record before us is mixed. One
commenter suggests that ``safety and security'' differs from ``security
and surveillance'' such that ``it relieves the Commission of
considering surveillance measures at all.'' Others argue that ``[t]he
Commission should not interpret `safety and security' to mean something
different than the term `security and surveillance' previously used in
the Commission's IPCS proceedings.''
364. We find that the best interpretation of the two phrases is
that the ``security and surveillance'' measures of the sort that
historically have been the focus of this proceeding fall within the
scope of ``safety and security'' measures under section 3(b)(2), and
that we need not go further at this time to more precisely define
whether the two phrases are coextensive. The services previously at
issue in the Inmate Calling Services proceeding, such as call blocking,
recording, and monitoring, are now before us for consideration, and fit
within the scope of ``safety and security.'' Although there is no
express reference to ``surveillance'' measures in section 3(b)(2), the
Commission not only has considered such costs in the proceedings that
formed the backdrop for the Martha Wright-Reed Act, but at times
suggested that ``security and surveillance'' measures collectively
could be seen as involving ``security.'' Against that backdrop--and
absent more detailed textual arguments that the language ``safety and
security'' should not be read to encompass surveillance of the sort we
historically have considered--we find such surveillance measures fall
within the scope of ``safety and security measures'' under section
3(b)(2) of the Martha Wright-Reed Act. Because we do, in fact, consider
the relevant cost evidence in the record here that even arguably could
fall within the scope of costs of ``safety and security measures''
under section 3(b)(2), we find it unnecessary to more precisely define
the ultimate scope and contours of that statutory language at this
time.
(iii) Which ``Safety and Security Measures'' Are ``Necessary To
Provide'' IPCS Under Section 3(b)(2) of the Martha Wright-Reed Act
365. Section 3(b)(2) of the Martha Wright-Reed Act mandates that,
in ``promulgating regulations necessary to implement this Act and the
amendments made by this Act'' and ``determining just and reasonable
rates,'' the Commission ``shall consider costs associated with any
safety and security measures necessary to provide'' IPCS. In 2023, the
Commission requested comment on how it should interpret the term
``necessary.'' Consistent with judicial precedent interpreting other
statutory uses of the term ``necessary,'' we interpret the term
``necessary'' in section 3(b)(2) to mean ``that which is required to
achieve a desired goal.'' Commenters generally support this
interpretation. Commenters rely on both judicial precedent and
dictionary definitions of the term ``necessary.''
366. Securus points out that this interpretation of ``necessary''
``requires identification of a desired goal.'' We agree and find that
the Martha Wright-Reed Act identifies the ``desired goal.'' In
pertinent part, section 3(b) of the Martha Wright-Reed Act states that
in ``determining just and reasonable rates,'' the Commission ``shall
consider costs associated with any safety and security measures
necessary to provide'' IPCS. Those IPCS services, in turn, are
``telephone service and advanced communications services.'' Based on
this language, we conclude that, for a safety and security measure to
be necessary, it must be required ``for the provision of telephone
service and advanced communications services to incarcerated people.''
In other words, for a safety and security measure to be necessary, it
must be required for the provision of communications services in
correctional institutions.
367. Some commenters claim that the goal of safety and security
measures ``is to prevent communications services from being used to
commit or facilitate potential crimes, fraud, or other abuses.''
Commenters focusing on the relationship between safety and security
measures and the commission of crimes using IPCS fail to acknowledge
the benefits that increased communications have on the incarcerated
population and the resulting impact on facility safety. We do not
dispute, and indeed the Commission has long recognized, that
communications services for incarcerated people occur in a unique
context that ``implicate[] important security concerns.'' To that end,
the Commission has recognized that there are certain features that
ensure these communications services are available to incarcerated
people and can be used safely. The Martha Wright-Reed Act envisions
such an outcome by directing the Commission to consider safety and
security measures ``necessary to provide'' communications services ``in
correctional institutions.''
368. We part ways with ViaPath and other commenters who assert that
all safety and security measures are necessary to provide IPCS. The
Act's use of the limiting term ``necessary'' implies that Congress did
not intend all safety and security measures would be treated as
necessary but rather implicitly suggests some limitation on the scope
of measures the Commission is to consider. Thus, while we do not
dispute the notion that the general goal of safety and security
measures is to ensure that IPCS are used safely, it does not follow
that any and all safety and security measures are necessary to achieve
that goal as Securus and others would suggest. We find certain
commenters' invocation of ``contraband devices'' in connection with its
discussion of safety and security for IPCS to be inapt. The issue of
contraband devices in correctional institutions is the subject of a
separate proceeding at the Commission and is unrelated to our
implementation of the Martha Wright-Reed Act or the consideration of
the costs of necessary safety and security measures for inclusion in
just and reasonable rates for IPCS. Nevertheless, the record suggests
that one of reasons for the proliferation of contraband devices are the
high IPCS
[[Page 77310]]
rates that the families of incarcerated people cannot afford to pay. We
similarly find inapposite the National Sheriffs' Association's
contention that because ``security and safety measures protect inmates
by reducing crime within the facility,'' such services are necessarily
related to the provision of IPCS. Finally, we find inapposite some
providers' contentions that the Commission has rejected the protection
of the public as a permissible safety and security function. While
section 1 of the Communications Act makes clear that the Commission was
created to promote the public safety, among other purposes, those other
purposes include ``mak[ing] available, so far as possible . . .
communication service . . . at reasonable charges'' and promoting ``the
national defense.'' It does not follow that in mandating that we ensure
just and reasonable rates and charges for all incarcerated people's
communication services and that we promote the ``widespread deployment
of payphone services to the benefit of the general public,'' Congress
intended that IPCS consumers should finance any measure that generally
promotes public safety or the national defense. Instead, we think that
Congress intended a narrower focus, one in which we determine which
costs IPCS consumers can justly and reasonably be required to finance.
That type of determination is one well known to the Commission and
under which we must evaluate different types of capital costs and
expenses to determine which are recoverable through regulated rates.
369. Although commenters that address the interplay between the
``necessary'' standard and ``used and useful'' framework contend that
``necessary'' is more limited than ``used and useful,'' we need not
resolve that ultimate interplay here. Although we agree with commenters
that GTE Serv. Corp. is relevant precedent regarding the interpretation
of the term ``necessary'' in a statute, we are not persuaded that it
resolves the question of the interplay between ``necessary'' in section
3(b)(2) of the Martha Wright-Reed Act and the ``used and useful''
standard we employ when setting just and reasonable rates. We see no
indication on the face of that opinion that the Commission's use of the
terminology ``used or useful'' in assessing whether collocation
obligations should apply under section 251(c)(6) of the Communications
Act was intended to draw upon, or overlap with, the ``used and useful''
analysis historically employed in the ratemaking context.
Independently, the D.C. Circuit subsequently has read GTE Serv. Corp.
(as well as Iowa Util. Board) as fully consistent with the notion that
the statutory context is relevant when interpreting the term
``necessary.'' And without definitively resolving the interplay of
terms, we note that in a statutory context where Congress has directed
the Commission to merely ``consider'' certain costs when setting just
and reasonable rates, it would not be an absurd result for the universe
of costs subject to consideration to be broader than the universe of
costs ultimately allowed for recovery in regulated rates. Thus,
although we find GTE Serv. Corp. to be relevant to the interpretation
of ``necessary'' in a general way, we are not currently persuaded to
rely on it in the more specific manner that some commenters have
advocated. We disagree with Securus's claim that by not reaching a
determination on which safety and security costs are ``necessary'' to
the provision of IPCS, we have somehow ``render[ed] the entire
`necessary' provision found at section 3(b)(2) of the MWR Act
superfluous.'' As we have just explained, by considering all safety and
security costs, it necessarily follows that we have complied with the
Martha Wright-Reed Act's mandate that we ``consider costs associated
with any safety and security measures necessary to provide'' IPCS in
setting just and reasonable rates. Our mode of ``considering'' such
costs via the ``used and useful'' framework thus is distinct from the
identification of the universe costs to be considered in the first
instance--and our approach therefore does not conflate the terms
``necessary'' and ``used and useful'' as Securus contends. Consistent
with our conclusion in the prior section regarding the interpretation
of ``safety and security,'' we have no need to more precisely define
the ultimate scope and contours of the statutory language ``necessary''
at this time because we do, in fact, consider the relevant cost
evidence in the record here that even arguably could fall within the
scope of costs of safety and security measures required to be
considered as ``necessary'' under section 3(b)(2). Stated differently,
the cost of any safety and security measure that even arguably could be
viewed as necessary to the provision of IPCS--under any understanding
of ``necessary''--is a cost that we evaluate, and reach a reasoned
decision about, under the used and useful framework that we employ to
determine just and reasonable IPCS rates in the Report and Order.
Because we evaluate the costs of all safety and security measures that
could arguably fall within the scope of the term ``necessary,'' we do
not opine on the necessity of safety and security measures that
correctional facilities may implement.
(iv) Consideration of Safety and Security Costs Under the Used and
Useful Framework
370. While section 3(b)(2) of the Martha Wright-Reed Act requires
us to ``consider'' certain safety and security costs when determining
just and reasonable rates, as we explain above, we employ the ``used
and useful'' framework to determine what costs and expenses can be
recovered through just and reasonable IPCS rates. Consequently, our
consideration of safety and security costs as required by section
3(b)(2)--and with respect to other safety and security costs raised in
the record--occurs within the context of that ``used and useful''
analysis. In particular, we rely on the ``used and useful'' framework
and its associated prudent expenditure standard to assess which costs
should be included in the rate caps we adopt to determine just and
reasonable IPCS rates. In applying the used and useful standard, we
consider whether a cost ``promotes customer benefits, or is primarily
for the benefit of the carrier,'' as well as whether that cost was
prudently incurred. There are several elements of the Commission's used
and useful analysis. First, the Commission considers the need to
compensate providers ``for the use of their property and expenses
incurred in providing the regulated service.'' Second, the Commission
looks to the ``equitable principle that ratepayers should not be forced
to pay a return except on investments that can be shown to benefit
them.'' In this regard, the Commission considers ``whether the expense
was necessary to the provision of'' the services subject to the ``just
and reasonable'' standard. And third, the Commission considers
``whether a carrier's investments and expenses were prudent (rather
than excessive).'' We note that in considering whether expenses are
``necessary to the provision of'' the services subject to the ``just
and reasonable standard,'' the used and useful framework accords with
the Commission's prior analysis of safety and security measures which
sought to determine the extent to which those measures were ``directly
related to the provision of IPCS.''
371. Since 2002, the Commission has recognized the need to
``balance the laudable goal of making calling services available to
inmates at reasonable rates, so that they may contact their families
[[Page 77311]]
and attorneys, with necessary security measures and costs related to
those measures.'' Security measures that might have ``the unintended,
and perhaps unnecessary, effect of increasing the costs incurred by
inmates and their families'' have long concerned the Commission, as has
the lack of data to properly analyze these costs. For years,
stakeholders have debated whether various safety and security measures
are part of inmate calling services, as certain providers and the
National Sheriffs' Association contend, or are ``not related to the
provision of communication service'' and of ``no benefit to
consumers.'' Prior deficiencies in the record, including the absence of
any meaningful data on the costs incurred in providing safety and
security measures, have prevented the Commission from determining the
extent to which safety and security costs may be recovered through
inmate calling services rates.
372. We now have a sufficiently robust record to apply the used and
useful framework for the first time to the safety and security measures
that providers and the National Sheriffs' Association claim are part of
IPCS and to quantify, to the extent the data permit, the costs
providers and facilities incur in implementing those safety and
security measures. Though far from perfect, that record allows us to
establish zones of reasonableness that capture, for each rate cap tier,
the approximate range within which the providers' and facilities' used
and useful safety and security fall. The record provides discrete data
on the costs providers claim to incur in providing seven categories of
safety and security measures and allows us to make reasoned decisions
about whether the measures in each category are generally used and
useful in the provision of IPCS. And the record allows us to compensate
for the imprecisions in the data before us--regarding both providers'
and facilities' costs of providing used and useful safety and security
measures--in selecting ``just and reasonable'' rate caps from within
the zones of reasonableness. The record before us now thus provides far
greater detail on the nature and purposes of the safety and security
measures that providers deploy, the extent of that deployment, and the
measures' underlying costs than was previously available to the
Commission. Consistent with this expanded record, our analysis builds
upon and, in certain instances where appropriate, departs from the
Commission's prior analyses of safety and security measures in the
inmate calling services context.
373. As discussed below, application of the used and useful
framework to the safety and security costs that providers and the
National Sheriffs' Association claim are IPCS costs helps us balance
the need to ensure reasonable recovery of providers' investments and
expenses used in providing IPCS with the requirement that we provide
for recovery through regulated rates when the costs incurred are used
and useful to the provision of IPCS and therefore promote customer
benefits. Securus criticizes the Commission's application of the used
and useful framework to safety and security costs as being solely
focused on whether a given cost or expense benefits IPCS consumers. We
disagree. As previously explained, application of the used and useful
framework balances the need to ensure that IPCS providers receive
reasonable recovery of their investments and expenses in providing IPCS
with the need to ensure that ratepayers bear only the costs of
providing the regulated service to them. This is what we do here in
evaluating all of the safety and security costs IPCS providers have
reported and determining the extent to which tasks associated with
those costs provide a benefit to IPCS consumers such that they may be
recovered through regulated rates. In allowing, within the limits of
the record before us, only those investments and expenses which are
used and useful to be recovered from ratepayers, we ``ensure that
current ratepayers bear only legitimate costs of providing service to
them.'' As one commenter explains, ``[t]he Commission has applied the
used and useful standard for decades when considering whether a
provider can recover costs for an asset or service, or in this case,
necessary safety and security measures.'' This is particularly relevant
with regard to the safety and security measures that providers furnish
pursuant to their contracts with correctional institutions, the
purposes and scope of which have evolved from simply facilitating the
provision of voice communications in correctional institutions to
broader measures designed to detect potential criminal activity and
enforce the criminal laws, among other non-communications purposes. For
example, in responses to the 2023 Mandatory Data Collection, when asked
to describe various safety and security measures, providers explain how
these measures assist law enforcement in investigating potential
criminal activity and building cases, create reports for facilities and
law enforcement, analyze data, and store records for use in court.
Securus makes clear that its subpoena and warrant services respond to
requests by ``prosecutors, investigators, district attorneys, police
officers, [and] detectives.''
374. The record is replete with examples of costly services that
are unrelated (or only marginally related) to providing IPCS and thus
provide no (or only marginal) benefits to ratepayers in their capacity
as consumers of IPCS. Safety and security measures that do not
facilitate the provision of underlying communications services in
correctional institutions are not used and useful. While law
enforcement, correctional facilities, and the public at large may
benefit from these measures, the Martha Wright-Reed Act mandates that
we ensure just and reasonable IPCS rates for incarcerated people and
their loved ones. Allowing the costs of measures that are not used and
useful in the provision of IPCS to be recovered through IPCS rates
would be inconsistent with that mandate. Similarly, the costs of safety
and security measures that provide a dual purpose--that are both used
and useful in providing IPCS and in furthering another purpose--should
be borne by both ratepayers and facilities.
375. Although the Commission has historically recognized that
safety and security measures were, at least in some sense, inherent in
providing communications services for incarcerated people, it has been
clear from the outset that only certain safety and security costs
should be recovered through regulated rates. In the 2013 ICS Order, for
example, the Commission determined that recovery of the costs of safety
and security measures should be limited to ``costs that are reasonably
and directly related to the provision of ICS'' and indicated that such
recovery ``would likely include . . . costs associated with security
features relating to the provision of ICS,'' but that ``costs relating
to general security features of the correctional facility unrelated to
ICS'' would be excluded. This dichotomy has remained a staple of
Commission decisions attempting to ``balance[e] the unique security
needs related to providing telecommunications service in correctional
institutions,'' with the statutory requirements of fair compensation
for providers, and, to the extent interstate and international audio
services were involved, just and reasonable rates for consumers and
providers. The Commission did not then and has not since made a
determination of which safety and security measure
[[Page 77312]]
costs should be recoverable in IPCS rates. We therefore reject
Securus's suggestion that ``Commission precedent is crystal clear that
the costs of safety and security measures such as recording,
monitoring, biometrics, and related services are inherent in the
provision of communications services to the incarcerated.'' The mandate
in section 276(b)(1)(A) that we ensure just and reasonable rates for
consumers, in conjunction with the Martha Wright-Reed Act's
requirements that we consider safety and security costs ``necessary''
to the provision of IPCS, requires that we reevaluate this precedent at
any rate.
376. In arguing that all safety and security costs must be
recoverable through IPCS rates, some commenters ignore the context of
the Commission's prior discussion of safety and security measures.
Instead, they rely on the fact that the Commission has previously
recognized the relationship between safety and security measures and
IPCS, but ignore that this relationship was always predicated on a
direct link to the provision of the underlying communications service.
Thus, while the Commission has previously recognized that
communications services for incarcerated people ``implicate[ ]
important security concerns,'' and that ``costs associated with
security features relating to the provision of ICS'' may constitute
recoverable costs, the Commission has never concluded that the costs of
all--or even a substantial portion--of the safety and security measures
that providers often voluntarily choose to offer or correctional
facilities may choose to require should be recovered from consumers. On
the contrary, while the precise formulation for inclusion has varied,
Commission precedent establishes that only the costs of those safety
and security measures with a sufficient nexus to the provision of IPCS
should be recovered through inmate calling services rates. Allowing
recovery of the costs associated with all safety and security measures
that providers decide to offer or that facilities choose to deploy
would be inconsistent with that precedent and, more broadly, with the
requirement that our compensation plan for IPCS ensure ``just and
reasonable'' rates and charges.
377. We similarly find overbroad Securus's suggestion that we must
``include safety and security costs in IPCS rates absent a finding that
those costs bear no relation to the provision of telephone or video
services.'' As an initial matter, nothing in the statute suggests such
a presumption. In fact, the statute implies the opposite--while it
requires the Commission to consider these costs, in doing so, it gives
the Commission latitude to exercise its judgment regarding the ultimate
just and reasonable rate determination. Thus, we agree with Securus
that the Commission does not have ``unfettered discretion to reject
necessary costs.'' And we do not reject any necessary costs that also
satisfy the used and useful standard. As we explain above, we consider
all cost evidence in the record regarding any safety and security
measures that could be viewed as necessary to the provision of IPCS,
under any understanding of the term ``necessary.'' We evaluate those
costs under our traditional used and useful ratemaking standard to
determine the extent to which those costs are recoverable from IPCS
consumers through regulated rates. Securus's approach also incorrectly
presumes that any cost that a provider or a correctional institution
reports as having been incurred for safety and security measures must
automatically be included in our rate cap calculations. We find instead
that those calculations should reflect, to the extent the record
permits us to make such a determination, only those costs that we
affirmatively find are used and useful in the provision of IPCS. More
fundamentally, Securus's test would require IPCS consumers to bear the
full costs of safety and security measures that are not directly
related to the provision of IPCS, but rather are more related to the
costs of incarceration generally, or are used principally for broader
law enforcement or investigative purposes.
378. To the extent correctional facilities contract with IPCS
providers for safety and security measures that do not facilitate the
provision of communications services, the costs of those measures
should not be passed on to IPCS consumers. We find overbroad the
National Sheriffs' Association's argument that because jails generally
have statutory obligations that require safety and security measures,
that it necessarily follows that IPCS consumers must bear the cost of
such measures. For example, the National Sheriff's Association
concludes that because the Death in Custody Reporting Act requires
facilities to ``report on the circumstances surrounding the death of an
incarcerated person (such as whether the cause of death was mental
health related),'' and because monitoring IPCS may identify persons
having mental health crises that could lead to suicide, IPCS consumers
must therefore pay for all safety and security costs related to
monitoring. As discussed above, facilities' obligation to care for the
safety and wellbeing of incarcerated people, as well as comply with
statutes that are unrelated to the provision of communications, are the
responsibility of facilities--as are the costs associated with such
obligations. IPCS consumers are not required to shoulder the burden of
paying for each and every facility cost whether related to the
provision of communications or not. For similar reasons, we find
inapposite some commenters' argument that not allowing the recovery of
certain safety and security costs through IPCS rates would necessarily
lead to ``increased taxes or an unnecessary reallocation of general
funds.'' Aside from the speculative nature of this claim, we have
explained why IPCS consumers should not bear the cost of services that
are unrelated to the provision of IPCS, nor should they be responsible
for services whose purpose is to serve law enforcement. For example,
customized reports for correctional facilities, long term storage of
recordings of communications, creating searchable databases of these
recordings, and voice biometrics that are used for law enforcement
purposes are measures that facilitate law enforcement but are not
required to restrict communications to permitted individuals. If they
were unavailable, incarcerated people would still be able to place
telephone calls or use advanced communications because these safety and
security measures serve almost exclusively law enforcement functions.
As the United Church of Christ and Public Knowledge explain, ``[t]he
customer of carceral functions is the carceral institution. The
customers of the communication are the two people using a service to
communicate with each other.'' Services that serve predominately law
enforcement purposes provide only marginal benefits to incarcerated
people and their families in their use of IPCS, and only a small
portion of the costs of those services are used and useful in the
provision of IPCS. The bulk of those costs related to incarceration,
generally--like feeding and housing--and, like those costs, cannot
justly and reasonably be imposed on incarcerated persons and their
loved ones. Correctional facilities are free to adopt any safety and
security measures they deem appropriate, but may not rely on IPCS
ratepayers to defray all the costs providers and facilities incur in
providing those measures. Instead, only the used and useful portion of
those costs should be recovered through IPCS rates.
[[Page 77313]]
379. Some commenters raise concerns that the used and useful
standard is inappropriate specifically when applied to safety and
security measures. We disagree. We are not persuaded that the
application of the used and useful standard to safety and security
costs would prohibit facilities' implementation of safety and security
measures in violation of section 4 of the Martha Wright-Reed Act.
Rather, we find that this argument conflates our authority over what
the facility and its service providers may charge ratepayers with the
facilities' authority over what safety and security measures ``the
facility and its service providers may choose to employ at their own
expense.'' Although section 4 of the Martha Wright-Reed Act bars the
Commission from prohibiting safety and security measures related to
IPCS in correctional facilities, nothing in the Martha Wright-Reed Act
requires that IPCS consumers pay for such measures through IPCS rates.
To the contrary, section 3(b)(2) of that Act indicates otherwise by
obliging the Commission merely to ``consider'' such costs without
requiring a particular outcome. While our rate-making process may
result in changing how some of those measures are funded, our
application of the used and useful framework in discharging this
mandate simply does not prohibit correctional officials, law
enforcement officials, or IPCS providers from implementing any safety
and security measures at any correctional facility. Correctional
facilities remain free to implement any safety and security measures of
their choosing; they just cannot expect the IPCS consumer to bear the
cost of all of those choices. The National Sheriffs' Association, in
its arguments against relying on the used and useful standard, suggests
that instead, ``the principle of cost causation, which states that
those who cause costs should pay for them'' should be used. The
National Sheriffs' Association argues that, for example, if a crime is
committed using IPCS, the incarcerated person should pay for all
related safety and security costs because without IPCS, the crime could
not have been committed. The Commission has previously rejected such
unpersuasive ``but for'' arguments, most recently in the Open Internet
proceeding. The National Sheriffs' Association's logic is flawed.
Simply because a crime occurred using a phone call does not mean that
the phone call was the cause of the crime, nor that IPCS consumers are
responsible for the associated safety and security costs. Law
enforcement activities are the responsibility of law enforcement. As
such, the costs associated with those activities are appropriately
borne by correctional facilities, not IPCS consumers. The used and
useful framework and cost causation principles both aim at ensuring
that ratepayers do not bear costs that were not incurred for the
ratepayers' benefit. Since the sole purpose of many of these safety and
security measures is to benefit law enforcement, we would allocate the
costs of these measures to the providers' non-IPCS operations even if
we were to employ a cost causation approach.
380. The ``Customer'' Under the Used and Useful Framework. In
applying the used and useful framework, ``the Commission considers
whether the investment or expense `promotes customer benefits, or is
primarily for the benefit of the carrier.' '' In applying that
framework to IPCS, we make clear that the ``customers'' referred to
under this analysis are the IPCS ratepayers in their status as
consumers of communications services in correctional institutions.
Securus encourages a broader interpretation of ``customer'' that would
include correctional facilities, as well as ratepayers, because
correctional facilities are ``necessary part[ies]'' to IPCS. Under this
logic, the providers themselves would also be included as beneficiaries
in the used and useful test. It suggests that the Commission has a
``general responsibility'' to protect the general public and ``ensure a
safe environment'' for accessing communications services. Pay Tel
mischaracterizes our rejection of Securus's overbroad interpretation of
``customer'' as a more general rejection of the need to provide
appropriate safety and security measures as part of the provision of
IPCS. As discussed above, and consistent with section 1 of the
Communications Act, the Commission has long embraced the inclusion of
safety and security measures as an integral part of the provision of
IPCS and incorporated the relevant costs in its approach to rates for
these services. These arguments do not overcome our responsibility here
where incarcerated people or their loved ones are the ones paying for
and using IPCS subject to Commission-specified rate regulations.
Although correctional institutions contract with providers for the
provision of IPCS, such services are used, and paid for, by
incarcerated people and their loved ones. As Worth Rises explains, the
``Commission's duty is to protect IPCS ratepayers and ensure reasonable
compensation for providers, not to protect the interests and demands of
non-ratepaying stakeholders.'' We rely on the used and useful framework
because it balances the ``equitable principle that the ratepayers may
not fairly be forced to pay a return except on investment which can be
shown directly to benefit them,'' with ensuring fair compensation for
providers. It therefore would be inappropriate--and, ultimately
inconsistent with our mandate to ensure just and reasonable IPCS
rates--to evaluate safety and security costs under a framework that
characterized correctional institutions as the customers. There are
indeed scenarios where the facility or governmental body may be the
customer in jurisdictions where free calling for incarcerated persons
has been implemented. That is not the scenario we are addressing in
this Order. Although Securus is correct that the used and useful
framework is flexible, it is not all encompassing, and we decline to
expand that framework to include non-ratepayers. Rather, we rely on
this flexibility to ensure that IPCS consumers ``bear only legitimate
costs of providing service to them.''
381. Our focus on incarcerated people and their loved ones as the
customers of IPCS has several cross-cutting implications for our
application of the used and useful standard to safety and security
measures broadly. For one, safety and security measures that serve
predominantly law enforcement functions do not yield sufficient (if
any) benefit to IPCS customers to warrant more than a marginal (or any)
recovery through just and reasonable IPCS rates. In this vein, in the
case of safety and security measures that are not universally or nearly
universally employed by IPCS providers, we are not persuaded that they
meet the used and useful standard for cost recovery through IPCS rates.
As explained by the Public Interest Parties, ``safety and security
features that are not universally used across facilities suggests that
they cannot be `necessary,' as some providers do offer IPCS without
needing to use such features.'' Safety and security measures cannot be
both required to provide IPCS and elective. The National Sheriffs'
Association unwittingly makes this point by explaining that ``different
facilities have different security requirements.'' While we agree with
the National Sheriffs' Association that correctional institutions that
have relatively large proportions of ``violent offenders'' generally
impose more extensive safety and security measures that other
correctional institutions, the record contains no information tying
those measures specifically to the provision of IPCS. Absent such
information, we conclude that those
[[Page 77314]]
measures are part of the correctional institutions' overall safety and
security operations, rather than an essential element of the provision
of communications services in a correctional environment. Such a focus
on safety and security measures shown to be deployed on a widespread
basis makes most sense when setting IPCS rate caps, rather than
prejudging whether and to what extent less commonly-employed measures
ultimately might someday be proven of sufficient necessity--and benefit
to IPCS customers--to warrant recovery in regulated IPCS rates and
charges. Independently, we conclude that those atypical costs or
expenses are excessive, and thus imprudent under the ``used and
useful'' framework, and thus not appropriate for inclusion in regulated
IPCS rates.
382. We also find that safety and security features offered solely
or chiefly to win contracts do not warrant recovery through regulated
IPCS rates. It is not uncommon for providers responding to requests for
proposals to offer enhanced safety and security measures that are not
specifically demanded by the correctional authority. Measures that
correctional institutions accept for free or in lieu of monetary site
commissions payments do not become a benefit to IPCS ratepayers by
virtue of that correctional facility's acceptance. Features not
included in requests for bids were clearly not considered critical to
IPCS by the correctional institutions themselves. We find persuasive
Worth Rises' reasoning that ``[t]he broad spectrum of elective safety
and security measures that IPCS providers offer'' have ``no
demonstrated, or at times even articulated, public benefit. These other
elective measures are nice-to-haves for corrections agencies, law
enforcement, and prosecutors and vary from agency to agency.'' Indeed,
we find that the costs of ``safety and security [that] are for the
benefit of `investigators, correctional administrators, prosecutors,
and other law enforcement officers''' are not appropriately borne by
IPCS ratepayers. We note that such features are also not used and
useful. Our evaluation of the 2023 Mandatory Data Collection responses
also supports assertions in the record that offering advanced safety
and security measures has become a chief means by which the largest
providers dominate the process correctional institutions use to select
IPCS providers. Indeed, while certain safety and security measures are
undoubtedly both used and useful in, and necessary for, the provision
of IPCS, the data raise questions whether and to what extent many of
the advanced safety and security measures may be more reflective of the
broken nature of competition in the dysfunctional IPCS marketplace and
tools certain providers use to gain advantages in winning contracts.
c. Assessing the Costs of Safety and Security Measures
383. Applying the standards described above, we reach reasoned
conclusions regarding the safety and security measures that primarily
benefit consumers and appropriately are included in regulated rates
under our used and useful analysis. Measures that serve only a law
enforcement function or provide no benefit to IPCS consumers are not
used and useful in the provision of IPCS. Costs that are used and
useful are used to calculate just and reasonable IPCS rate caps. Thus,
we do not exclude all safety and security costs from our ratemaking
calculus.
(i) Application of the Used and Useful Framework
384. We evaluate whether the costs of the seven categories of
safety and security measures set forth in the 2023 Mandatory Data
Collection should be included in IPCS rates by applying the used and
useful framework. As an initial matter, we reiterate that the used and
useful framework is flexible. Although the Commission has identified
``general principles regarding what constitutes `used and useful'
investment,'' it ``has recognized `that these guidelines are general
and subject to modification, addition, or deletion.'' The Commission
emphasized that ``[t]he particular facts of each case must be
ascertained in order to determine what part of a utility's investment
is used and useful.' '' The Commission ``may, in its reasonable
discretion, fashion an appropriate resolution that is tailored to the
specific circumstances before it.'' Moreover, courts typically defer to
the Commission's discretion on rate-related determinations. Pay Tel
overlooks this flexibility in arguing we have applied a ``newly-minted
`user benefit' standard'' in our application of the used and useful
framework to safety and security measures. As we have explained, the
used and useful framework, as applied for decades by the Commission in
its familiar ratemaking functions, is an equitable principle that
prevents ratepayers from having to pay for costs that are primarily
incurred for the benefit of the provider, while allowing regulated
entities to be compensated for providing service. We do not, as Pay Tel
suggests, depart from these core ratemaking principles in evaluating
safety and security measures under the used and useful framework here.
385. Additionally, to account for the facts that the categories of
safety and security costs in the 2023 Mandatory Data Collection are
imprecise, and that providers' allocations of their safety and security
costs are at times inexact among these categories, we evaluate
categories based on the nature of the preponderance of tasks or
functions within each category. If the predominant use of tasks and
functions within a category are not used and useful, the entire
category will be treated as not used and useful and excluded from the
lower bound of our zone of reasonableness. In addition to relying on
this procedure only for setting the lower bound for our range of
reasonable rates, we also note that we are adopting a waiver process to
accommodate providers in atypical circumstances that can demonstrate
grounds for recovery beyond that provided by our rate caps. We
acknowledge that the nature of safety and security measures is evolving
such that some measures that we determine are not generally used and
useful may be ``second or third generation implementations of the same
measures'' the Commission has found to be used and useful. As we
explain below, however, our conclusions in this regard are part of the
larger task of setting IPCS rate caps that are just and reasonable for
consumers and providers and that afford fair compensation to providers.
This task necessarily requires us to arrive at a reasonable end result
based on the record before us. And due to the imprecise nature of the
categories of safety and security measures and providers' reporting of
those costs, we find that, based on the record and core ratemaking
precedent, some costs of safety and security measures are not generally
used and useful. This is particularly true in situations where
providers allege that additional safety and security measures are
necessary to ensure that the safety and security measures we conclude
are used and useful function properly. We are skeptical of such claims.
For example, while certain providers claim that voice biometrics
services can be used to prevent fraud or the circumvention of calling
restrictions, the record does not indicate that voice biometrics
services primarily ensure the proper functioning of providers'
communications security services.
386. We find two categories of safety and security costs to be
generally used and useful--Category 1: CALEA compliance measures; and
Category 3: communications security services. We
[[Page 77315]]
conclude that the remaining five categories of safety and security
measures should not be treated as used and useful in setting a lower
bound on the range of reasonable rates. Specifically, categories 2 (law
enforcement support services); 4 (communication recording services); 5
(communication monitoring services); 6 (voice biometrics services); and
7 (other safety and security measures). In particular, in setting IPCS
rate caps, we include the costs of all safety and security categories
in the upper bounds of our zones of reasonableness, but include only
the costs of the two categories found to be generally used and useful
in the lower bounds of our zones of reasonableness.
387. We also adjust our rate setting within the zones of
reasonableness to develop overall rate caps that recognize the
imprecision of both the seven defined safety and security categories in
the 2023 Mandatory Data Collection, and the inconsistencies in the
narrative descriptions and varied allocations made in provider
responses. Securus overlooks this fact in complaining that the
Commission relies on the seven defined safety and security categories
in the 2023 Mandatory Data Collection. To the extent Securus's issue is
with the seven categories of safety and security measures from the 2023
Mandatory Data Collection, Securus and other interested parties were
free at any time, but particularly in response to the Commission's
Public Notice seeking comment on the 2023 Mandatory Data Collection, to
propose another method of collecting cost data regarding safety and
security measures. But Securus did not do so and actually conceded that
the cost categories the Commission proposed were ``similar to
categories employed in the Third Mandatory Data Collection.'' To the
extent IPCS providers did not allocate costs to those seven categories
(despite being instructed to perform allocations using their best
estimate), they did so with full knowledge that the Commission would
use the results of the data collection as a critical part of its
efforts to fulfill its obligations under the Martha Wright-Reed Act.
For example, IPCS providers' narrative responses to our request for
CALEA compliance information revealed confusion regarding which safety
and security measures were related to CALEA compliance, and few
providers identified any associated costs. CALEA requires that
telecommunications carriers and manufacturers of telecommunications
equipment design their equipment, facilities, and services to ensure
that they have the necessary surveillance capabilities to comply with
legal requests for information. Telecommunications carriers must
``ensure that [they] are capable of accommodating simultaneously the
number of interceptions, pen registers, and trap and trace devices'' as
requested by the Attorney General. The Commission has found that
interconnected VoIP providers also must comply with CALEA requirements.
However, it appears that some providers have allocated certain
functions, such as portions of call monitoring and recording, to other
categories, i.e., Category 4 (communications recording services) and
Category 5 (communications monitoring services), that likely should
have been allocated to the CALEA category insofar as they facilitate
the type of electronic surveillance required by CALEA. As referenced
above, CALEA was designed to ensure that law enforcement could conduct
electronic surveillance by requiring telecommunications carriers and
manufacturers of telecommunications equipment to ensure they have the
necessary surveillance capabilities. Because we are unable to
disaggregate the costs reported to these other categories to identify
precisely which portions of call monitoring and recording costs should
have been appropriately included in the CALEA category, we account for
these under-reported CALEA costs in setting our overall rate caps,
which have been adjusted accordingly. The same is true for safety and
security measures that providers have described as ``inherent'' or
built into their systems such that they do not have separate costs to
allocate. Because our upper and lower bounds include the costs of
safety and security measures that are inherent in IPCS providers'
platforms and which serve both IPCS-related and other purposes, we make
adjustments in setting our rate caps to reasonably attempt to ensure
that those caps do not over-recover or under-recover the costs of
safety and security measures.
388. In sum, we find that this three-step process--including all
reported safety and security measure costs in our upper bounds,
including only a portion of those costs in our lower bounds, and taking
the imprecision of those bounds into account in setting rate caps--
reasonably applies the used and useful framework to the record before
us. The resulting rate caps--the ``end result'' of our ratemaking--
reflect a balance that recognizes both the merits and shortcomings of
the commenters' positions on whether the costs of safety and security
measures should be recovered through IPCS rates. At one end of the
spectrum, some commenters urge us to set rate caps at levels that would
allow providers and facilities to recover all (or virtually all) the
costs they incur in providing safety and security measures. These
commenters correctly recognize that, for the most part, the safety and
security measures on which we need to make a judgment contribute toward
the provision of ``inmate telephone services and advanced
communications services'' in correctional institutions. But these
commenters fail to recognize that many of these measures also
contribute toward other purposes, including law enforcement and
investigative purposes that are only circumstantially related to the
provision of IPCS. At the other end of the spectrum, other commenters
would exclude virtually all safety and security measure costs from our
ratemaking calculus. These commenters focus on the law enforcement and
investigative purposes served by the safety and security measures
before us, while deemphasizing or ignoring the contributions the
measures make toward the safe provision of IPCS.
389. We do not adopt either extreme position. Instead, we apply the
used and useful standard, as articulated in core ratemaking precedent,
to evaluate all of the arguably recoverable costs in the record,
including costs associated with safety and security measures, to
distinguish those costs that should be included in our ratemaking
calculus from those that should not. In doing so, we arrive at a middle
ground that properly balances the ``equitable principle that public
utilities must be compensated for the use of their property in
providing service to the public'' with the ``[e]qually central . . .
equitable principle that the ratepayers may not fairly be forced to pay
a return except on investment which can be shown directly to benefit
them.''
390. Contrary to the characterizations of some commenters, our
actions today, and in particular our actions regarding safety and
security measures, are about fulfilling our obligation under the Martha
Wright-Reed Act to adopt a compensation plan for IPCS that ensures just
and reasonable rates and charges for IPCS consumers and providers and
fair compensation for IPCS providers. Our actions are not about
questioning or overriding the judgment of correctional officials or
``evaluat[ing] the credibility of [correctional officials'] decisions
regarding safety and security of [their] institutions.'' Nor do our
actions bar correctional authorities from
[[Page 77316]]
implementing any safety and security measures they deem necessary. Our
task is a narrow one: to determine the extent to which claimed IPCS
costs can be recovered through regulated rates charged to consumers.
And that is exactly what we do in applying bedrock ratemaking precedent
to evaluate all of the claimed IPCS costs and expenses in the record
before us to determine the extent to which consumers should bear those
costs. We reject as unsupported and speculative suggestions that our
approach to safety and security measures will result in less security
of IPCS communications generally and will facilitate criminal activity
using IPCS. We next discuss the application of the used and useful
standard to each category of safety and security costs.
391. Category 1: CALEA Compliance Measures. The instructions for
the 2023 Mandatory Data Collection directed providers to identify and
describe each of the safety and security measures that they took to
comply with CALEA. CALEA mandates that certain communications services
providers ``ensure that [their] equipment, facilities, or services that
provide a customer or subscriber with the ability to originate,
terminate, or direct communications are capable of'' intercepting
communications, providing the Federal government with access call-
identifying information, and delivering intercepted communications and
call-identifying information to the Federal government. Although we are
not persuaded that the functionalities associated with CALEA compliance
generally would directly benefit IPCS users, under the current
regulatory status quo we nonetheless find that the costs related to
CALEA compliance measures are used and useful in the provision of IPCS.
Pay Tel takes issue with the Commission's determination that costs
associated with CALEA compliance measures are used and useful while
indicating that these measures generally may not directly benefit IPCS
consumers. As we note above, however, the used and useful standard is a
flexible standard, allowing the Commission to ``fashion an appropriate
resolution that is tailored to the specific circumstances before it.''
Here, given the legal obligations associated with CALEA, we determine
that such costs are used and useful in the provision of IPCS. Pay Tel
further argues that in the same way CALEA is a legal requirement, IPCS
providers ``are also required by the facilities which they seek to
serve to employ a range of safety and security measures.'' This
argument is unavailing. A requirement imposed by a law passed by
Congress is quite different from a contractual ``requirement'' that
results from the commercial negotiations between parties to a contract.
First, without CALEA compliance, IPCS providers could not offer their
audio or certain advanced communications services. CALEA requires that
telecommunications carriers and manufacturers of telecommunications
equipment design their equipment, facilities, and services to ensure
that they have the necessary surveillance capabilities to comply with
legal requests for information. The Commission has found that
interconnected VoIP providers also must comply with CALEA requirements.
We thus disagree that IPCS providers, to the extent they provide
telecommunications services and VoIP services, are exempt from CALEA
compliance. When the Commission considered payphone providers,
generally, as exempt from CALEA, the Commission was not intending to
sweep in those same payphone providers to the extent they were also
telecommunications services providers or VoIP providers. Contrary to
Securus's claim that we have departed from Commission precedent without
proper notice, we are not modifying such precedent. To the extent that
IPCS providers offer both payphone services and audio communications
services, including telecommunications services and VoIP, they have
been, and remain, subject to CALEA requirements. This includes the
ability to enable the government to monitor and record communications
``pursuant to a court order or other lawful authorization.'' We note
that the monitoring and recording requirements associated with CALEA
are significantly more limited than those services included in
Categories 4 and 5. We find the costs of those limited monitoring or
recording services to be used and useful in the provision of IPCS. This
is in stark contrast to the constant and pervasive communications
recording and monitoring within correctional facilities for all
communications--services that far exceed the requirements of CALEA. As
Worth Rises explains, ``CALEA compliance is required of all
telecommunications carriers and providers of interconnected voice over
internet protocol services, not just providers of IPCS.''
392. Second, under the regulatory status quo the Commission
previously has held that CALEA compliance costs appropriately can be
recovered through user charges. In particular, the Commission has
previously held that telecommunications carriers and interconnected
VoIP providers ``may absorb the costs of CALEA compliance as a
necessary cost of doing business, or, where appropriate, recover some
portion of their CALEA . . . implementation costs from their
subscribers'' for compliance measures taken after January 1, 1995. To
the extent IPCS providers obtain transmission services from third
parties, the rates they pay likely include charges for those third
parties' CALEA compliance costs.
393. IPCS providers also may be required to perform discrete tasks
to comply with CALEA. Any such tasks also facilitate the provision of
IPCS because IPCS providers must comply with CALEA as a precondition to
offering audio services and certain advanced communications. We,
therefore, conclude, based on the record, that costs providers incur as
a result of CALEA compliance are used and useful in the provision of
IPCS. Securus argues that the Commission's conclusion that CALEA costs
are used and useful ``adds nothing to the rate caps'' because providers
allocated relatively small amounts of such costs to CALEA in the 2023
Mandatory Data Collection. Simply because providers did not allocate
significant amounts to CALEA compliance is not a basis on which to
conclude that such costs are irrelevant to our ratemaking. As noted
above, we evaluate all safety and security cost data in the record
before us. For the same reasons, we also conclude that costs IPCS
providers incur in complying with CALEA are prudently incurred.
394. Category 2: Law Enforcement Support Services. The instructions
for the 2023 Mandatory Data Collection directed providers to identify
and describe each of their safety and security measures that they
classified as a law enforcement support service. These ``services
include, but are not limited to, the administration of subpoenas, the
administration of crime tip lines, the administration of informant
lines, and the maintenance of data repositories for use by law
enforcement personnel.'' In their responses to the 2023 Mandatory Data
Collection, providers identified certain law enforcement support
services. We find that law enforcement support services are generally
not used and useful in the provision of IPCS because they do not
facilitate the provision of IPCS. Rather, as the record makes clear,
these services are primarily intended to serve law enforcement
purposes. Providers' own descriptions of their law
[[Page 77317]]
enforcement support services support this conclusion. For example, the
record shows that such services include tasks such as ``search warrant
processing'' and ``Freedom of Information Act (FOIA) request
processing.'' Also included in this category are call transcription
services, which are primarily used to create databases for law
enforcement to conduct investigations and assist with case building.
Some commenters claim these services assist in minimizing crime and
identifying potential violators, functions that primarily serve law
enforcement purposes and do not facilitate or enable the provision of
IPCS. We recognize that some functions within this category may provide
a benefit to incarcerated people, such as the administration of
tiplines to anonymously report crimes and connect incarcerated people
with Prison Rape Elimination Act (PREA) report centers; however, they
do not facilitate the provision of IPCS and are therefore not used and
useful in the provision of IPCS. In other words, communications
services for incarcerated people are able to take place without these
services and we generally do not find that these functions benefit IPCS
users in their use of IPCS in a way that makes it equitable for them to
bear the costs of these functions in regulated IPCS rates.
395. Category 3: Communications Security Services. The instructions
for the 2023 Mandatory Data Collection directed providers to identify
and describe each of their safety and security measures that they
classified as a communications security service. These ``services
include, but are not limited to, implementing measures that allow an
Incarcerated Person to call only certain individuals or numbers;
implementing measures that limit the individuals or numbers an
incarcerated person may call; providing personal identification numbers
(PINs) to incarcerated people; providing disclaimers to called parties
regarding communication origination; implementing communication-
acceptance procedures; preventing three-way communications; preventing
chain communications; dual-tone multifrequency detection; manual call
control for the Facility; tracking frequently called numbers;
implementing incoming communication restrictions; and fraud
management.'' In their 2023 Mandatory Data Collection responses,
providers identified certain communications security services. Based on
the record, we find that the functions included in the communications
security services category are generally used and useful in the
provision of IPCS. Most of the functions that providers classify as
communications security services are safety and security measures that
the Commission has traditionally found to be ``inherent'' in
communications services for incarcerated people. Such functions include
the development of pre-approved ``allow'' lists, preventing three-way
communications, and fraud management. These basic functions are
directly related to the underlying communications service and do not go
beyond that required to enable or appropriately limit the customer's
use of the underlying communications service in a correctional
institution. These basic safety and security functions prevent witness
tampering and violations of no-contact orders, and protect consumer
accounts from being used unlawfully. They also benefit consumers of
IPCS by ensuring that communications services can be safely and
securely offered in an incarceration setting. Contrary to Securus's
claim that we ignore the benefits of such safety and security measures
to ``incarcerated people and their friends and family,'' we recognize
that the ``establishment of PIN numbers, limiting calls to certain
preapproved numbers, and preventing call forwarding or three-way
calling'' are used and useful to the provision of IPCS and are
recoverable in our rate caps. We find that costs associated with this
category of basic safety and security measures are generally used and
useful. At the same time, the record does not provide a reason to
question the communications security services costs reported in the
2023 Mandatory Data Collection or otherwise determine them imprudent.
396. The Commission has long held that there are legitimate reasons
for certain safety and security measures that facilitate or enable the
provision of communications services in the correctional environment.
Services in this category appear to be universally offered by IPCS
providers and are a standard part of all IPCS offerings. Based on the
record before us, and consistent with the Commission's previous
discussions, we find that these communications security services are
inherent in the provision of IPCS and are the key factors
distinguishing IPCS communications from those communications of the
general public, which do not require such services. For example,
measures such as pre-approved numbers lists, blocking three-way
communications, and the use of PIN numbers to help ensure that the
incarcerated individual associated with the account is initiating the
communication facilitate the provision of communications services in
correctional institutions by preventing calls to inappropriate parties
such as judges or witnesses and protecting against fraud. These
functions are distinguished however from other duplicative and
expensive functions that go way beyond what is necessary to accomplish
these objectives and that we consider not used and useful.
397. One commenter argues that communications security services are
not used and useful ``as they are designed and intended to restrict the
access that incarcerated people and their loved ones have to
communications.'' While we agree that call blocking functionalities
impose restrictions on who incarcerated people can communicate with,
such measures are required to facilitate the provision of
communications services in the carceral setting. As the Commission
explained in the 2013 ICS Order, ``a disproportionately large
percentage of ICS-enabled crimes target and victimize vulnerable
populations consisting of victims, witnesses, jurors, inmates, and
family members of these individuals.'' We find that the safety and
security measures included in the communications security services
category, such as blocking mechanisms and call allow lists, ensure the
safety and security of IPCS by appropriately balancing the need to
protect public safety against ensuring that incarcerated people can
stay connected with their loved ones.
398. Category 4: Communications Recording Services. The
instructions for the 2023 Mandatory Data Collection directed providers
to identify and describe each of their safety and security measures
that they classified as a communications recording service. These
category 4 services ``include, but are not limited to, providing a
disclaimer regarding recording of communications, recording of
communications, and storage of recorded communications.'' In their 2023
Mandatory Data Collection responses, providers identified a number of
specific communications recording services. We find that communications
recording services included in this category generally are not used and
useful in the provision of IPCS. These services are primarily used to
police the contents of all communications or to gather information for
law enforcement purposes. Providers describe these services as
including functions such as storing recorded communications,
transcribing such recordings, and converting recordings into digital
[[Page 77318]]
formats to support investigation and litigation activities. None of
these services actually facilitate the provision of IPCS. Further,
certain providers' communications recordings services
{[REDACTED]{time} and create downloadable recordings of all IPCS in a
variety of digital formats. These latter functions are wholly avoidable
to the provision of communications services in correctional
institutions and are therefore not used and useful.
399. Some commenters explain that the cost of storing these
recordings is ever increasing, particularly for video communications.
Although the Commission suggested in the 2013 ICS Order that it would
``likely find the costs of the storage of inmate call recordings''
recoverable in the context of those recordings being used in court
proceedings, the Commission subsequently questioned that position based
on several factors reflecting the significant evolution of the industry
since that time. First, the Commission could not have predicted that
audio recordings would be stored for years or in perpetuity and the
cost of that storage would be rolled into IPCS consumer rates. Also,
video communications were not even within the scope of the Commission's
inmate calling services regulations; nor was the use of video
communications as prevalent as it is today. Finally, the Commission has
a considerably more developed perspective on the industry given the
current, more extensive record, including its recent mandatory data
collections. With this more complete record and exercising our full
authority over video communications services consistent with the Martha
Wright-Reed Act, we are not persuaded that the costs of storing
communications recordings for which we are not generally including the
costs of the recordings in the first place, are generally used and
useful in the provision of IPCS. Similarly, we share Worth Rises's
concerns that the high cost of storage could incentivize providers to
``artificially cause calls to drop, which allows them to collect the
full cost of a video call and save on the storage that full video call
recording would cost them.'' Nor do we conclude that the rising costs
of these features justify including them in the rates paid by the IPCS
consumers.
400. Next, some providers argue that communications recording
services facilitate the provision of IPCS. For example, one provider
explains that it uses ``call recording analysis'' to ensure that
incarcerated people are not using its communications services to
intimidate judges and witnesses. Other providers use call recordings to
verify that the incarcerated person participating in a communication
was the person whose PIN was used to originate the communication and to
resolve complaints regarding the charges for specific communications.
While such uses of communication recording services may be generally
beneficial, the record contains no evidence to suggest that these
services actually facilitate the provision of IPCS and are not just
redundant features to the blocking and PIN number administration
purposes that we do recognize as recoverable costs. On balance, then,
we conclude that for the most part these functions suit general law
enforcement needs rather than providing capabilities necessary or
beneficial to IPCS ratepayers in their capacity as IPCS users.
Consequently, we conclude this category generally fails to meet the
used and useful test. As an independent, alternative basis for our
decision, to the extent that these features are supplemental ways of
addressing concerns already addressed by safety and security measures
the costs of which we have found used and useful above, we conclude
that incurring these additional costs to serve the same ends are
excessive as far as IPCS is concerned, and thus imprudent.
401. Category 5: Communications Monitoring Services. The
instructions for the 2023 Mandatory Data Collection directed providers
to identify and describe each of their safety and security measures
that they classified as a communications monitoring service. These
services ``include, but are not limited to, live or real-time
monitoring of communications; automatic word detection; communication
transcription; and analysis of recordings, which may also include
keyword searches.'' In their 2023 Mandatory Data Collection responses,
providers identified a number of specific communications monitoring
services. We find that communications monitoring services generally are
not used and useful in the provision of IPCS because they primarily
serve a law enforcement purpose, not a communications purpose, and they
generally do not benefit ratepayers in their capacity as consumers of
IPCS. As the record makes clear, communications monitoring costs are
``part of carceral functions, not communications functions.'' Indeed,
IPCS providers ``advertise their surveillance add-ons as
`investigative' tools `designed to identify potential criminal
activity.' '' And, despite claiming that ``surveillance fits
comfortably within the rubric of safety and security measures,'' the
National Sheriffs' Association acknowledges that ``surveillance is not
necessarily conducted expressly or solely for safety or security
purposes.''
402. One commenter notes that the Commission has previously
recognized that `` `security features such as call recording and
monitoring' . . . `advance[ ] the safety and security of the general
public.' '' The National Sheriffs' Association argues that
``surveillance fits comfortably within the rubric of safety and
security measures.'' We find the National Sheriffs' Association's
reliance on the Second Circuit's decision in Amen to be misplaced. That
court's finding, after considering the Fourth Amendment, that there is
a legitimate security concern linked to call monitoring is distinct
from whether the IPCS consumers must pay for call monitoring costs
through IPCS rates. For the same reason, we find unpersuasive FDC's
reliance on other judicial precedent and Florida law for the same
reason. While we accept as true that the Florida legislature has
granted FDC jurisdiction over all matters related to correctional
institutions in Florida, nothing in these cases or Florida law requires
that IPCS consumers bear the costs of any particular safety and
security measure that facilities choose to implement. The Commission
has also described the monitoring of frequently called numbers to
prevent incarcerated people from ``evad[ing] calling restrictions via
call-forwarding or three-way calling'' as being part of inmate calling
services. We are not persuaded by these arguments because these
statements were based on the record at the time they were made and do
not reflect the evolution of the industry and the proliferation of such
services during the course of this proceeding.
403. The current record, including data and information submitted
by IPCS providers, reveals that call monitoring has evolved and
expanded significantly and is now predominantly ``used to aid
investigations related to detention facilities,'' ``aid corrections
agencies and law enforcement in `investigation and litigation
activities,' '' and ``provide[ ] for skilled investigators.'' One
provider describes its audio monitoring services as including an alert
system ``mostly configured before the incarcerated person has been
prosecuted and evidence is still being gathered.'' Not surprisingly,
the data submitted by IPCS providers demonstrate that communications
monitoring services have become a significant profit center for at
least some providers. While communications monitoring services are
argued to be a tool for keeping
[[Page 77319]]
incarcerated people from calling blocked numbers and from engaging in
three-way calling, enabling the full recovery of costs for these
monitoring services would amount to significant over-recovery for
providers, given that we already include the recovery for the costs of
providing the call blocking and limitation on three-way calling
capabilities in our rate caps. We find, on balance, that call
monitoring services, for the most part, are primarily used for law
enforcement or investigative purposes, and therefore are generally not
used and useful in the provision of IPCS. As an independent,
alternative basis for our decision, to the extent that call monitoring
services are, in part, used to supplement measures like call blocking
and limitation on three-way calling capabilities for which we already
allow recovery, we conclude that incurring these additional costs to
serve the same ends are excessive as far as IPCS is concerned, and thus
imprudent.
404. Category 6: Voice Biometrics Services. The instructions for
the 2023 Mandatory Data Collection directed providers to identify and
describe each of their safety and security measures that they
classified as a voice biometrics service. These category 6 services
``include, but are not limited to, voice printing, voice
identification, continuous voice verification, and voice databasing. In
their 2023 Mandatory Data Collection responses, providers identified a
number of specific voice biometrics services. We next conclude that
voice biometrics services are elective safety and security measures
used predominantly for general law enforcement purposes that do not
facilitate the provision of IPCS. Inmate calling services pre-date the
availability of Voice Biometrics. Voice biometrics services are
likewise not used, or even offered, universally, in many cases being an
elective feature only. As such, they generally are not used and useful
in the provision of IPCS. This treatment of voice biometrics services
is also supported by several commenters that expressly oppose recovery
of the costs of voice biometrics services through our rate caps.
405. Certain providers claim that their voice biometrics services
are used and useful in the provision of IPCS in that they help prevent
fraud and the circumvention of calling restrictions by preventing
incarcerated people from passing a call to another person, and they
help validate that the ``rightful owner of [a] PIN'' is placing the
call. Some of those same providers, however, also describe using these
services as furthering more general law enforcement purposes, including
``generati[ng] targeted investigative leads,'' ``help[ing]
investigators find correlations among calls,'' and {[REDACTED]{time} .
Voice biometrics recordings also are subject to being rolled up into
voice print databases and marketed as a broader investigative tool for
general law enforcement and surveillance purposes.
406. As Securus explains, ``[e]arly IPCS was typically provided by
on-site operators that would handle the approval and connection of
collect calls placed by incarcerated persons.'' Over time, the market
for safety and security measures has evolved with one of those
``advances'' being the development of voice biometrics. The fact that
IPCS has historically been offered without capabilities like voice
biometrics undercuts the notion that these capabilities are required
for the provision of IPCS. And, as Securus notes, demand for features
like voice biometrics ``has largely been driven by facilities,''
suggesting that these measures are elective and do not actually prevent
consumers from using IPCS if they are not available or used. For these
reasons, we find that voice biometrics services as a category generally
are not used and useful in the provision of IPCS. As an independent,
alternative basis for our decision, to the extent that voice biometrics
services are, in part, used to supplement fraud prevention and calling
restriction measures for which we already allow recovery, we conclude
that incurring these additional costs to serve the same ends are
excessive as far as IPCS is concerned, and thus imprudent.
407. Category 7: Other Safety and Security Measures. The
instructions for the 2023 Mandatory Data Collection directed providers
to identify and describe each of their safety and security measures
that were not included in any of the prior six categories. These
services ``include, but are not limited to, reporting obligations,
acquisition of patents to support safety and security technologies, and
research and development of new safety and security technologies.'' In
their 2023 Mandatory Data Collection responses, providers identified a
number of specific safety and security measures. We find that other
safety and security measures as a category are generally not used and
useful in the provision of IPCS. The instructions to the 2023 Mandatory
Data Collection established this category as a catch-all category for
providers to allocate the costs of safety and security measures that
did not fit into the other categories and to ensure that providers
reported the costs of all their safety and security measures. As a
result, the tasks or functions reported in this category are varied and
diverse. However, few, if any, of the safety and security measures
reported in this category serve even a nominal communications function.
For example, one provider includes access to a free law library, while
another reports that it provides ``a postal mail scanning service in
some facilities.'' These services also ``help[ ] correctional agencies
generate targeted investigative leads . . . create `actionable
intelligence' for federal law enforcement . . . [and] flag calls in
which incarcerated people discussed contacting media about cover-ups of
COVID-19 outbreaks.'' Based on the record, we are persuaded that the
safety and security measures included in this category either largely
serve a law enforcement function or, to the extent they do not serve a
law enforcement function, also do not facilitate the provision of IPCS.
As a result, we conclude that the safety and security measures included
in this category generally are not used and useful.
8. Ancillary Service Charges
408. We eliminate all separately assessed ancillary service charges
for IPCS and, instead, allow for the recovery of the costs of ancillary
services as reported by providers through the rate caps we adopt today.
In 2022, the Commission sought comment on whether some or all ancillary
services are inherently part of inmate calling services and, if so,
whether it should include the costs of those services in its rate cap
calculations and preclude providers from imposing separate charges in
connection with those services. Based on the record, we conclude that
the best means of discharging our mandate to establish a compensation
plan that ensures both just and reasonable IPCS rates and charges, as
well as fair compensation for providers is to allow recovery of the
costs of ancillary services within our overall IPCS rate caps. In doing
so, we eliminate a source of consumer confusion and detrimental
provider practices while ensuring that providers have the opportunity
to recover their used and useful costs of providing ancillary services.
a. The Commission's Prior Treatment of Ancillary Service Charges
409. The Commission has long recognized the economic burden that
unreasonably high ancillary service charges impose on incarcerated
people and their loved ones. Those charges have been a continuous
source of confusion and gamesmanship, significantly increasing the
costs of IPCS
[[Page 77320]]
``because incarcerated people and their families must either incur them
when making a call or forego contact with their loved ones.'' As one
commenter explains, ancillary service charges ``can increase the cost
of staying in touch with loved ones by 40%.'' Deposits consumers make
in their accounts can be ``consumed'' by ancillary service charges,
which can dramatically reduce the amount of call time available to
consumers for a given amount of account funds.
410. The Commission's prior reform efforts limited the ancillary
services for which providers could assess separate charges and capped
those ``permissible'' charges, in an effort to foreclose providers'
``incentive and ability to continue to extract unjust and unreasonable
ancillary service charges.'' The Commission permitted five types of
ancillary service charges--automated payment fees, third-party
financial transaction fees, live agent fees, paper bill/statement fees,
and single-call and related services fees. As examples, under the 2015
ICS Order, the cap for single-call and related services was ``the exact
transaction fee charged by the third-party provider, with no markup,
plus the adopted per-minute rate,'' and the capped third-party
financial transaction fee was ``the exact fees, with no markup that
result from the transaction.'' The Commission cautioned that it was
``mindful of and concerned about the potential for continued abuse of
ancillary service charges, and [would] monitor the implementation of
these caps and determine if additional reforms are necessary in the
future.''
411. In the 2021 ICS Order, in response to allegations of inmate
calling service provider abuses, the Commission responded to the need
for further ancillary service charge reform specifically for the third-
party fees for single-call and related services and third-party
financial transactions. The Commission reasoned that fixed, interim
caps of ``$6.95 per transaction'' were necessary to discourage
providers from seeking out, as part of revenue-sharing schemes,
artificially high rates for these services from third parties. In 2021,
the Commission highlighted record evidence concerning the assessment of
duplicate ancillary service charges for individual transactions and
sought comment on whether providers were assessing both automated
payment fees and third-party transaction fees for individual credit
card or debit card transactions. The Commission expressed concern that
providers were exploiting ambiguities in the rules to engage in such
``double dipping,'' and sought comment on whether the Commission's
rules were sufficiently clear in prohibiting providers from assessing
multiple ancillary service charges per transaction or should be amended
to implement such a prohibition.
412. In the 2022 ICS Order, in response to further allegations of
harmful provider practices associated with third-party fees, the
Commission set $3.00 as the maximum amount that providers could pass
through to consumers for single-call and related services and any
third-party financial transactions where the transaction involves the
use of an automated payment system, and set $5.95 as the maximum pass-
through amount where the transaction involves the use of a live agent.
In setting these caps, the Commission sought to address concerns raised
by commenters that the caps on third-party fees adopted in 2021
``simply encourage[d] some carriers to steer customers toward
unnecessarily expensive calling options.''
413. In 2022, the Commission sought comment on whether it should
eliminate ancillary service charges as separate fees and instead
include the costs of those services in its overall rate cap
calculations. The Commission also sought comment on how it might use
data from the Third Mandatory Data Collection to set reasonable
ancillary service caps in the event it decided to continue to allow
separate ancillary service charges. The Commission asked, in
particular, whether the data providers had submitted in response to the
Third Mandatory Data Collection ``provide[d] a reasonable allocation of
costs between inmate calling services and various ancillary services''
that would allow it to set reasonable cost-based ancillary service
caps. Finally, the Commission asked how it should revise its rules to
prevent detrimental practices, such as ``double dipping,'' associated
with any ancillary service charges that it continued to permit. In
2023, the Commission reiterated these requests for comment in light of
enactment of the Martha Wright-Reed Act, and sought comment on whether
ancillary service charge caps should apply uniformly to all audio and
video incarcerated people's communications services.
b. Eliminating All Separate Ancillary Service Charges
414. We conclude that our compensation plan for IPCS should allow
providers to recover their costs of providing ancillary services
through per-minute rate caps, rather than through separate ancillary
service charges. We therefore eliminate all separately assessed
ancillary service charges for IPCS, including any ancillary service
charges associated with intrastate IPCS. To the extent that providers
assess ancillary services charges for their own services or on behalf
of facilities, such fees are now prohibited. For example, in Arizona,
``[a]ll adult visitors applying for in-person/phone, and video visits
must pay a one time, non-refundable, $25.00 background check fee.'' To
process this Visitation Application, some providers charge additional
ancillary service fees. To ensure that providers have an opportunity to
recover their costs of providing ancillary services, we include
providers' reported ancillary service costs from the 2023 Mandatory
Data Collection in the used and useful IPCS costs that we use to set
the rate caps we adopt in the Report and Order.
415. Recognizing that Ancillary Services Are Inherently Part of
IPCS. These actions reflect four independently sufficient findings.
These findings apply equally to audio and video IPCS because, as
certain commenters explain, the utility and costs of providing
ancillary services do not vary between types of services. First, we
find that all ancillary services associated with IPCS, including the
five types of ancillary services for which our inmate calling services
rules presently permit separate charges, are inherent in the provision
of IPCS. In 2022, the Commission sought comment on whether ``some or
all'' of the permissible ancillary services are ``an inherent part of
providing inmate calling services,'' such that the Commission should
continue to ``include those costs in [the] per-minute rate cap
calculations and eliminate some or all charges for ancillary
services.'' To a large extent, the permissible ancillary services
reflect routine internal business functions, such as internal computer
processing and other back office, in-house functions inherent in
providing a consumer-facing service. For example, automated payment
fees are, by definition, fees for IPCS providers' internal ``credit
card payment, debit card payment, and bill processing'' that are basic
back office functions that are a routine part of providing a
communications service. Given the historical backdrop of problems that
have arisen from separately-imposed ancillary service charges in this
context, we find that providers should not be allowed to treat payment
for IPCS as a service--separate and apart from IPCS service itself--for
which a separate charge is assessed.
416. The other permissible ancillary services--third-party
financial
[[Page 77321]]
transaction fees, live agent fees, paper bill/statement fees, and
single-call and related services fees--relate primarily to how
consumers are billed for and pay for IPCS, and thus also are inherently
part of IPCS. Although these ancillary services may have qualified as a
``convenience'' in 2015 when the Commission first identified them in
its rules, the record indicates that they are now the predominant means
by which consumers gain access to IPCS. While alternative methods of
funding an account remain available (e.g., by check or money order),
automated payment or money transmitter services are ``an intrinsic
part'' of accessing and using IPCS, as is the case with most other
services in the 21st-century economy. Indeed, one provider has pointed
to the decreased usage of collect calls, and its alternative payment
mechanisms, in support of its proposal that the Commission eliminate
the fee for paper statements. In short, ``incarcerated people and their
families must either incur [these charges] when making a call or forego
contact with their loved ones.''
417. We recognize, of course, that an IPCS user may contact a live
agent, request a paper bill, or otherwise interact with an IPCS
provider regarding matters other than routine billing and collection.
For instance, an IPCS account holder may wish to speak with a live
agent to complain about the service quality on video communications, to
learn about the provider's alternate pricing plans, or to obtain a
refund of money from an inactive account. We find that these other non-
billing and collection interactions also are inherent in the provision
of IPCS, in much the same way that similar interactions are inherent in
products and services provided outside the IPCS context. As such, we
conclude that the costs of these interactions should be recovered
through IPCS rates, rather than ancillary service charges that have
been an ongoing source of harm in the IPCS context.
418. Eliminating Incentives for Abuses. Second, we find that
continuing to allow providers to impose separate ancillary service
charges would create an incentive for providers to continue to engage
in practices that unreasonably burden consumers and effectively raise
the cost of IPCS. Although the Commission has previously restricted the
type and amount of ancillary service charges, providers are still
``motivated to exploit every available opportunity to continue deriving
unreasonable profits from such fees.'' A rate structure that eliminates
all separate ancillary service charges while still allowing providers
to recover the costs of these functions will eliminate the incentive
and ability for providers to charge multiple fees for the same
transaction, as a way of exacting revenue from consumers that far
exceeds their actual costs of completing the transaction, a problem
that is well-documented in the record. The record reflects substantial
debate or confusion as to whether--and if so, under what
circumstances--multiple fees can be charged for a single transaction,
and more generally, what activity the payment-related fees were
intended to encompass. Because we eliminate all ancillary service
charges associated with IPCS, we find it unnecessary to resolve this
dispute in this rulemaking. By including providers' reported costs of
all ancillary services into our rate caps and eliminating providers'
ability to charge for them separately, we also remove the incentive for
providers to ``double dip'' in this manner, mooting related concerns in
regard to our existing rules and eliminating consumer confusion arising
from these practices.
419. We similarly eliminate the ability of providers to engage in
other rent-seeking activity described in the record, including concerns
that providers may ``steer'' consumers to a more expensive single-call
option for an incarcerated person's initial call after incarceration in
an effort to artificially inflate revenues through single-call fees.
Commenters describe circumstances where providers charged multiple
single-call fees when calls were disconnected and reconnected, or where
a provider ``charge[d] a billing statement fee as a matter of course
without offering an option of providing a free electronic copy,'' and
several other rent-seeking practices. These practices undermine the
intent of our rules and merely inflate providers' revenues well beyond
costs at the expense of consumers while providing no additional
consumer value.
420. Recognizing the Limitations of Providers' Ancillary Services
Cost Data. Third, we find that the limitations inherent in providers'
reported ancillary service charge data preclude our setting reasonable,
cost-based caps on individual ancillary service charges. In the 2021
ICS Order, the Commission found that the data before it provided ``no
reliable way to exclude ancillary service costs'' from the calculations
for the provider-related rate cap component, resulting in interim rate
caps that included the costs that consumers were also paying through
ancillary service fees. The Commission was unable to ``isolate with any
degree of accuracy'' the costs of providing ancillary services because
the instructions for the Second Mandatory Data Collection required
providers to report certain ancillary service revenues separately, but
did not require providers to report their ancillary service costs
separately from other inmate calling services costs. Further, those
instructions did not require providers to separately report costs
relating to any specific ancillary service, and no commenter suggested
a way of identifying the providers' ancillary service costs. To correct
for this problem, in the 2023 Mandatory Data Collection, providers were
required to follow detailed instructions in allocating their costs to,
and among, their permissible ancillary services. In contrast to the
Second Mandatory Data Collection, the instructions for the 2023
Mandatory Data Collection required providers to report their costs of
each ancillary service separately. But, as made clear in a technical
appendix, providers failed to reliably or consistently allocate their
costs among the various ancillary services. This makes it impossible
for us to assess reliable costs for each individual ancillary service.
Incorporating all of these reported costs into our rate cap
calculations avoids the risk of setting individual caps for each
ancillary service charge that fail to reflect providers' actual costs,
while still ensuring the providers are able to recover their costs
through our rates. By incorporating providers' reported ancillary
service charge costs into our rate cap calculations, we ensure they
have an opportunity to recover, but not double recover, their actual
costs of providing ancillary services. Additionally, by including
providers' costs of providing ancillary services in our rate caps, we
effectively exclude from our rate cap calculations the amount by which
providers' revenues from ancillary service charges unreasonably
exceeded their costs.
421. Additional Benefits. Fourth, we find that incorporating
providers' ancillary service costs into our rate cap calculations will
benefit both consumers and providers. As an initial matter, that
approach will result in a rate structure that will be easier for
consumers to understand and for providers to administer, while still
allowing providers to recover any used and useful costs they incur in
providing ancillary services. It will simplify providers' record
keeping and billing processes, easing the administrative burdens on
providers and reducing the burdens on consumers as they seek to
[[Page 77322]]
understand any charges to their IPCS accounts.
422. We likewise find that incorporating ancillary service costs
into our rate cap calculations will align rates and charges more fairly
with actual user activity. Commenters point out the seeming
unreasonableness and disproportionality of imposing a $3.00 fee for
automated single call and related services for a call that may be of
short duration, or passing through similar fees for smaller deposits,
causing consumers to ``lose a significant amount'' of their account
deposits through such fees. Incorporating ancillary service costs into
our rate caps spreads those costs across all calls and communications,
ensuring that the cost of any particular communication for any IPCS
consumer is more proportionate to its duration.
423. Even beyond those direct effects on IPCS rates and charges, we
also eliminate certain incentives for consumer behavior that our
current fee structure would perpetuate, such as avoiding a live agent
or transferring funds to relatives less frequently in an effort to
avoid such charges. Our actions today reduce these barriers to
communication, resulting in a compensation plan ensuring just and
reasonable rates and charges--and fair compensation for providers--in a
way that best benefits the general public. Our actions also better
align with similar services in the non-carceral communications context.
As one commenter explains, ``[m]ost telephone corporations and other
utilities provide customer services for free, including services such
as speaking with a live agent to set up an account, adding money to an
account, or assisting with making a call.'' Similarly, by incorporating
the reported costs of paper bills into our rate cap calculations, we
align IPCS billing practices more closely with telecommunications
billing practices outside of the carceral context, where separate
charges typically are not assessed for paper bills.
424. Finally, we find that incorporating ancillary service costs
into our rate cap calculations aligns our rate and fee structure more
effectively with broader patterns in the IPCS industry while
recognizing the diminishing usage of certain ancillary services. As the
Commission has previously observed, several states have already banned
ancillary service charges, either piecemeal or outright. For example,
several providers assert they rarely charge a paper bill fee as few
consumers require paper bills, even proposing that this fee be
eliminated. At least one provider no longer charges a live agent fee,
having switched to an automated system during the pandemic. Meanwhile,
some providers have shifted from offering single-call services through
third parties (as defined in our rules) to instead provide these
services themselves. Other commenters propose eliminating the single-
call fee entirely. The record further suggests that the single-call
service, which ostensibly offers the convenience of completing initial
contact without setting up an account, may in practice offer little
benefit to consumers, as the called parties still have to enter their
payment card information to accept the call. Our actions are consistent
with our recent initiative requiring cable and direct broadcasting
satellite operators to offer ``all-in'' prices to consumers so that
consumers have a transparent and accurate reflection of the total cost
of services, inclusive of all additional fees.
425. Some commenters object to the approach of incorporating
ancillary service costs into our rate cap calculations. Those
commenters argue that this methodology ``does not reflect the manner in
which costs are caused by users of the service,'' and ``would impose
costs for payment processing on all consumers, rather than just those
consumers directly responsible for the cost.'' We are unpersuaded. We
find that most of these functions have become ``an intrinsic part of
providing'' IPCS because they provide IPCS consumers the means to
obtain IPCS, such that consumers typically ``must either incur [these
charges] when making a call or forego contact with their loved ones.''
For the same reason, we are not persuaded by Securus's implicit
argument that the current ancillary fees are offered ``as a convenience
to incarcerated persons or their friends and family and are not
intrinsic to the provision of ICS.'' Certain ancillary service charges,
for example those for automated payment services, are costs that are
either universally or near universally incurred by consumers. But it is
not necessary that these services be used by ``all consumers''; the
fact that these services can operate as a threshold, coupled with the
factors identified above that support ancillary service cost recovery
through per-minute IPCS rate caps, will ensure that our approach
provides for just and reasonable rates for consumers and providers,
while also providing appropriate cost recovery for providers. In the
2015 ICS Order, the Commission found that single-call services were not
``reasonably and directly related to the provision of ICS'' because
they ``inflate the effective price end users pay for ICS and result in
excessive compensation to providers.'' We find that this pattern has
been ameliorated, in part, by the changes to single-call fees adopted
in the 2021 ICS Order and 2022 ICS Order; we also recognize that
providers incur some amount of legitimate costs for providing this
service, which for at least some consumers may offer a crucial means of
completing an IPCS communication. At the same time, we find that the
continuing abuse of this fee described in the comment record, supports
elimination of the single-call fee as an independent charge.
426. Further, commenters opposing the elimination of separate
ancillary service charges ignore the other factors that make it the
best means of ensuring just and reasonable IPCS rates and charges. As
discussed above, each of the other factors supporting our approach--the
need to eliminate incentives for providers to assess unreasonable
ancillary service charges, the impossibility of setting reasonable
ancillary service charge caps given the limitations on the data on
ancillary service costs providers reported in response to the 2023
Mandatory Data Collection, and the additional public interest benefits
our approach will produce--fully and independently support our approach
both individually, and in any combination.
9. Alternate Pricing Plans
a. Introduction
427. The Commission has traditionally required IPCS providers to
charge for interstate and international audio IPCS on a per-minute
basis principally to safeguard consumers from potentially unreasonable
rates and practices. The Commission's rules have long prohibited
providers from using ``flat-rate calling'' that would require consumers
to pay a flat rate per call regardless of the length of the call. By
comparison, in recent years many telecommunications service plans in
non-carceral settings have transitioned to flat-rate pricing for a
specific quantity of, or an unlimited number of, minutes. At the same
time, IPCS marketplace developments have also led to ``emerging pay
models'' that more closely track the ``modern marketplace.'' In
recognition of these developments and the pro-consumer benefits of
allowing more flexible pricing programs, today we permit IPCS providers
to offer incarcerated people and their friends and family IPCS via
optional ``alternate pricing plans,'' subject to clearly defined
safeguards to ensure that IPCS consumers are protected. The Commission
previously
[[Page 77323]]
referred to these programs as ``pilot programs.'' These optional
programs could, for example, consist of blocks of audio calls or video
communications, or an unlimited quantity of either service, at a set
monthly or weekly price.
428. The record reflects that alternate pricing plans can provide
meaningful benefits to IPCS consumers, including, but not limited to,
increased utilization of IPCS, with all of its attendant benefits for
reducing recidivism, and greater budgetary certainty for IPCS
consumers. Nevertheless, we are mindful that alternate pricing plans
may not be a good fit for every consumer and therefore include
guardrails to protect against potential ``abuse and higher prices.'' We
find that, on balance, the potential advantages of these plans are
significant. We therefore permit IPCS providers to offer alternate
pricing plans subject to rules and conditions to ensure that consumers
that elect these plans have the information needed to make informed
choices and are protected from unjust and unreasonable rates and
charges. As explained above, the Martha Wright-Reed Act requires just
and reasonable rates and charges, and provides us with limited
authority to regulate IPCS providers' practices, classifications, and
regulations that relate to IPCS rates and charges. Alternate pricing
plans may include the full range of IPCS now subject to the
Commission's authority, including intrastate IPCS and advanced
communications services now included in the statutory definition of
``payphone service'' in carceral facilities.
b. Background
429. The Commission has previously invited comment on how its
regulation of IPCS ``should evolve in light of marketplace developments
to better accommodate the needs of incarcerated people,'' including
through the use of ``alternative rate structures.'' In the 2020 ICS
Notice, the Commission sought comment about ``alternative rate
structures'' and whether it should change its rules ``to recognize
industry innovations'' including new pay models. At that time, some
commenters voiced support for such changes. Later, in 2021, the
Commission asked whether it should consider ``alternative rate
structures, such as one under which an incarcerated person would have a
specified--or unlimited--number of monthly minutes of use for a
predetermined monthly charge.'' Some commenters expressed support for
``alternative rate structures'' while acknowledging the need to ensure
incarcerated people and their loved ones are protected from unjust and
unreasonable rates and charges. At that time, the Prison Policy
Initiative asserted that alternate pricing plans were premature as a
matter of law and fact, and requested that the Commission ensure that
the alternate pricing plans be ``fair to consumers.''
430. Shortly after seeking comment in 2021, Securus filed a
Petition for Waiver of the Commission's rules so it and ``other
providers'' could offer flat-rate calling packages for interstate audio
IPCS. Securus had been offering subscription plans for intrastate audio
service since December 2020. Under its subscription plans, Securus
charged a flat rate for a fixed number of calls for a period of, for
example, one month. In addition to the flat rate, Securus charged a
``site commission[ ] (if applicable), plus $3.00 automated payment
fee.'' Also, the plans were ``[d]esigned to be used only to call
specific numbers from a specific facility.'' Calls made to other
numbers that were not using Securus's subscription plan were charged at
Securus's per-minute rates. The Bureau sought comment on the Securus
Waiver Petition. While commenters did not object to alternate pricing
plans in general, the responses were mixed, with some urging the
Commission to grant the Securus Waiver Petition, and others expressing
concern and suggesting that the Commission proceed slowly and adopt
consumer protection measures applicable to such plans. Securus
terminated its subscription plans later in 2021 due to its inability to
determine the jurisdictional nature of the calls included in the plans.
431. In 2022, and again in 2023, the Commission sought further
comment on alternate pricing plans, conditions that may be placed on
the plans, and consumer disclosures to ensure that providers accurately
disclose the details of any alternate pricing plans. The record in
response generally supports the agency permitting these alternate
pricing plans but many commenters focused on requirements and
protective measures related to these plans. ViaPath asks the Commission
to refrain from adopting ``excessive and unnecessary conditions''
applicable to the plans. Securus requests flexibility in selecting the
form of the plans, and recognizes that ``reasonable conditions'' will
be necessary. The Public Interest Parties suggest that the Commission
permit the plans subject to a number of conditions concerning, for
example, rates and consumer information, to ensure that consumers are
protected. Based on the foregoing suggestions, Pay Tel observes that
the plans may have benefits ``in some settings for some customers.''
Stephen Raher requests a robust system of consumer disclosures.
Subsequent ex parte filings provide additional detail on Securus's
experience offering alternate pricing plans and discuss possible
conditions on these plans.
c. Discussion
432. We find that the record supports allowing IPCS providers to
offer alternatives to per-minute pricing for IPCS subject to the rules
and conditions adopted in the Report and Order. We therefore allow IPCS
providers flexibility to offer pricing structures other than per-minute
pricing as options for consumers in addition to offering standard per-
minute pricing plans. In reply comments to 2022, the Public Interest
Parties request the Commission to defer consideration of alternate
pricing plans due to the enactment of the Martha Wright-Reed Act in
January 2023, and the circulation of the draft 2023 IPCS NPRM (which
was released Mar. 17, 2023). Parties have had more than three years and
several opportunities to comment on alternate pricing plans, including
in response to further questions about such plans raised in connection
with the Commission's implementation of the Martha Wright-Reed Act in
2023. Given the potential benefits discussed herein, we see no reason
to wait any longer to allow such plans. The record indicates both
provider and consumer interest in such plans, and we find that these
plans offer benefits that consumers want. For example, Securus's plans
were ``developed as a direct result of consultations between Securus
leadership and justice-involved families.'' After Securus terminated
its subscription plans, consumers asked it to reinstate the plans, and
emphasized their benefits. Former subscribers explained that Securus's
subscription plans helped them be able to talk to loved ones, helped
stabilize their mental health, and enabled an incarcerated person to
help their children with their homework. The Director of Facility
Operations at one carceral facility describes Securus's plan as ``the
most economical option for communication [between incarcerated people
and] their wives and children.'' Securus remarks that a ``key benefit''
to the individuals enrolled in its subscription plans ``was being able
to better budget for calls by knowing in advance how much would be
spent on calls during a given period.'' Demand for flat-rate monthly
plans also was expressed in the California PUC's hearings on Regulating
Telecommunications Services Used by Incarcerated People. Consumers
mentioned the flat-rate monthly plans for cell phone usage, and
streaming
[[Page 77324]]
services like Disney and Netflix, and asked whether flat-rate monthly
plans could be provided for telephone calls with incarcerated people.
To support its argument that fixed-rate pricing helps consumers budget
for calls, Securus points to Connecticut, where the Department of
Corrections (DOC) now pays for calls, thereby making the calls free to
the consumers. Securus asserts that it charges the DOC for Securus's
services on a per-incarcerated-person basis (rather than using per-
minute rates) to enable DOC to better budget for Securus's services.
433. Additionally, data provided by Securus indicate that consumers
experienced longer and less costly calls under its subscription plans.
According to Securus, the average cost per call was $0.65 under its
subscription plans (with an average call length of 14.51 minutes)
compared to an average cost per call of $1.62 using Securus's per-
minute rates (with an average call length of 9.19 minutes). Securus
explains that ``[c]osts decreased [an] average of 61% per call and 74%
on a per-minute basis.'' ViaPath also predicts that alternate pricing
plans ``will promote increased calling while reducing costs.''
434. Nevertheless, other commenters urge caution regarding
alternate pricing plans. For example, Pay Tel expresses concern that if
a consumer does not use all of the minutes in a plan, the cost they pay
for a plan would be greater than they would have paid at the per-minute
rates offered by that provider. The Accessibility Advocacy and Research
Organizations ask the Commission to take a ``cautious approach designed
to ensure [alternate pricing plans] serve incarcerated people with
disabilities' interests first, and not those of ICS providers looking
for ways to circumvent their pricing obligations.'' Worth Rises points
out that ``IPCS providers have a record of exploiting incarcerated
people and their loved ones.'' Although Securus points out that
``[s]ubscribers saved money at low levels of utilization: [15 to
30%,]'' the data do not tell the complete story. The Public Interest
Parties point out that a ``substantial number of participants'' (i.e.,
from 10% to 34% of the consumers) in Securus's nine subscription plans
had low usage and as a result, paid more using the subscription plans
than they would have paid under per-minute rates. The Public Interest
Parties, and Securus's spreadsheet, reference the breakeven point for
Securus's subscription plans. The breakeven point refers to the amount
of usage required for a consumer to realize a rate that equals the
provider's per-minute rate. Specifically, the ``breakeven point'' is
the usage amount: (a) below which a consumer would pay more for the
subscription plan than they would have paid under the provider's per-
minute rates, and (b) at or above which the cost of the subscription
plan would be less than or equal to what the consumer would pay under
the provider's per-minute rates. For example, Securus shows that 76% of
its subscribers were above the breakeven point at one facility. In
other words, 76% of the subscribers had usage high enough to justify
the cost of the subscription plan whereas the remaining 24% of
subscribers effectively paid more for the subscription plan than they
would have paid if they had paid for the service at Securus's per-
minute rates.
435. Given the apparent demand from consumers and the potential
savings and increased communications that can result from alternate
pricing plans, we will permit IPCS providers to offer such plans.
However, to help make sure that consumers who enroll in the plans
benefit from them and that IPCS providers do not use such plans to
otherwise evade the Commission's IPCS rules, we require that these
plans comply with the general rules applicable to all IPCS, and adopt
specific consumer protection and disclosure rules for these plans. We
expect the rules we adopt today will provide sufficient consumer
protections, and in any event, the alternate pricing plans are optional
for both providers and consumers.
436. We acknowledge that our decision today represents an evolution
in the Commission's thinking concerning permitted rate structures. We
emphasize that IPCS alternate pricing plans are optional to consumers,
and IPCS providers that offer such plans are still required to offer a
per-minute pricing option to the consumers they serve. This ensures
that consumers will always have the option of selecting per-minute
pricing if traditional per-minute pricing offers greater value. In
facilities where alternate pricing plans are offered, consumers will
now have the ability to select the pricing models that best meet their
needs and their budgets, similar to the flexibility afforded to
consumers outside the carceral setting.
(i) General Parameters of Alternate Pricing Plans
437. We allow IPCS providers the option to offer alternate pricing
plans. We first define an ``alternate pricing plan'' as the offering of
IPCS to consumers using a pricing structure other than per-minute
pricing. An IPCS provider may determine whether to offer such a plan,
which services to include, which format (i.e., the rates (subject to
the applicable rate caps) and the number of minutes, calls or
communications for example, included (or an unlimited number of
minutes, calls or communications)), and where to offer the plan, as
discussed below. We require IPCS providers that offer alternate pricing
plans to comply with the rules specific to alternate pricing plans, as
well as other rules applicable to all IPCS, to help ensure just and
reasonable rates and charges. For example, the prohibitions and
limitations on per-call, per-connection, and per-communication charges,
site commissions, ancillary service charges, and taxes and fees as
provided for in our rule revisions, also apply to alternate pricing
plans.
438. Optional to Consumers and to IPCS Providers. As a threshold
matter, a consumer may enroll in an alternate pricing plan at their
discretion. IPCS providers must not require a consumer to enroll in an
alternate pricing plan. In 2021 and 2022, the Commission asked whether
providers should be permitted to offer optional pricing structures as
long as consumers would still have the ability to purchase service on a
per-minute basis. In response, the Public Interest Parties and ViaPath
agree that participation in an alternate pricing plan should be
voluntary for the consumer. No commenter suggests that enrollment in a
plan should be mandatory for a consumer.
439. Similarly, we do not require IPCS providers to offer alternate
pricing plans. An IPCS provider's decision to offer an alternate
pricing plan is voluntary. Consistent with the record and to ensure the
optional nature of alternate pricing plans particularly for consumers,
we require providers offering alternate pricing plans to also continue
offering per-minute pricing. We adopt revisions to section 64.6010(a)
of our rules to incorporate this requirement. Consumers therefore will
still have the option of paying for IPCS on a per-minute basis. As
Worth Rises points out, ``[p]er minute pricing structures . . . protect
ratepayers who may only make a few calls and do not want to be locked
into paying for extended time periods.'' No commenter requested that
the Commission mandate the offering of alternate pricing plans, or
eliminate the per-minute option. Worth Rises asks the Commission to
obtain more data before permitting providers to offer alternate pricing
plans, but our requirements that alternate pricing plans to be optional
for consumers, and that the plans comply with the other rules and
conditions we adopt here
[[Page 77325]]
generally for IPCS, should resolve Worth Rises's concerns.
440. Format. An IPCS provider may employ any format for its
alternate pricing plans that complies with the Commission's generally
applicable IPCS rules and the safeguards we adopt in the Report and
Order, which, together, are designed to protect consumers from unjust
and unreasonable rates and charges, consistent with the Martha Wright-
Reed Act. IPCS providers will have the flexibility to determine the
format of their alternate pricing plans and may offer plans based on
pricing by minutes of use, calls or communications made, or any other
format. In 2022 and 2021, the Commission asked about plans that would
offer a specific, or unlimited, number of minutes of use for audio
services at a monthly charge, and the merits of different pricing
structures and their impact on consumers and providers. Our decision to
permit IPCS providers to offer alternate pricing plans based on a fixed
or unlimited number of minutes, calls or communications seems to be
inconsistent with the Commission's prior implication, in the 2022 ICS
Order, that per-minute rates are preferable to per-call rates. But in
the 2022 ICS Order, the Commission cited to a discussion in the 2021
ICS Order concerning cost allocators, not rate setting. Thus, because
our decision here is about rate setting, not cost allocation, that
passage in the 2022 ICS Order does not apply. Some commenters oppose
plans based on a specified number of calls due to concerns about
dropped calls, which we address below. One commenter argues that the
Commission's prohibition on flat-rate calling and per-call charges
prohibits alternate pricing plans. As discussed below, we remove the
rule prohibiting flat-rate calling, making this concern moot. In
addition, the prohibition on per-call charges does not prohibit the
provision of alternate pricing plans based on a specific number, or
unlimited number of, calls or communications; the prohibition on per-
call charges just prohibits charges that are assessed in addition to
the base rates for calls. As discussed above, we retain and amend the
prohibition on per-call charges. Thus, the commenter's concern about
per-call charges is misplaced. Because we now have authority to
regulate rates for certain advanced communications services, including
video services, alternate pricing plans may include advanced
communications services, which likewise may be offered for a fixed
number of or an unlimited number of minutes or communications, for a
service period of a week or a month, among other formats.
441. When determining the format of an alternate pricing plan, IPCS
providers must consider the type and characteristics of the facilities
they serve, including: (a) any limits on the number of and length of
calls or communications imposed by the facility; (b) the availability
of correctional staff to manage the use of the service; and (c)
equipment availability for the calls or communications. The amount of
communications equipment per facility varies but, as an example, the
Public Interest Parties suggest that in 2023, the California Department
of Corrections and Rehabilitation Facilities had an average of 1
telephone for every 22 incarcerated people. Additionally, in the
Genessee County Jail, ``[e]ach jail pod has only two video kiosks for
roughly 60 to 70 people, and it is common for only one of the kiosks to
be working at any given time.'' A provider's consideration of these
factors will help ensure that consumers are reasonably able to make
enough calls to reach the breakeven point for the specific plan as
discussed below. We want to avoid IPCS providers, offering alternate
pricing plans of, for example, 200 calls per month when because of
equipment limitations or call length and frequency limitations the
incarcerated individual could not possibly make 200 calls a month at
their facility.
442. Service Period. In 2022, the Commission asked parties to
comment on the appropriate service period for alternate pricing plans.
The Public Interest Parties and Securus suggest that ``consumers should
not be required to sign up for long term commitments.'' PPI notes that
in prisons, ``residents have a longer and more predictable length of
stay (as compared to jails), allowing them to more effectively budget
for recurring expenses like phone calls,'' whereas in jails,
``populations are more transient and financial planning is more
difficult.'' NCIC suggests that bulk packages for video could be
offered as an option at longer-term facilities, but that ``per-minute
billing would be the most cost-effective solution for short-term and
county jails that may house incarcerated persons for an evening or
weekend.'' Although these statements appear to assume that the consumer
is the incarcerated person, the concern about the length of stay likely
would similarly apply to the friends and family of the incarcerated
person, if they are the consumers. We agree and therefore limit the
service period IPCS providers may offer an alternate pricing plan to no
longer than one month. When Securus offered its subscription plans, the
services were offered for no more than one month at a time before
renewal was required. One month is the length of a standard billing
cycle used by IPCS providers in carceral facilities and
telecommunications companies in non-carceral settings. Limiting
alternate pricing plans to service periods of at most one month limits
consumers' potential financial liability and permits flexibility for
any changed circumstances. At the end of a service period, a consumer
who is participating in the alternate pricing plan will need to renew
their enrollment if they want to continue participating in the plan
(unless the consumer previously has opted in to automatic renewals, if
offered by the provider).
443. Services Included. An alternate pricing plan may consist of:
(a) a single service that is defined as IPCS (e.g., an audio or video
communications service) or (b) any bundle of services for which each
service is defined as IPCS. Our use of the word ``bundle'' in the
context of alternate pricing plans refers only to a combination of
services; it does not imply a discount. We also note that ``bundling''
is mentioned in the record in the context of services offered by a
provider to a contracting authority. By comparison, ``bundling'' in
alternate pricing plans concerns services offered by a provider to
consumers.
Most comments in the record focus on the provision of interstate
audio IPCS, because most of the comments were filed before the
enactment of the Martha Wright-Reed Act, which expanded the
Commission's regulatory authority to include all audio and video
communications services in carceral facilities. In the absence of
regulation, we recognize that some providers have priced video services
at flat rates, and others have priced video services by the minute. In
2023, the Commission asked whether it should ``allow voice and video
services to be offered as bundles.'' While not advocating for alternate
pricing plans that would consist of combinations of services with
prices based on broadband usage, Worth Rises previously suggested that
the Commission consider such approaches and determine if they would
protect consumers. In response, Securus urges the Commission to ``make
clear'' that providers ``may bundle voice, video and other services''
in alternate pricing plans, and that the Commission could ``exercise
oversight'' through reporting requirements. Additionally, the
California Public Utilities Commission states that bundles should not
be allowed ``unless the provider provides
[[Page 77326]]
transparency on the cost or what the rate entails.'' Our rate,
reporting and other alternate pricing plan requirements should resolve
these concerns.
444. We recognize that services offered in combination under an
alternate pricing plan may not be subject to the same rate caps.
Nevertheless, services offered under an alternate pricing plan remain
subject to the general IPCS rules, including the applicable rate caps
for both audio and video services and the prohibition for levying
separate ancillary service charges. To the extent a consumer purchasing
services under an alternate pricing plan believes that the charge
assessed for the bundled services resulted in the effective rate
exceeding the applicable rate caps established in the Report and Order,
the consumer would first need to show that their usage of each service
in the bundle meets or exceeds the usages required to meet the
specified breakeven point(s), and then the IPCS provider would bear the
burden of demonstrating that the rate charged to that consumer under
its alternate pricing plan is less than or equal to the applicable IPCS
per-minute rate cap. The breakeven point refers to the amount of usage
required for a consumer to realize a rate that equals the provider's
applicable per-minute rate at the facility. Specifically, the
``breakeven point'' is the usage amount: (a) below which a consumer
would pay more for the subscription plan than they would have paid
under the provider's per-minute rates, and (b) at or above which the
cost of the subscription plan would be less than or equal to what the
consumer would pay under the provider's per-minute rates.
445. We do not permit alternate pricing plans that combine IPCS
with non-regulated services, as requested by some IPCS providers.
Several providers suggest that the Commission should permit bundling of
non-IPCS with IPCS. NCIC explains that its accounting system is set up
to support just subscription plans or just per-minute plans. Thus, if
subscription plans include audio but not messaging, then a consumer
would need to have two accounts with NCIC if they want both services--
and NCIC would need to modify its accounting platform to support the
two accounts. NCIC is the only commenter that expresses concern about
the cost of establishing subscription plans, and NCIC does not quantify
that cost. However, NCIC does point out that other IPCS providers have
separate accounts for separate services, and charge their customers
varying fees for each of those accounts. NCIC is concerned that the FCC
would ``mandate a subscription plan.'' Because we are making
subscription plans optional to the provider, NCIC can choose to not
offer such plans. As the Public Interest Parties observe, alternate
pricing plans should not include non-IPCS ``which lack visibility and
transparency in their pricing.'' A key premise in our decision to allow
alternate pricing plans is the ability of IPCS users to make informed
decisions about whether to choose such optional plans. Where the plans
are limited to IPCS, users can make comparisons to the rate-regulated
per-minute plans capped by Commission rules. By contrast, if non-
regulated services are included in alternate pricing plans, we are not
confident that IPCS users consistently will have the same type of
visibility and transparency in the pricing for those non-regulated
services sufficient to make an informed decision whether to elect an
alternate pricing plan.
446. Facilities. Alternate pricing plans may be offered at any
carceral facilities served by the IPCS provider, such as jails and
prisons, where the relevant correctional authorities permit. Securus
offered its subscription plans in eight jails and one prison. One of
those facilities was a short-term detention facility where Securus
offered a plan of just 25 calls per week, but that facility had low
utilization. Securus consequently posits that ``[i]t may be that
subscription plans are not optimal for short term facilities.'' By not
specifying the types of facilities in which IPCS providers may offer
alternate pricing plans, we allow providers the flexibility to
determine where these plans would be most beneficial.
(ii) Rules and Conditions Specific to Alternate Pricing Plans
447. Alternate pricing plans must comply with the rules generally
applicable to IPCS, as well as specific rules and conditions designed
to ensure that consumers that choose these pricing plans are protected.
Requiring compliance with these comprehensive rules will serve to
protect consumers and ensure just and reasonable rates and charges as
required by the Communications Act and the Martha Wright-Reed Act.
a. Using a Consumer's Comparable Per-Minute Rate
448. In 2021, the Commission asked about the appropriate rate of
IPCS offered via an alternate pricing plan. In 2022, the Commission
asked how to protect consumers from ``unreasonably high interstate and
international rates in connection with pilot programs.'' Today, we
require that any IPCS alternate pricing plan be offered at a rate that
has a breakeven point equal to or less than the applicable rate cap. In
2022, the Commission also asked whether it should require providers to
offer consumers a discount compared to what they would pay for the same
usage under the rate caps. Securus objects to being required to offer a
discount because ``there [would be] little or no incentive to price
these plans at a substantial price discount.'' We do not require that
alternate pricing plans be offered at a discount from the Commission's
per-minute rate caps. Providers can determine the details of their
alternate pricing plans, subject to our rules and what the market will
bear. The rates of alternate pricing plans that satisfy this
requirement will be presumed lawful. We therefore ensure that providers
cannot use alternate pricing plans to circumvent our rate caps, as
commenters have cautioned.
449. For purposes of demonstrating compliance with our rules in the
event of a consumer complaint or investigation, an alternate pricing
plan, whether offering bundled IPCS or a stand-alone service, must have
a breakeven point that, when calculated on a per-minute basis, is less
than or equal to the applicable rate caps. The IPCS provider bears the
burden of demonstrating compliance with this condition if its alternate
pricing plan is the subject of a complaint or an investigation by the
Commission. Commenters agree that the providers should bear the burden
of demonstrating their compliance with the Commission's rate caps and
ancillary services caps, because ``IPCS providers . . . are in the best
position to provide this information about usage to the Commission.'' A
consumer complaint about the provider's alternate pricing plan rates
will not be entertained under the alternate pricing plan rule in Sec.
64.6140 unless the consumer's usage meets or exceeds the breakeven
point(s) for the alternate pricing plan. This limitation does not
restrict non-rate-related complaints about providers' alternate pricing
plans, for example about dropped calls or billing issues, while it does
strike a balance by limiting the number of rate complaints that can be
brought to the Commission to those brought by consumers whose usage met
the breakeven point.
450. In 2022, the Commission also sought comment on whether a
consumer's actual usage should be taken into account when determining
whether
[[Page 77327]]
an alternate pricing plan is consistent with the rate caps. One
commenter suggests that a plan's effective rate be calculated based on
the usage data for a specific consumer. Other commenters propose using
alternative methods such as a ``reasonable utilization'' of the
allotted minutes, ``a reasonable assumption of usage,'' and an
``average level of usage.'' Securus also suggests that no plan ``should
be offered if its effective per-minute rate at full utilization is not
below the applicable per-minute cap.'' Calculating a comparable per-
minute rate at full utilization assumes that a ``consumer will use
every call and minute available,'' an assumption that defies the
purpose of our requirement to calculate the consumer's effective rate.
None of these commenters explain how these alternative methods would be
implemented in practice. We find that comparing the amount of usage to
meet the breakeven point to the consumer's actual usage of the
alternate pricing plan will result in a more meaningful and accurate
assessment than using the alternate methods proposed by commenters.
451. Our rule requiring comparison of a consumer's actual usage to
the alternate pricing plan's breakeven point makes the determination of
whether a plan results in just and reasonable rates for a specific
consumer straightforward. In the event of a challenge, the IPCS
provider would need to use only the number of minutes used by the
consumer challenging the lawfulness of the alternate pricing plan,
without needing to analyze other consumers' usage to determine an
``average'' or ``reasonable'' amount of usage. Securus cautions that
the Commission ``be mindful . . . of not imposing excessive burdens on
providers'' as it considers the calculation of a consumer's effective
rate, but Securus does not explain what it thinks the ``burden'' may
be. We find that requiring that a consumer's actual usage be used to
determine the comparable per-minute rate for that consumer is less of a
burden than Securus's suggestions that providers use a ``reasonable''
or ``average'' amount of usage.
(b) Complaints of Dropped Calls or Communications
452. When using an alternate pricing plan based on a specific
number of calls or communications, an IPCS consumer may be charged for
more than one call or communication if an original call is dropped and
the consumer is forced to reinitiate the call or communication to
finish a conversation. We, therefore, address the issue of refunds or
credits for such calls or communications when consumers are effectively
charged for more than one call when a call is dropped. In the case of
plans that charge on a per-call or per-communication basis, we expect
refunds or credits to be provided in particular circumstances for
dropped calls, and also require specific consumer disclosures to ensure
that consumers are aware of the ability to request those refunds or
credits.
453. Complaints of dropped calls, and the attendant lost funds
associated with those calls, have been a constant refrain since the
beginning of the Commission's regulatory efforts to reform
communications services for incarcerated persons. Then, in the 2015 ICS
Order, the Commission prohibited per-call (and per-connection) charges,
in part, due to the `` `assessment of multiple per-call charges for
what was, in effect, a single conversation' '' that was interrupted
when the call was dropped. Unfortunately, dropped calls continue to be
a problem and are not limited to audio IPCS. In 2021, the Commission
asked about preventing providers from assessing duplicative ancillary
service charges when a call is dropped. In 2022, the Commission sought
comment on adopting a requirement to provide credits or other remedies
for dropped calls in the context of alternate pricing plans. At the
October 27, 2023, and February 1, 2024, IPCS Listening Sessions, IPCS
consumers also discussed the issue and the difficulty of having calls
dropped.
454. There are several possible reasons for an audio call or a
video communication to drop. On the one hand, there could be a
technical reason such as faulty equipment in the carceral facility, a
problem in the IPCS provider's network, in the transmission network
between the IPCS provider and the called party, or in the called
party's network, in which instances we expect providers to take steps
to provide appropriate refunds or credits. On the other hand, calls or
communications can be intentionally disconnected for non-technical
reasons related to security, such as stopping attempts to initiate a
three-way call, for which refunds or credits would not be appropriate.
For example, when it offered its subscription plan, Securus made
refunds available upon request and acknowledged that refunds may be
available ``for verified performance problems such as poor quality or
outages caused by Securus systems.'' Upon receipt of a dropped call
complaint, we similarly expect IPCS providers to investigate these
claims in good faith and resolve them swiftly so as not to delay giving
a refund or credit to the IPCS consumer when warranted. The record
indicates that Securus monitored the incidences of dropped calls in its
subscription plans, thereby suggesting that this task will not be
overly burdensome for IPCS providers. Regardless, we will vigilantly
monitor complaints about inappropriately dropped communications, and,
if necessary, will adopt specific rules requiring refunds or credits in
the instance of dropped calls or communications. We seek comment on
call or communication service quality and the issue of dropped calls
due to service quality in the accompanying document.
455. We next require IPCS providers to clearly describe their
policies regarding dropped calls or communications in plain language in
their consumer disclosures, including explaining the types of dropped
calls and communications for which a consumer can seek a refund or
credit. The provider also must explain how the refund or credit for a
dropped call or communication will be calculated. For example, if an
alternate pricing plan is based on the number of calls or
communications, then the IPCS provider could give a credit of at least
one call or communication, if there is enough time left in the service
period for the consumer to use that credit; otherwise, a pro-rated
refund may be appropriate. If the alternate pricing plan consists of a
fixed number of minutes, we suggest that the IPCS provider give the
consumer a refund for the minutes used by the call or communication
that was dropped. Finally, if the alternate pricing plan consists of
unlimited calls or communications, or unlimited minutes, then no credit
or refund would be needed. In its consumer disclosures, the IPCS
provider must also clearly explain the method the consumer must use to
make a complaint and request a refund or credit for a dropped call or
communication, and that method must be easy for the consumer to
complete. ViaPath suggests that complaints could be filed at the
Commission. However, clearly informing consumers of a provider's
policies regarding dropped calls or communications and providing an
easy-to-use method for requesting a refund or credit will be a good
first step toward resolving issues with dropped calls and
communications.
(c) Automatic Renewals
456. To protect consumers from being billed for additional service
periods without their consent, we permit IPCS providers to offer
automatic renewals of any alternate pricing plan but only on an opt-in
basis, and subject to other
[[Page 77328]]
requirements discussed below. In 2022, the Commission sought comment on
whether consumers should be able to opt out of automatic renewals for
alternate pricing plans, citing concerns that without such protections,
alternate pricing plans may default to renewals consumers do not intend
to purchase or no longer need. In response, some commenters expressed
similar concerns and even suggested prohibiting automatic renewals.
Alternatively, Securus asserts that ``the consumer should have a
readily accessible means to decline or cancel any renewal option.''
During Securus's subscription plans, when a consumer signed up using
its website, Securus gave the choice between manual renewal and
automatic renewal. PPI notes that Securus apparently did not give
advance notice when a renewal occurred for its subscription plan;
Securus notified customers only ``after their renewal payments have
been processed.'' PPI also points out that although Securus stated that
customers could receive a refund within 14 days of an unwanted and
unused automatic renewal, Securus's contracts did not include these
terms.
457. We adopt rules to ensure that consumers are informed about
their renewal options. These rules are intended to give consumers the
option to select automatic renewal, and also an easy method and
sufficient opportunity for consumers to cancel the service before a
plan renews. We are guided by the record, and many other situations
where the Commission has required service providers to educate their
consumers and allow them to opt into or out of a service. These rules
apply to all IPCS offered through an alternate pricing plan.
458. We also require that IPCS providers offering automatic
renewals for alternate pricing plans explain, in plain language, the
terms and conditions of the automatic renewal both at the time that it
initially offers the automatic renewal option to a consumer, and before
any automatic renewal is about to occur by whatever method the IPCS
provider has established for other consumer notifications. The notices
must explain that if a consumer who requested automatic renewals does
not later want the alternate pricing plan to be renewed, the consumer
may cancel their participation within a reasonable grace period
identified by the provider at the time service is initiated.
459. The IPCS provider must give notice to the consumer of an
upcoming renewal with sufficient time before the renewal date to ensure
the consumer can cancel their enrollment in the alternate pricing plan
prior to its renewal. The Prison Policy Initiative suggests that a
notification two to three ``business days prior to renewal would help
customers avoid potential overdraft fees and remind them to cancel
their subscription if they have been meaning to do so but forgot.'' No
other commenter mentions the notices to be provided before automatic
renewals. We agree that this requirement will ensure that consumers
have sufficient notice. Therefore, we require that providers give
notice directly to consumers no later than three business days prior to
the renewal date, and, to ensure receipt of the notice, we require
providers use, at a minimum, the method of communication that consumers
agreed to at the time they enrolled in the alternate pricing plan. For
example, Securus used email to remind consumers when they were reaching
the call limit of its subscription plans. PPI commends Securus for
providing an online option for cancelling enrollment (although they
suggest that the related terms and conditions were confusing).
(d) Cancellation by the Consumer
460. A consumer must be able to cancel their enrollment in an
alternate pricing plan at any time and revert to per-minute pricing.
Refunds or credits must be made available to consumers in the
circumstances detailed below. Providers should process the cancellation
by the next business day after the cancellation request. In its
consumer disclosures, the provider must clearly explain the process for
requesting plan cancellation, which must include the ability to use the
method the consumer used to enroll in the plan. Securus provided an
online cancellation option but, according to PPI, did not tell
consumers that procedure was available. The disclosures also must
include an explanation of the option to request a specific termination
date if different from the date that the provider processes the
cancellation. For example, the consumer may want to request a
cancellation because an incarcerated person is going to be transferred,
and the consumer would want the plan to terminate after the date of
transfer. The consumer disclosures also must include an explanation of
the amount of the refund that will be provided in situations where the
IPCS provider does give refunds under the circumstances surrounding
cancellation. The provider must clearly explain that once the alternate
pricing plan terminates, and where applicable, the provider will bill
for its service(s) at the provider's per-minute rates for the
service(s) by the first day after the termination date. For example, if
the plan is cancelled due to the incarcerated person being released,
then the ability for the incarcerated person to call their friends and
family would no longer be needed. By comparison, if the cancellation is
not due to one of the special circumstances, then the incarcerated
person may still need to use the service of the provider and would pay
for that service using the provider's per-minute rates. We do not
require providers to roll over unused minutes, calls or communications.
461. When Cancellation Is Allowed. IPCS providers must allow
consumers to cancel their participation in an alternate pricing plan at
any time during the service period and revert to per-minute pricing.
This requirement applies regardless of whether the consumer has elected
to permit the provider to automatically renew their participation in
the plan. In 2022, the Commission sought comment on whether consumers
should be permitted to cancel their enrollment in an alternate pricing
plan before the end of their enrollment period. NCIC noted that people
who are incarcerated for only a short period of time or are moved to
another facility may not be able to ``receive the full benefit of the
subscription plan.'' The Public Interest Parties assert that
``[c]onsumers should . . . not be bound by any long-term commitments
and should be free to switch to a per-minute structure upon request.''
The record also indicates that a consumer may want to cancel their
enrollment if they have not used the service since the beginning of the
service period or if their incarceration status has changed. There may
also be ``special circumstances'' such as release or transfer under
which a consumer may need to cancel their participation in an alternate
pricing plan. Securus repeatedly states that consumers should be
permitted to cancel at any time, and refers to easy cancellations as
the ``ultimate consumer protection.'' We agree. Regardless of when a
consumer wants to cancel their enrollment, the IPCS provider's
procedures for cancelling the service must be easy to follow and use
the same method to effectuate cancellation that the consumer used to
enroll in the plan. As Securus points out, the method for cancelling
service should be ``readily accessible.''
462. Refunds Upon Cancellation. In the 2022 ICS Further Notice, the
Commission asked whether IPCS providers should be required to offer
refunds when consumers cancel an alternate pricing plan before the end
of the ``subscription period.'' Securus
[[Page 77329]]
explains that under its subscription plan, ``refunds [were] available
upon request,'' and suggests that refund options should be limited to
special circumstances such as the transfer or release of the
incarcerated person. Securus argues that requiring providers to
otherwise give refunds to consumers who cancel during a service period
``would deprive providers of the benefit of the bargain--low rates in
exchange for a predictable revenue stream.'' We agree. Therefore,
although consumers may cancel their enrollment in an alternate pricing
plan at any time, IPCS providers are not required to refund the balance
of the subscription amount except in the case of special circumstances.
The special circumstances recognized by the IPCS provider shall include
situations where the incarcerated person: (a) is released; (b) is
transferred to another facility; or (c) is not permitted to make calls
or communications for a substantial portion (for example 50% or more)
of the subscription period of the alternate pricing plan. Under such
circumstances, the consumer would not be able to make use of the
alternate pricing plan, and thus not be able to receive the benefit of
the services they paid for. The IPCS provider may also establish other
special circumstances for which it will provide a refund when a
consumer requests cancellation.
463. Any refund provided due to special circumstances shall be no
less than the pro-rated amount that corresponds to the unused portion
of the service period remaining under the alternate pricing plan. For
example, if a consumer is enrolled in an alternate pricing plan and has
used 200 minutes of an allotted 600 minutes when the consumer cancels
due to special circumstances, the consumer would have 400 minutes (=
600 minutes-200 minutes) unused at the time of cancellation. The
provider would give a refund of at least \2/3\ (= 400 minutes/600
minutes) of the amount the consumer paid for the plan. These limited
refund requirements strike the appropriate balance between protecting
consumers in the case of changed circumstances while still making the
plans attractive for IPCS providers. Although we do not require an IPCS
provider to give a refund for the unused portion of the alternate
pricing plan when a cancellation occurs in situations other than the
special circumstances detailed here, an IPCS provider may offer a
refund at the provider's option in other situations.
464. No Required Rollovers. We do not require providers to roll
over unused minutes, calls, or communications from one service period
under an alternate pricing plan to another service period. One
commenter observes that Securus's subscription plan did not allow for
the rollover of unused minutes, thereby increasing the consumer's
effective rate. Securus opposes a requirement for consumers to be able
to roll over unused minutes because rollovers would convert alternate
pricing plans into ``repackaged per-minute rate plans and prevent
consumers from enjoying lower prices.'' Indeed, in Securus's
subscription plan, Securus did not roll over unused calls. We agree
that a rollover requirement may undermine IPCS providers' incentives to
offer alternate pricing plans, and therefore refrain from requiring
providers to roll over unused minutes, calls, or communications.
d. Other Issues
(i) Flat-Rate Calling
465. Because we permit IPCS providers to offer alternate pricing
plans at flat rates (e.g., $Y per month or $Y per week), we remove
Sec. 64.6090 of the Commission's rules which prohibits the offering of
IPCS via flat rates. That prohibition on ``flat-rate calling'' was
adopted by the Commission in the 2015 ICS Order when some providers
required consumers to pay for a 15-minute call even if the call ended
prior to the expiration of the 15 minutes. The Commission concluded
that flat-rate prices for such short calls were ``disproportionately
high'' and therefore prohibited flat-rate calling. Today, IPCS
providers offer their IPCS at per-minute pricing, and we permit them to
offer flat-rated alternate pricing plans as an option to the per-minute
pricing. Consequently, we no longer need to prohibit flat-rate calling
to protect consumers. One commenter opposes flat-rate charges for IPCS
video calling, providing examples where the flat-rate charges are the
only way to pay for video calling. Because today we adopt per-minute
rate caps for IPCS video calling and permit flat-rate charges for video
calling only within the context of an optional alternate pricing plan,
these concerns are mitigated. If a provider offers a flat rate option
for IPCS, they would be offering an alternate pricing plan, and would
be subject to our general IPCS rules as well as the alternate pricing
plan rules which will serve to protect consumers.
(ii) Disability Access via Alternate Pricing Plans
466. IPCS providers that offer alternate pricing plans must ensure
that they comply with our rules concerning TRS and related
communication services. In 2022 and 2023, the Commission sought comment
regarding the features or attributes that should be included in
alternate pricing plans, and what conditions it would need to impose to
ensure just and reasonable rates for audio and video communications
services relevant here. In 2023, the Commission also sought comment on
the extent to which the Martha Wright-Reed Act expands its ability to
ensure that any audio and video communications services used by
incarcerated people are accessible to and usable by people with
disabilities. The Accessibility Advocacy and Research Organizations
urge the Commission to ``be proactive and aggressive in preventing''
providers from using alternate pricing plans to circumvent ``the
prohibition on charges for certain TRS calls'' as well as providers'
``pricing obligations.''
467. In the 2022 ICS Order, the Commission amended Sec. 64.6040 of
its rules to improve access to TRS and related communications services,
and clarified and expanded the restrictions on charges for TRS calls.
In the Report and Order, we amend Sec. 14.10 to reflect the Martha
Wright-Reed Act's expansion of the Communications Act's definition of
advanced communications service, making clear the obligations of IPCS
providers to ensure their video and voice communications services are
accessible to and usable by incarcerated people with disabilities, and
we amend Sec. 64.611 to facilitate the provision of IP CTS to
incarcerated people with disabilities. Here, we amend Sec. 64.6040 to
clarify how calls or communications using TRS and related
communications services shall be treated under an alternate pricing
plan.
468. An IPCS provider that offers an alternate pricing plan must
treat the calls or communications made to use TRS and related
communications services in accordance with new Sec. 64.6040(e). The
requirements in new Sec. 64.6040(e) mirror the restrictions on charges
for IPCS in Sec. 64.6040(d). If an alternate pricing plan offers an
unlimited number of minutes or calls, then eligible TRS users must be
allowed unlimited TRS, text-telephone-to-text-telephone (TTY-to-TTY),
and point-to-point American Sign Language (ASL) video calls under the
same plan. If an alternate pricing plan limits the number of calls or
minutes that are allowed during a billing period, then: (1) Video Relay
Service (VRS), internet Protocol Relay Service (IP Relay), and Speech-
to-Speech Relay Service (STS) calls or minutes shall not be counted for
[[Page 77330]]
purposes of such limits; (2) each internet Protocol Captioned Telephone
Service (IP CTS) and Captioned Telephone Service (CTS) call or minute
shall be counted as equal to a non-TRS audio call or minute; and (3)
TTY-to-TTY calls (which under a per-minute rate plan must not be
charged at more than 25% of the per-minute rate) shall be counted as
single calls (under a plan that limits the number of calls) or counted
at one fourth the number of minutes used (if the plan limits the number
of minutes). Also, each point-to-point video call shall be counted as
equal to an audio call. Regardless of the format of an alternate
pricing plan, there shall be no charge or fee for any equipment used to
access TRS and related communication services, and no charge or fee for
the internet or data portion of an IP CTS or CTS call, or for any
additional internet or other connections needed for services covered by
Sec. 64.6040. For example, with CTS and IP CTS, a second telephone
line or an internet connection--separate from the voice connection--is
often used to connect the user's device with the IP CTS provider to
enable the provision of captions. If an alternate pricing plan offers a
fixed number of minutes for voice service, for example, then in
applying such a limit to a CTS or IP CTS user, only the minutes handled
by the voice service line may be counted. These rules will prevent IPCS
providers that offer alternate pricing plans, from circumventing the
requirements adopted in the 2022 ICS Order. The rules also will satisfy
requests in the record, and our statutory duties to ensure that
communications services are accessible to and usable by persons with
disabilities.
(iii) Consistency With the Martha Wright-Reed Act
469. We find that allowing alternate pricing plans subject to the
requirements and rules we adopt today is consistent with the Martha
Wright-Reed Act. In 2023, the Commission asked whether the Martha
Wright-Reed Act precludes the Commission from permitting alternate
pricing plans for audio or video communications. Only one commenter
addressed this issue, asserting that nothing in the Martha Wright-Reed
Act ``bars use of different pricing structures.'' Previously, in
response to 2021, the Prison Policy Initiative argued that the
effective rates of alternate pricing plans and the consumer disclosures
provided at that time could violate the Commission's statutory duties
under sections 201(b) and 276(b)(1)(A).Act. We find, however, the
conditions we impose today on the offering of alternate pricing plans
sufficiently address the fundamental concerns raised in the record.
Because we limit the rates that may be charged for IPCS when offered
through alternate pricing plans to the just and reasonable rate caps we
adopt today on a per-minute basis--rate caps that ensure fair
compensation to providers--alternate pricing plan rates and charges
will also be just and reasonable and provide fair compensation
consistent with the Martha Wright-Reed Act. While we find that the per-
minute rate caps we adopt today will ensure that IPCS providers are
``fairly compensated,'' in accordance with section 276(b)(1)(A) of the
Communications Act, an IPCS provider that chooses to offer an alternate
pricing plan will bear the responsibility for ensuring that the plan
will adequately compensate it for its services on a companywide basis.
(iv) Start Date and End Date
470. Consistent with the voluntary nature of any IPCS alternate
pricing plan, an IPCS provider that elects to offer an alternate
pricing plan may choose when to offer the plan once the rules
permitting such plans are effective. The Commission previously asked
about possibly allowing alternate pricing plans on a temporary or pilot
program basis only. We decline to limit providers' ability to offer
these plans given that no IPCS user must choose such a plan, and given
the other protections we adopt. Worth Rises suggests that the
Commission permit a pilot program pursuant to a waiver for no longer
than three months so that the Commission may collect data to ensure
compliance with the rate caps before permitting the plan to continue.
Conversely, Securus asserts that the Commission should not limit the
length of time the plan can be offered and argues that ``[a]rtificially
ending programs that may be providing substantial benefits would harm
the very consumers the Commission wishes to protect.'' We also do not
limit the time frame during which an alternate pricing plan may be
offered due, in part, to the potential consumer benefits of these plans
and to our adoption of rules and conditions that will ensure such
benefits. However, we caution providers that if we see evidence of
gamesmanship or that providers are otherwise taking advantage of
consumers through these alternate pricing plans, we will not hesitate
to revisit allowing IPCS providers to offer such plans.
471. Just as we permit providers to determine when to offer an
alternate pricing plan without prior approval from or notification to
the Commission, we similarly permit providers to terminate a plan at
their discretion, provided that sufficient notice is given to their
consumers. We permit providers to determine what is reasonable notice
of termination, and require notification to consumers in accordance
with applicable consumer disclosure rules. For example, given that
alternate pricing plans are limited to one month service periods, IPCS
provider notification to affected consumers two weeks prior to it no
longer offering a monthly plan exemplifies reasonable notice.
10. International Rate Caps
472. In the 2021 ICS Order, the Commission first adopted interim
rate caps on international audio IPCS communications comprised of the
applicable interstate rate cap component for that facility plus an
international termination component. The record and the data before us
demonstrate that providers continue to incur termination charges for
completing international audio communications. We therefore decline to
disturb the rules for international calls on the record before us, and
maintain our existing international rate cap structure for audio IPCS.
473. In 2021, the Commission sought comment on whether and how it
should further reform international rates, a request echoed in
subsequent requests for comment. In response, certain commenters raised
concerns with the formula for calculating international rates set forth
in our rules, arguing that tracking multiple ``floating rates'' raises
surveillance costs for providers and reduces predictability for
consumers. We are unpersuaded. As an initial matter, we decline to
establish a uniform safe harbor under which the termination component
that would apply to all of a provider's international audio calls (or
alternatively to all of the provider's international audio calls under
a particular contract) would equal the average of the provider's
international termination charges for the previous calendar year (or
alternatively the average of such charges under the particular
contract), as one commenter suggests. Because international termination
charges vary significantly depending on the calls' destinations, any
such approach would result in IPCS consumers being charged unreasonably
high rates for calls to international destinations having relatively
low termination charges. It is also hard to understand how
predictability could decline when the international termination fees
themselves change frequently, and the commenters have
[[Page 77331]]
not substantiated their claims of compliance difficulties with cost
data. No commenter raises other concerns with the current international
rate cap formula. At the same time, providers' submitted data are
remarkably devoid of any data on the cost of providing international
IPCS, with only one provider reporting such costs. We therefore find
that both the data and the record are, at present, insufficient to
support revisions to our rules, or to develop alternative approaches to
international rate caps.
474. We recognize that differences between audio IPCS and video
IPCS may limit the applicability of these rules to video IPCS. Unlike
audio IPCS, we have no record evidence that video communications
services incur international termination charges. In fact, the data
from the 2023 Mandatory Data Collection do not indicate that providers
routinely or ordinarily incur termination charges for completing
international video communications. In the absence of any record
supporting the need for international video communications rate caps,
we decline to adopt an international termination component for video
IPCS at this time. In the absence of such a separate component for
video IPCS, international video communications will be subject to the
interstate video cap in effect for the relevant facility.
E. Waivers
475. We adopt with modifications the waiver process previously
adopted by the Commission in the 2021 ICS Order. The modifications
reflect our full jurisdiction under the Martha Wright-Reed Act to
include intrastate services and various advanced communications
services, including video services and providers that offer them, in
addition to the interstate and international services that previously
were the focus of our IPCS rules. The modifications also reflect the
Act's direction that the Commission may use a provider's average costs
in determining just and reasonable IPCS rates. The waiver process we
adopt will ensure that providers that may face unusually high costs to
serve a particular facility or set of facilities covered by a contract
will have the opportunity to demonstrate that those costs are, indeed,
used and useful costs in their provision of IPCS and are therefore
recoverable. As discussed above, we interpret and apply section
276(b)(1)(A) in a manner that harmonizes the ``just and reasonable''
and ``fairly compensated'' criteria. Consequently, the used and useful
analysis we employ will involve that harmonization of the ``just and
reasonable'' and ``fairly compensated'' standards.
476. The Commission's previous waiver process permitted an inmate
calling service provider to file a petition for a waiver of our interim
inmate calling services rate caps if the provider makes certain
showings that it cannot recover its allowable costs under the
Commission's interim inmate calling services rate caps. The portions of
the 2015 ICS Order regarding the waiver process were unaltered by the
GTL v. FCC court's 2017 vacatur. We modify that process to take into
account the Commission's full authority under the Martha Wright-Reed
Act to include intrastate services and advanced communications
services. In addition, the Commission will evaluate waiver petitions in
light of the Act's elimination of the section 276 requirements that
providers be compensated on a ``per-call'' basis, and compensated for
``each and every call,'' and in light of the addition of the
requirement that the Commission ensure IPCS rates are just and
reasonable while ensuring that providers are fairly compensated.
477. To be granted a waiver under the rules adopted in 2021,
providers are required to show that they faced ``unusually high costs
in providing interstate or international inmate calling services at a
particular facility or under a particular contract that are otherwise
not recoverable through the per-minute charges for those services and
through ancillary service fees associated with those services.'' When
adopted, the Commission noted that various providers argued that
reductions in inmate calling services rates would threaten their
financial viability, imperiling their ability to provide service, and
risk degrading or lowering their quality of service. It determined that
those claims were best addressed on a case-by-case basis through a
waiver process that focused on the costs the provider incurred in
providing interstate and international inmate calling services, and any
associated ancillary services, at an individual facility or under a
specific contract.
478. In 2023, the Commission sought comment on ``any other matters
that may be relevant to our implementation of the Martha Wright-Reed
Act to adopt just and reasonable rates and charges for incarcerated
people's audio and video communications services.'' In the context of
analyzing providers' site commission payments, it also asked for
comment on the showing it should require to evaluate waivers seeking to
recover the portion of those payments that compensate facilities for
their used and useful costs of providing IPCS. Based on the record, we
retain our current waiver process framework with modifications to
reflect the provisions of the Martha Wright-Reed Act, including our new
authority thereunder. We decline at this time to extend our waiver
process to include pilot programs or to impose requirements on state
rate-setting processes. State rate-setting processes (in contrast to
site commission payment requirements) are not governed by our current
IPCS rules, to the extent they do not result in state rates or charges
exceeding our rate caps, and thus cannot be addressed by waiver in any
case. And we decline to depart from our rules governing alternate
pricing plans via waiver because we believe those rules already provide
for appropriate flexibility, and adhering to that regulatory framework
provides certainty regarding the parameters for any such
experimentation that will occur, thereby facilitating appropriate
Commission oversight and managing what IPCS users will be expected to
understand about such plans, and the protections they will have under
them.
479. The IPCS rate cap methodology we adopt herein comprehensively
accounts for providers' reported costs of providing IPCS as
contemplated by the Act, and we therefore anticipate that instances
where providers cannot recover their cost of service should be
exceptional. To the extent such instances occur, however, we adopt a
process that allows providers to seek waivers of our rate caps to
ensure recovery of the used and useful costs of providing IPCS. We also
expand the scope of our previous waiver process to allow providers to
seek waivers related to the provision of advanced communications
services, including video, as well as with respect to our overall IPCS
rate caps which will now apply to international, interstate and
intrastate services. Additionally, we remove any reference to ancillary
services in our waiver rules because, as explained above, separately-
identified ancillary service fees have been prohibited, and the costs
of providing ancillary services have instead been included in the
overall rate caps. As was the case with our previous IPCS waiver
process, providers may seek a waiver either on a facility basis or
contract basis. We disagree with Securus that we should allow company-
wide waivers given that company-wide waivers would likely be too
complex and time-consuming to provide adequate and timely relief for
providers.
480. Consistent with the Commission's previous waiver process and
with its waiver processes generally,
[[Page 77332]]
petitioners will continue to bear the burden of proof to show that good
cause exists to support waiver requests, but all waiver requests must
now include a showing that the request will not result in unjust and
unreasonable IPCS rates and charges. An IPCS provider filing a petition
for waiver must clearly demonstrate that good cause exists for waiving
our rate caps or other rules at a given facility or group of
facilities, or under a particular contract, and that strict compliance
with these caps would be inconsistent with the public interest. For any
waiver request based on a particular facility or group of facilities,
the provider must show that the costs of the entirety of its contract
are not recoverable under the applicable rate caps, not merely the
costs at an individual facility or group of facilities that are part of
an otherwise profitable contract. As the Commission explained in the
2021 ICS Order, conclusory assertions that the reductions in rates will
harm the provider or make it difficult for the provider to expand its
service offerings will not be sufficient to obtain a waiver. Providers
requesting a waiver of our IPCS rules will continue to be required to
provide a detailed explanation of their claims, including all relevant
financial and operational data as referenced in our rules. In order to
evaluate waivers, we also require a provider to submit its total
company IPCS costs and revenues and other financial data and
information, including justification for deviating from ``the average
costs of service of a communications service provider'' to assess the
merits of a petition. Failure to provide such information will prevent
us from making a determination regarding the waiver request and will be
grounds for dismissal without prejudice. Furthermore, the petitioner
must provide any additional information requested by Commission staff
to evaluate the waiver request during the course of its review.
481. We caution petitioners that we will continue to evaluate
waiver petitions thoroughly and waivers will not be routinely granted.
The Commission previously delegated authority to the Bureau to review
and rule on petitions for waivers, and we reaffirm that delegation of
authority today. Waiver petitions will be placed on public requests for
comment, and interested parties will be provided an opportunity for
comment.
F. Communications Services for Incarcerated People With Disabilities
482. We amend our rules to improve communications services for
incarcerated people with disabilities. First, in response to comments
on 2023, we amend our Part 14 rules as appropriate to reflect the
Martha Wright-Reed Act's expansion of the Communications Act's
definition of ``advanced communication service.'' Next, in response to
comments on 2022, we amend our Part 64 TRS rules to allow a form of
enterprise registration for the use of internet Protocol Captioned
Telephone Service (IP CTS) in carceral facilities. We also amend the
Part 64 IPCS rules to require that IPCS providers provide billing and
other information regarding their services in accessible formats. We
clarify that internet-based IPCS providers may provide access to
traditional (TTY-based) TRS via real-time text. We defer action on
setting a timeline to expand the scope of our IPCS rules on access to
TRS and related services, pending the collection of further information
on implementation of the current rules.
1. Part 14 Changes
483. Advanced Communications Services Definition. We adopt the
Commission's proposal, in 2023, to amend the definition of ``advanced
communications services'' in our Part 14 rules to incorporate the
amended statutory definition. Prior to the Martha Wright-Reed Act, the
Communications Act (and Part 14 of our rules) defined ``advanced
communications services'' to be: (1) interconnected VoIP service; (2)
non-interconnected VoIP service; (3) electronic messaging service; and
(4) interoperable video conferencing service. In light of the lengthy
pendency of unsettled questions regarding the application of Part 14 to
video conferencing, the Commission extended until September 3, 2024,
the deadline for providers of such services to comply with the Part 14
accessibility rules for advanced communications services. The Martha
Wright-Reed Act amended this definition to add a fifth category: ``any
audio or video communications services used by inmates for the purposes
of communicating with individuals outside the correctional institution
where the inmate is held, regardless of technology used.'' We now amend
the definition of ``advanced communications services'' in our Part 14
rules to include that category as well, aligning the definition in our
rules with the amended statutory definition. One commenter agrees that
the Commission should simply incorporate section 3's definition of ACS,
as amended by the Martha Wright-Reed Act, into Part 14. No other
commenters directly address the issue.
484. Statutory Accessibility Requirements. Pursuant to section 716
of the Communications Act, providers of advanced communications
services and manufacturers of equipment used for such services
(including end user equipment, network equipment, and software) must
ensure that such services, equipment, and software are accessible to
and usable by individuals with disabilities, unless doing so is ``not
achievable.'' The term ``achievable'' means with reasonable effort or
expense, as determined by the Commission. Section 716 of the
Communications Act specifies that, in determining whether the
requirements of a provision are achievable, the Commission shall
consider the following factors: (1) the nature and cost of the steps
needed to meet the requirements of this section with respect to the
specific equipment or service in question; (2) the technical and
economic impact on the operation of the manufacturer or provider and on
the operation of the specific equipment or service in question,
including on the development and deployment of new communications
technologies; (3) the type of operations of the manufacturer or
provider; and (4) the extent to which the service provider or
manufacturer in question offers accessible services or equipment
containing varying degrees of functionality and features, and offered
at differing price points. Whenever those requirements are not
achievable a manufacturer or provider must ensure that its equipment or
service is compatible with existing peripheral devices or specialized
customer premises equipment commonly used by individuals with
disabilities to achieve access, unless such compatibility is not
achievable. Providers of advanced communications services are also
prohibited from installing network features, functions, or capabilities
that impede accessibility or usability. The Commission has implemented
section 716 by adopting performance objectives to ensure the
accessibility, usability, and compatibility of advanced communications
services and the associated equipment, recordkeeping requirements, and
the consumer dispute assistance and informal and formal complaint
processes. ``Manufacturers and service providers must consider [these
performance objectives] at the design stage as early as possible and
must implement such performance objectives, to the extent that they are
achievable.'' In addition, ``[m]anufacturers and service providers must
identify barriers to accessibility and usability as part of such
evaluation.'' Covered service providers
[[Page 77333]]
and equipment manufacturers also must file certificates of compliance
with applicable recordkeeping requirements, including contact
information for persons authorized to resolve complaints regarding
alleged violations of accessibility requirements.
485. Effect of the Martha Wright-Reed Act on the Scope of Rules. In
2023, the Commission sought comment on the extent to which the Martha
Wright-Reed Act expands its ability to ensure that any audio and video
communications services used by incarcerated people are accessible to
and usable by people with disabilities. As a number of commenters
recognize, prior to enactment of that legislation, voice services
offered by IPCS providers were already subject to the requirements of
section 716 or the related requirements of section 255 of the
Communications Act. Section 255 imposes similar accessibility
obligations on providers of telecommunications services and
manufacturers of telecommunications equipment, and the Commission's
regulations implementing section 255, 47 CFR part 6, also apply to
providers of interconnected VoIP service. Accessibility of voicemail
equipment and services are addressed in 47 CFR part 7. Overlap between
sections 255 and 716 is avoided because section 716 provides that it
does not apply to ``any equipment or services, including interconnected
VoIP service, that [were] subject to the requirements of section 255''
of the Communications Act prior to the enactment of section 716.
Accessibility of voicemail equipment and services are addressed in 47
CFR part 7. Overlap between sections 255 and 716 is avoided because
section 716 provides that it does not apply to ``any equipment or
services, including interconnected VoIP service, that [were] subject to
the requirements of section 255'' of the Communications Act prior to
the enactment of section 716. Such services and equipment ``shall
remain subject to the requirements of section 255'' of the
Communications Act. However, the recordkeeping, certificate of
compliance, consumer dispute assistance, and enforcement requirements
of Part 14 apply to manufacturers and service providers covered by
section 255 as well as those covered by section 716. Similarly,
electronic messaging services and interoperable video conferencing
services offered by IPCS providers were also subject to section 716 and
the Part 14 rules. The record does not indicate to what extent, if at
all, there are other audio and video communication services offered by
IPCS providers that were not previously included in the definitions of
``telecommunications service'' or ``advanced communications services,''
and that, accordingly, are newly subject to accessibility requirements
under section 716 of the Communications Act and Part 14 of our rules.
However, to the extent that any IPCS provider may have been uncertain
whether accessibility requirements apply to a particular voice or video
communication service that it provides for the use of incarcerated
persons in communicating with non-incarcerated persons, the Martha
Wright-Reed Act makes clear that the accessibility requirements of the
Commission's rules apply to such services.
486. Part 14 Performance Objectives. The 2023 IPCS NPRM also sought
comment on whether the Commission should add or modify any performance
objectives or recordkeeping requirements for application in the
correctional facility context. At this time, we do not see a need to
create new or different performance objectives for IPCS providers. As
noted above, communications services offered by IPCS providers were
already covered by section 255 or 716 of the Communications Act, and
the record does not indicate that any audio and video communications
services used by incarcerated people were not previously included in
the statutory definitions of telecommunications services and advanced
communications services. Further, while the communication challenges
experienced by incarcerated people with disabilities may be more acute,
the record does not indicate that they are different in kind from those
of non-incarcerated people with disabilities. For example, to be
accessible to a blind person, whether incarcerated or not, an advanced
communications service should ``[p]rovide at least one mode that does
not require user vision.''
487. We decline, at this time, to impose a limitation on the use of
automatic speech recognition (ASR) technology alone in the provision of
IP CTS in carceral facilities. The Commission previously found the use
of ASR-only captioning in the provision of IP CTS to be comparable in
accuracy to CA-assisted IP CTS. While we continue to encourage
providers to make CA-assisted IP CTS available, there is not a
sufficient record in this proceeding to suggest that provision of ASR-
only IP CTS would discriminate against for example, people who speak
dialects, have accented speech, or speech impediments, nor a record to
suggest that CA-assisted IP CTS would cure or otherwise prevent such
discrimination. The Commission will continue to collect data and
information annually from IPCS providers and it has open dockets
concerning advanced communications services and IP CTS where a record
on the raised concerns may be developed to be addressed. In the
interim, we proceed with ensuring the Commission's current
accessibility rules are appropriately applied in the correctional
facilities context.
488. We are also not persuaded that it is necessary to modify Part
14 performance objectives to address ``the unique challenges of
offering internet-based IPCS and consistent with the Commission's
existing IPCS accessibility rules,'' as recommended by Ameelio, a
provider of internet-based IPCS. To the extent that security issues or
other factors may affect the achievability of specific performance
objectives, such concerns can be addressed consistently with the
current Part 14 rules, as Part 14 obligations are expressly subject to
the proviso ``unless the requirements of this [subsection/paragraph]
are not achievable.'' We also note that some of the concerns raised by
Ameelio appear to be based on a misunderstanding of the Commission's
video conferencing proposals. For example, the Commission has proposed
to modify the TRS ``privacy screen'' rule (redesignated 47 CFR
64.604(d)(5)) to allow VRS providers to be compensated for providing
VRS in a video conference in which some participants turn off their
video cameras. However, nothing in the Commission's proposal suggests
that the proposed rule would affect the ability of a video conferencing
service provider or host to require participants to leave their cameras
on, for security or other reasons.
2. Enterprise Registration for IP CTS and IP Relay
489. Background. To prevent waste, fraud, and abuse and allow the
collection of data on TRS usage, our rules generally condition TRS Fund
support for VRS, IP CTS, and IP Relay on eligible users of these
services being registered with a service provider. Certain personal
data, as well as a self-certification of eligibility to use TRS, must
be collected from each TRS user and--for VRS and IP CTS users--entered
in the TRS User Registration Database (User Database), a central
registry maintained by a Commission-designated administrator. The User
Database has not yet been activated for IP CTS. Pending its activation,
however, registration data and a self-certification of eligibility must
be collected and maintained by the IP CTS provider. For VRS, however,
the rules provide an alternative to individual registration for
[[Page 77334]]
videophones maintained by businesses, organizations, government
agencies, or other entities and made available to their employees or
clients as ``enterprise videophones.'' This ``enterprise registration''
alternative is not currently authorized for IP CTS or IP Relay. The
Commission has previously granted a waiver of the TRS registration rule
to allow TRS providers to provide IP CTS and IP Relay to federal
government employees and on-premises contractors through a registration
process similar to the VRS enterprise registration process.
490. In the 2022 ICS Order, the Commission modified its
registration rules for incarcerated people eligible to use TRS,
simplifying the registration data that must be collected in that
context to account for differences in the availability and source of
registration information. IPCS providers are required to assist TRS
providers in collecting registration information and documentation from
incarcerated users and correctional authorities. The Commission also
authorized a modified form of enterprise registration for VRS use in
correctional facilities. In lieu of registering each videophone, the
amended enterprise rule allows a VRS provider to assign a pool of
telephone numbers to a correctional authority. The numbers may be used
interchangeably with any videophone or other user device made available
for the use of VRS within the correctional facility. In 2022, the
Commission sought comment on whether to adopt a comparable form of
enterprise registration for IP CTS in the incarceration context. All
commenters addressing the issue support such a rule change. In
addition, Securus urges that enterprise registration also be allowed
for IP Relay in the carceral context, noting that ``the same logistical
issues at the correction facility for individual registration of IP
CTS'' extend to IP Relay.
491. To further expedite access to TRS by incarcerated people, we
amend our rules to allow enterprise registration for IP CTS and IP
Relay in the incarceration context. The record indicates that the
individual registration process can pose significant challenges for
incarcerated people attempting to use IP CTS or IP Relay. When a person
is initially confined and seeks to notify a family member or attorney
of their situation, the need for individual registration may delay
access to IP CTS or IP Relay for hours or days, with potentially
serious consequences for the newly incarcerated person. For example,
some of the required registration information and documentation may not
be readily available at the time of initial incarceration, and
assistance in collecting or preparing such information and
documentation may not always be available from correctional
authorities. Further, incarcerated persons, particularly those newly
incarcerated, are often transferred between facilities. If a transferee
must re-register (e.g., because the new facility is operated by a
different correctional authority or a different TRS provider is
providing a particular relay service), or if there is a delay in
confirming an existing registration (e.g., because the TRS provider is
not promptly informed of the transfer) access to TRS could be
interrupted or even terminated. Additional registration issues may
arise in juvenile detention facilities, where a parent or guardian
would need to register on behalf of a minor who has been incarcerated.
492. The record confirms that allowing enterprise registration for
IP CTS and IP Relay in the carceral setting would not significantly
increase the risk of TRS waste, fraud, or abuse. In the 2022 ICS Order,
the Commission found that the security measures routinely applied to
telephone service in correctional facilities limit any risk of waste,
fraud, and abuse associated with enterprise registration for VRS, and
those same security measures would tend to limit such risks in the case
of IP CTS and IP Relay. Further, by allowing the assessment of charges
for IP CTS that do not exceed those for an equivalent voice telephone
call, we have limited the potential incentive of incarcerated people
who do not need the service to seek to use it in lieu of ordinary voice
service. Conversely, the limitation of IP CTS charges to those for an
equivalent voice call limits any incentive for correctional authorities
to allow or promote the use of IP CTS by incarcerated people with no
need for the service. In IP Relay, no charges are permitted. However,
with IP Relay, unlike IP CTS, the communications assistant mediates
communication in both directions. As a result, IP Relay conversations
tend to be substantially slower than the equivalent voice
conversations, and there is accordingly less incentive for incarcerated
people to request use of the service if they do not need it for
functionally equivalent communication.
493. The enterprise registration rule we adopt for IP CTS and IP
Relay in the carceral context parallels the VRS enterprise registration
rule, as modified for the carceral context. To make it easier to find
the applicable requirements, we combine the existing requirements for
carceral enterprise registration for VRS with the new requirements for
such registration for IP CTS and IP Relay in a single new paragraph (l)
of Sec. 64.611. For enterprise registration of a correctional facility
or correctional authority, a TRS provider must transmit to the TRS User
Registration Database administrator the following information: the TRS
provider's name, the telephone numbers or other unique identifiers
assigned to the correctional authority, the name and address of the
correctional facility or correctional authority, the date of initiation
of service to the correctional authority, and the name of the
individual responsible for the device(s) used to access VRS, IP Relay,
or IP CTS at the correctional facility or facilities involved. The
existing rule for VRS allows enterprise registration of a single pool
of telephone numbers for use by a correctional authority in all of its
facilities. We allow the same flexibility for IP CTS. Such numbers may
be assigned either by the IPCS provider or the TRS provider. As with
the existing rule for VRS, the address may be the main or
administrative address of the correctional authority. This individual
may be an employee of either the correctional authority or the IPCS
provider. When a TRS provider ceases providing relay service to a
correctional authority via enterprise registration, the provider shall
transmit the date of termination of such service.
494. The TRS provider also must obtain a signed certification from
the responsible individual attesting that he or she understands the
functions of the devices used to access TRS and that the cost of TRS is
financed by the federally regulated Interstate TRS Fund. The
certification also must state that the correctional authority or IPCS
provider will make reasonable efforts to ensure that for VRS and IP
Relay only persons with a hearing or speech disability are permitted to
access the service, and that for IP CTS only persons with hearing loss
that necessitates the use of IP CTS to communicate by telephone are
permitted to access IP CTS. A VRS or IP CTS provider must also obtain
the responsible individual's consent to transmit this information to
the TRS User Registration Database. At this time, the TRS rules do not
require that IP Relay registration data be entered in the User
Registration Database. Before obtaining such consent, the TRS provider
must describe, using clear, easily understood language, the specific
information being transmitted, that the information is being
transmitted to the TRS User Registration Database to ensure proper
administration of the TRS program, and that failure to provide consent
will require individual
[[Page 77335]]
registration and self-certification by incarcerated persons. A TRS
provider shall maintain the confidentiality of any registration and
certification information obtained by the TRS provider, and shall not
disclose such registration and certification information, or the
content of such registration and certification information, except as
required by law or regulation.
3. Other Issues
495. Accessible Billing Formats. As also proposed in 2022, we amend
our rules to require that any charges for IPCS be disclosed in
accessible formats to incarcerated people with disabilities. The record
in this proceeding generally supports this proposal. We do not agree
with ViaPath that amendment of the Part 64 rules in this respect is
unnecessary. Although our Part 6, 7, and 14 rules include requirements
that information and documentation provided to customers regarding
covered services be accessible to individuals with disabilities, those
rules are subject to an achievability condition--which is not
applicable to our Part 64 IPCS rules. Given the special importance of
communication to incarcerated people with disabilities and the history
of egregious telephone charges imposed on incarcerated people and their
families, we decline to impose an achievability condition on access to
billing information in the carceral setting.
496. Charges for TRS-Related Services. As discussed above, we amend
Sec. 64.6040 of our rules to clarify the treatment of TRS and related
services under alternate pricing plans. We do not otherwise alter the
provisions of Sec. 64.6040 regarding charges for TRS and related
services. In particular, we decline Securus's request for modification
of Sec. 64.6040(d)(3), which caps the permitted charges for point-to-
point video service used by incarcerated persons with disabilities who
can use ASL, limiting such charges to the equivalent rate for an
equivalent voice call. Securus recommends that, ``[n]ow that the
Commission has set rate caps for video IPCS charges for video IPCS,''
the benchmark for point-to-point ASL video charges should be the
charges for equivalent non-ASL video calls. We deny this request.
Although ASL point-to-point video service is not relay service per se,
it serves the same statutory purpose--``to provide the ability for an
individual who is deaf, hard of hearing, deaf-blind, or who has a
speech disability to engage in communication by wire or radio in a
manner that is functionally equivalent to the ability of a hearing
individual . . . to communicate using voice communication services.''
Therefore, access to this service is mandated for any facility covered
by Sec. 64.6040(b)(2)(ii), even if video communication is not
otherwise made available at such facility. Accordingly, in 2022, the
Commission appropriately benchmarked the charges for the use of point-
to-point video to communicate in ASL at the charges for an equivalent
voice call. Permitting the assessment of a higher video rate for such
calls, instead of the equivalent voice rate at any correctional
institution, would be inconsistent with the underlying statutory
purpose--to make available communication that is functionally
equivalent to voice communication.
497. Analog TRS. In response to reply comments by Ameelio, an
internet-based video IPCS provider, we clarify the application to such
providers of the IPCS rules mandating the availability of traditional
(TTY-based) TRS and STS. Noting that the internet does not support
analog services, Ameelio ``proposes that the Commission update its IPCS
accessibility rules to accommodate advanced communications services
that . . . do not rely on the Public Switched Telephone Network (PSTN),
by clarifying that app-based IPCS providers may comply with the IPCS
accessibility rules by providing functional equivalents to the
traditional accessibility services that rely on the legacy telephone
network.'' As the Commission explained in the 2022 ICS Order, while TTY
technology is incompatible with the IP protocol, TTY-based TRS and STS
continue to be essential for ensuring that all segments of the TRS-
eligible population have access to functionally equivalent
communications. In addition, U.S. Department of Justice regulations
implementing Title II of the American with Disabilities Act currently
require correctional authorities to furnish auxiliary aids and
services, which are defined to include voice, text, and video-based
telecommunications products and systems, including TTYs, videophones,
and captioned telephones or equally effective telecommunications
devices. However, rules the Commission adopted in 2016 allow mobile
service providers to comply with TTY-related requirements by supporting
real-time text, an IP-based protocol, as an alternative to TTY
connection. We amend our codified IPCS rules to make clear that,
similarly, IPCS providers may provide access to traditional TRS via
real-time text, as an alternative to TTY transmissions, if real-time
text transmission is supported by the available devices and reliable
service can be provided by this method. Additionally, for IPCS
providers to meet their requirement to provide access to traditional
TTY-based TRS and STS, they need only ensure that incarcerated
individuals eligible to use TRS can access at least one certified
provider of each form of TRS. If an IPCS provider does not interconnect
with the PSTN, it could rely on contracting or other arrangements with
a correctional facility to ensure that TTY-based TRS and STS are made
available.
498. We also do not address at this time the Commission's proposal
to expand the scope of coverage of the TRS Access Rule to include
correctional facilities in jurisdictions with an ADP of fewer than 50
incarcerated people. We recognize that the Communications Act directs
us to ensure that TRS are available to all eligible persons in the
United States, to the extent possible, and we reaffirm the Commission's
belief that, to ensure the availability of TRS and point-to-point ASL
video communication to the fullest extent possible, the TRS-related
access obligations of incarcerated people's communications service
providers should be at least coextensive with those of correctional
authorities under federal disability rights law--which are not subject
to any population size limitation. However, given that the current rule
has been effective for less than a year, we believe that our
determination of an appropriate timeline for the expansion of TRS
access to those facilities not covered by the current rule may benefit
from experience gained regarding the first year of implementation.
Therefore, we will keep the record open for additional input on this
matter.
G. Reform of Consumer Protection Rules
499. In light of the expansion of our authority under the Martha
Wright-Reed Act, we next revise our existing consumer protection rules
to improve consumer disclosure requirements and to protect the funds of
IPCS account-holders to ensure IPCS consumers fully benefit from the
various reforms we adopt in the Report and Order. The Commission's
consumer disclosure rules currently require providers to disclose their
rates, ancillary service charges, and charges for terminating
international calls to account holders and specify how certain charges
should be displayed on billing statements. The existing inactive
account rules bar providers, on an interim basis, from converting
unused funds in inactive ICS
[[Page 77336]]
accounts to their own use and require them to make reasonable efforts
to refund those funds. Based on the record, we expand these consumer
protection rules to apply to the full scope of IPCS now subject to our
ratemaking authority.
500. We also address certain limitations in our existing rules
which the record shows lack sufficient scope, clarity, and specificity
to enable IPCS consumers--and the public--to make fully informed
decisions regarding the rates, charges, and practices associated with
providers' offerings. Some commenters also contend that the current
rules are inadequate to ensure that IPCS consumers receive the
information they need to verify charges to their accounts. Similarly,
the record makes clear a need to revise and strengthen the interim
inactive account rules to ensure that IPCS consumers are able to
receive timely refunds of unused funds in IPCS accounts deemed to be
inactive. In light of this, we decline to simply apply our existing
consumer protection rules to the expanded list of services--video IPCS
and other audio and video advanced communications services, including
intrastate services--over which we now have jurisdiction under section
276. Instead, we revise and strengthen those rules and apply them to
all IPCS as set forth below.
501. Section 276(b)(1)(A) of the Communications Act, as amended by
the Martha Wright-Reed Act, requires that we develop a compensation
plan ensuring just and reasonable rates and charges for consumers and
providers, while providing fair compensation to providers. As set forth
above, we interpret this requirement as giving us authority over
providers' practices associated with IPCS to the extent they may affect
our ability to ensure just and reasonable audio and video IPCS rates
and charges and fair compensation for all IPCS. We exercise that
authority to adopt rules requiring IPCS providers to timely and
effectively disclose the information that IPCS consumers will need to
make informed decisions in setting up and using their IPCS accounts as
well as rules to facilitate refunds of funds remaining in accounts that
have been deemed inactive.
1. Consumer Disclosure Rules
c. Disclosure of Rates, Charges, and Practices
502. We revise and expand our consumer disclosure rules so all IPCS
users and, where appropriate, the general public will have sufficient
information to evaluate providers' IPCS rates, charges, terms and
conditions. Expanding these rules will offer increased transparency and
protection for consumers beyond those afforded by the Commission's
existing rules, facilitating the monitoring and enforcement of our
rules to ensure just and reasonable IPCS rates and charges. We expand
the scope of our rules to include all IPCS providers subject to our
expanded jurisdiction under the Martha Wright-Reed Act, including video
IPCS and other advanced communications services. We also expand the
scope of our rules to apply to the different stages of consumers'
interaction with IPCS providers, from prior to the opening of an IPCS
account to the closing of an inactive account. We conclude pursuant to
our authority under section 276(b)(1)(A) of the Communications Act, as
amended by the Martha Wright-Reed Act and, to the extent interstate or
international telecommunications services are involved, pursuant to
section 201(b) of the Communications Act, that the increased
transparency we require is necessary to ensure just and reasonable IPCS
rates and charges, and fair compensation as the Martha Wright-Reed Act
mandates.
503. Background. In the 2015 ICS Order, the Commission first
required ICS providers to ``clearly, accurately, and conspicuously''
disclose their interstate, intrastate, and international rates and
ancillary service charges to consumers ``on their websites or in
another reasonable manner readily available to consumers.'' This rule
is now codified at 47 CFR 64.6110(a). The Commission also stated that
ICS providers that are non-dominant interexchange carriers must make
their current rates, terms, and conditions available to the public via
their company websites. In the 2021 ICS Order, the Commission required
providers to separately disclose any charges for terminating
international calls, and to ``clearly label'' as ``separate line
item[s] on [c]onsumer bills'' any amounts charged consumers for site
commissions and international calling.
504. In 2022, the Commission sought comment on expanding the
``breadth and scope'' of the existing consumer disclosure requirements
to reach more ICS consumers and increase transparency regarding the
rates and charges they pay for IPCS. In 2023, the Commission sought
``renewed comment'' on these matters and asked what additional specific
rule changes would be needed to implement the Martha Wright-Reed Act.
505. Scope of Disclosure Requirements. We first expand the scope of
our disclosure requirements to apply to all IPCS providers that provide
any audio IPCS or video IPCS subject to our jurisdiction under the
Martha Wright-Reed Act. This essential step in our implementation of
the Act will ensure that all IPCS consumers will have the same
transparency into their providers' rates, charges and practices
regardless of the type of IPCS they use.
506. Public website Disclosure. Section 64.6110 of our rules
requires ICS providers to disclose certain information on their
websites or in another reasonable manner readily available to IPCS
consumers. The record suggests that this rule, as currently written,
does not allow for adequate information for the public. Some providers
suggest that they have already taken steps to make such information
generally available. Therefore, to promote transparency regarding IPCS
offerings, we revise our rules to require IPCS providers to disclose
their IPCS rates, charges, and associated practices in an easily
accessible manner on their publicly available websites. We note that
the disclosure requirements we impose on publicly-available websites
apply equally to IPCS providers that offer their IPCS services through
web-based applications. This information must be available to all
members of the public, including our state regulatory partners, and not
just to consumers with a preexisting IPCS account with the provider at
any particular facility. Providers must not require that website
visitors open an account with the provider as a precondition to
obtaining website access to the provider's rates and charges. This
disclosure requirement will enable any consumer with internet access to
make informed decisions regarding the provider's IPCS offerings both
prior to opening an account and on an ongoing basis once an account has
been created. It will also allow the Commission, our state
counterparts, and the public to evaluate whether providers' rates,
charges, and associated practices comply with the rules we adopt in the
Report and Order. The Martha Wright-Reed Act makes clear our authority
over intrastate IPCS, but such required public disclosure will allow us
to benefit from the experience of our state regulatory partners. We
anticipate that the additional public awareness will help consumers
make informed choices and generally promote compliance with our IPCS
rules.
507. Building upon the Commission's previous efforts to ensure
transparency of ICS rates and charges, providers are required to post
on their public websites complete information about their IPCS
offerings, including information on rates, charges, and associated
practices. One commenter expressed concern that provider websites
contain ``misleading
[[Page 77337]]
information'' that can cause consumers to select ``high priced
service[s].'' Therefore, we amend our current rules to include
information that will assist consumers in making informed decisions
regarding IPCS. Specifically, we find that providers must include, on
their publicly available websites, information on how to manage an
account, fund accounts, close accounts, and how to obtain refunds of
unused balances. The public website disclosures must also contain
sufficient information to enable IPCS users ``to understand the cost of
a call before picking up the phone.''
508. Methods of Disclosure. To ensure consumers receive the
information necessary to make informed decisions, IPCS providers must
make consumer disclosures available: (a) via the provider's website in
a form generally accessible to the public without needing to have an
account with the provider; (b) via the provider's online and mobile
application, if consumers use that application to enroll; and (c) on
paper, upon request of the consumer. In doing so, we respond to the
record which suggests that information about providers' service plans
may already be provided this way. Likewise, by requiring different
methods of disclosure, we recognize that consumers access these
disclosures in different ways. For example, many incarcerated people
may lack access to the internet, and therefore may have no way of
learning of a provider's rates and charges where availability of these
disclosures is limited to a website or online application. To ensure
these consumers are able to access providers' disclosures, we require
IPCS providers to make their disclosures available on paper if
requested by a consumer, thereby ``devising a framework to ensure that
all IPCS carriers provide such information in a concise, portable, and
easy-to understand format.'' As one commenter explains, a 2022 study
found that ``consumers comprehended and retained financial disclosures
better when they read them on paper than on a computer screen; and
study participants showed even worse retention and comprehension rates
when they read the disclosures on smartphones.'' We anticipate that
requiring these methods of making the necessary disclosures will be
minimally burdensome to providers and relatively straightforward to
implement, while also being familiar to IPCS users based on their
experiences to date.
509. Billing Statements and Statements of Accounts. Based on the
record, we require providers to make available billing statements and
statements of account to all IPCS account holders on a monthly basis,
via the provider's website, or via the provider's mobile or online
application, and in any event, via paper statements upon request. As
demonstrated by the record, however, this is not occurring. Our new
requirement will ensure that consumers receive the necessary
disclosures. Our rules do not presently require providers to make
billing statements and statements of account available to ICS users. In
2022, the Commission proposed to modify the consumer disclosure rules
to ensure consumers receive bills or statements of account from their
providers. The record reveals a lack of consistency as to how IPCS
providers disseminate information regarding their rates and charges to
consumers. Securus contends that consumers and the general public have
access to information on funding fees and taxes and the ``rates
applicable to any facility that Securus serves.'' NCIC contends that
online account access allows ICS providers to reduce customer service
costs; consumers and family members no longer need to call customer
service representatives or ask facility staff for ICS account
information. Most providers offer rate and charge information online
without providing periodic bills or statements of account, although a
few, such as Pay Tel, issue monthly electronic statements to account
holders via online accounts and mobile applications. We conclude that a
consistently applied and transparent requirement is appropriate, and
that all providers must make account-related disclosures to account
holders monthly, which will foster consumer education and consumer
protection.
510. Receiving monthly billing statements or statements of account
will place IPCS account holders on the same footing as consumers
generally, who typically receive monthly bills or statements of account
(either online or via paper statements). Indeed, this is even more
crucial for incarcerated individuals because many do not have the
freedom to check their accounts at regular intervals. We rely in
particular on one commenter's assertion that information on websites or
web applications ``of varying detail and salience'' is not a substitute
for statements in concise, easy-to-read formats. Stephen Raher also
proposes a model statement of account that would provide customized
information based on a consumer's activity. We do not require this type
of statement at this time. In addition, Mr. Raher proposes a working
group for consumer disclosures and billing statements. We do not
believe this is necessary, given our updates to the consumer disclosure
requirements. Given that IPCS providers routinely track and maintain
information on consumers' accounts, they should be able to generate
monthly updates to consumers without undue burden as other
communications service providers routinely do. Given concerns that
certain consumers may not have access to the internet or may have
accessibility issues, we also require providers to issue paper bills or
statements of account upon request by a consumer. In fact, many
providers already make paper statements available upon request. We find
inapposite Pay Tel's opposition to providing paper billing statements
or disclosures based on facility imposed ``restrictions or limits on
paper usage, due to the cost of processing the resulting waste.'' Our
billing statement and disclosure rules govern provider methods of
dissemination; facility practices over paper use are irrelevant.
511. Each IPCS provider is required to make available to account
holders the information they will need to understand any transactions
affecting their accounts. We do not dictate the format of the bills or
statements of account, but require them to include the amount of any
deposits to the account, the duration of any calls and communications
charged to the account on a per-minute basis, the rates and charges
applied to each call and communication for which a charge is assessed,
and the balance remaining in the account after the deduction of those
charges. We recognize that, in light of action we take in the Report
and Order, site commission information does not have to be included.
Whether a provider issues paper statements or online statements, the
disclosures must include this same vital information.
512. Billing Statements and Statements of Account for Alternate
Pricing Plans. We find that additional information must be provided in
billing statements and statements of account for alternate pricing
plans. The billing statement or statement of account must provide for
each service period: (a) call details, including the duration of each
call, and the total minutes used for that service period, and the total
charge including taxes and fees, with explanations of each tax or fee;
(b) the total charges that would have been assessed using the
provider's per-minute rate; (c) the calculated per-minute rate for the
service period, calculated as the charge for the service period divided
by the total minutes used by that consumer, with an
[[Page 77338]]
explanation of that rate; and (d) the breakeven point, with an
explanation of the breakeven point. Also, as discussed above for
billing statements and statements of account for services rendered on a
per-minute basis, the billing statements and statements of account for
an alternate pricing plan must provide information about deposits made
to the consumer's account and the account balance.
513. Repeal of Site Commission Disclosure Requirement. In light of
our action today prohibiting the payment of site commissions related to
IPCS, we repeal Sec. 64.6110(b) of the rules, which requires that
providers ``clearly label'' as ``a separate line item on [c]onsumer
bills'' any amounts charged consumers for facility costs included in
the providers' site commission payments. Given our prohibition against
IPCS providers paying site commissions of any kind associated with
intrastate, interstate, international, jurisdictionally mixed, or
jurisdictionally indeterminate audio and video IPCS, including all
monetary and in-kind site commissions, we find that this rule is no
longer needed. Similarly, given our elimination of ancillary service
charges elsewhere in the Report and Order, we also repeal the portion
of Sec. 64.6110(a) that requires providers to disclose those charges
to consumers.
b. Effective Consumer Disclosures
514. Just as we have required all prior consumer disclosures to be
clear, accurate and conspicuous, we now conclude that all required IPCS
provider disclosures, including those implementing our inactive account
and alternate pricing plan rules, must be clear, accurate, and
conspicuous--the same standard our current rules set for disclosure of
audio rates and ancillary service charges. Adherence to these standards
will allow a reasonable person to readily understand IPCS audio and
video rates and charges. For example, a provider should price its
products in dollars per minute, rather than in dollars per megabyte as
one provider does and which would be confusing to consumers. In this
manner, incarcerated people and their loved ones will be able to
understand the rates and charges they are, or will be, assessed and the
terms and conditions that will apply to a provider's IPCS offerings.
This, in turn, will help them make informed decisions about which
services to purchase and whether an alternate pricing plan would be
beneficial.
515. We expect that the requirement that disclosures be ``clear,
accurate, and conspicuous'' and the other disclosure requirements we
adopt in the Report and Order will ensure IPCS users and the public
will timely receive clear and transparent information about providers'
rates, charges, and practices. We therefore find that our revised
disclosure rules give providers ``clear guidance'' regarding the
information providers must disclose and how it must be disclosed, as
certain commenters urge. These requirements will reduce consumer
confusion when accessing provider websites which, while technically
providing the information required by our rules, continue to be
difficult for consumers to navigate. For example, as one commenter
explains, one provider's ``terms and conditions and privacy policy
collectively total almost 18,000 words,'' with ``the sheer volume and
complexity of this information . . . not reasonably accommodate[ing]
the actual needs of the average consumer.'' This same providers lists
its rates and charges under a page called ``Tariffs.'' Securus's web
page for ``Rates'' does not, in fact, include any rate information,
instead merely stating that its ``rates are in compliance with
applicable state and federal regulations.'' In order to find pricing
information, consumers must navigate to a page labeled ``Tariffs''
which links to each individual state or federal tariff. Thus, the
requested information is on its website, but we find it doubtful that
consumers as a whole would understand what a tariff is and that that is
the place in which they should look for pricing information. Another
provider's rates and charges are included in a page labelled ``Legal
and Privacy,'' giving no indication to consumers that this is the
location of such information. Given these practices, we find that it is
necessary to amend our current rules to ensure that consumers can
easily understand and access such information by requiring that
providers make their rates, charges, and associated practices available
on their websites in a manner in which consumers can easily find the
information. We also find that the disclosures we require with regard
to alternate pricing plans ``should provide sufficient information to
enable consumers to assess the value to them of the [alternate pricing]
plan versus using standard per-minute rate plans.'' In view of these
findings, we decline to adopt a specific ``IPCS label'' for billing
statements and statements of account, as was proposed in the record.
The Public Interest Parties assert that the Commission should adopt a
version of the consumer broadband label adopted in the 2022 Broadband
Label Order so that consumers can make informed decisions before making
a call. They contend that the Commission should tailor a similar label
for IPCS, ``and require . . . providers to make information about their
rates, terms, and conditions of service, including information about
site commissions and international rate components, available generally
to the public in an easily accessed manner.'' We find such an approach
overly prescriptive and unnecessary. To minimize unnecessary burdens on
providers and to allow flexibility, we decline to prescribe a
particular format for disclosures.
c. Accessible Formats for Consumer Disclosures
516. All disclosures concerning IPCS, including disclosures
pertaining to inactive accounts and alternate pricing plans, must be
accessible to people with disabilities. In 2022, the Commission sought
comment on the effectiveness of its rules in providing information
regarding rates, charges, and fees to people who are deaf, hard of
hearing, deaf-blind, or have a speech disability. The Commission
proposed that all disclosures, including those regarding reporting
requirements and charges, be made in an accessible format for
incarcerated persons with disabilities, and invited comment on what
steps it should take to implement that proposal.
517. Based on the record, we revise our consumer disclosure rules
to specify that consumer disclosures must be in accessible formats for
people with disabilities. We agree with commenters that any website
disclosures, billing statements, and statements of account must be in
accessible formats. We do not prescribe specific mechanisms, but afford
providers flexibility to respond to specific requests and make
reasonable accommodations.
d. Alternate Pricing Plan Consumer Disclosure Requirements
518. We adopt consumer disclosure requirements specific to
alternate pricing plans, including disclosures prior to enrollment and
on billing statements and statements of account. In 2022, the
Commission asked ``[w]hat type of consumer outreach or education would
be needed to ensure that consumers are able to choose the [alternate
pricing plan] that best meets their needs.'' The Commission also asked
``what information consumers would need about providers' pilot programs
to help them make informed choices between a pilot program and
traditional per-minute pricing,'' and whether it should require
providers to inform consumers ``how a pilot
[[Page 77339]]
program's prices translate on a per-minute basis, to enable consumers
to make an informed decision between the program and the traditional
per-minute pricing model.'' These rules are in addition to the
disclosure requirements generally applicable to IPCS.
519. Several commenters discuss the benefits of enhanced consumer
disclosure for alternate pricing plans. The Public Interest Parties
assert that ``[e]nsuring that all fees are disclosed should help
protect consumers against junk fees, hidden-fees pricing, and negative-
option subscriptions.'' PPI suggests that such information would allow
consumers to ``consider their likely phone usage and compare
subscription costs to what they would pay under per-minute pricing.''
The Leadership Conference requests the Commission to ``ensure that
consumers are fully informed about alternative pricing structures so
that they can make informed decisions about their choices.'' Securus
suggests that the Commission ``[r]equire baseline disclosures so [the]
consumer can make an informed choice,'' and that the disclosures
include the ``offered terms, (e.g., X number of calls per month for
$X).'' We agree that consumers need some essential information to
assess whether a particular alternate pricing plan best meets their
needs. For example, IPCS consumers should know the format of and
charges for the alternate pricing plan prior to enrollment. Providers
also should ensure that consumers know the terms, conditions and
procedures for renewals, cancellations, and reporting dropped calls, so
they will be in control of the length of time they are enrolled in the
plan and know how to report dropped calls; the option to obtain service
on a per-minute basis, so they are aware that enrollment in the plan is
not the only option available to them; the breakeven point for the
plan, so they will know what their usage level needs to be to benefit
from the plan; and the availability of their usage and billing data
upon request, so they can analyze their past usage and make decisions
about their future enrollment in the plan. The disclosure of the
breakeven point will especially be needed if a provider offers an
alternate pricing plan that is designed for heavy users. A light user
of IPCS, being told what the breakeven point is for such an alternate
pricing plan, and being given an explanation of the breakeven point,
would have information that could be used in deciding whether the plan
makes sense for their circumstances. Accordingly, we find that
providers offering alternate pricing plans must disclose the following
information: (We are listing these items together here to give one list
encompassing the details of alternate pricing plan disclosures.)
--The rates and any added taxes or fees, a detailed explanation of the
taxes and fees, total charge, quantity of minutes, calls or
communications included in the plan, the service period, and the
beginning and end dates of the service period;
--Terms and conditions, including those concerning dropped calls and
communications, automatic renewals and cancellations;
--An explanation that per-minute rates are always available as an
option to an alternate pricing plan and that per-minute rates apply if
the consumer exceeds the calls/communications allotted in the plan;
--The breakeven point, and an explanation in plain language that the
breakeven point is the amount of plan usage the consumer must make to
start to save money compared to the provider's applicable per-minute
rate for the same type and amount of service; and
--The ability to obtain usage and billing data, upon request, for each
of the most recent three service periods (where feasible), including
total usage and total charges including taxes and fees. If the consumer
had not been a customer of the provider during one or more of the three
previous service periods, the provider must give the usage and billing
data for whatever service periods the consumer did use the provider's
services and for which the provider has retained the information. If
the consumer has never been a customer of the provider, then this
requirement does not apply. These disclosure requirements resolve
Leadership Conference's concerns that consumers be informed about costs
and refunds.
520. ViaPath opposes the adoption of consumer disclosure rules
specific to alternate pricing plans, arguing that the Commission's
rules ``already facilitate significant transparency,'' and that
``[c]onsumers are in the best position to determine whether alternative
pricing arrangements meet their needs.'' ViaPath also asserts that
expanded disclosures are not needed because ``[t]here is no record
evidence that prior alternative pricing trials have resulted in
anything other than satisfied customers.'' The evidence ViaPath refers
to is testimony provided by Securus from a small subset of its
customers--meaning we do not have information about how satisfied the
remaining customers were, including the customers whose usage did not
meet the breakeven points in Securus's plans. In particular, ViaPath
cites to Sec. 64.710 of the Commission's rules which requires audible
information about the cost of a call prior to call connection. However,
Sec. 64.710 applies to interstate calls made from correctional
facilities and therefore does not apply to intrastate IPCS calls over
which the Commission now has jurisdiction. Because Sec. 64.710 was
adopted over two decades ago, it does not require providers to give all
the terms and conditions of alternate pricing plans. The other rule
sections referenced by ViaPath--Sec. Sec. 42.10, 42.11, 64.2401 and
64.6110--fare no better. Sections 42.10 and 42.11 of the Commission's
rules do not apply to intrastate services. Also, Sec. 42.10 requires
rate information to be publicly available at one physical location,
which at a minimum, would not be useful to incarcerated people; and
Sec. 42.11 requires the information to be available for submission to
the Commission and state regulatory commissions, not the public or
consumers. Section 64.2401 applies to telephone bills, not to
disclosures at other times, such as when someone is trying to determine
whether to enroll in an alternate pricing plan. Finally, ViaPath
suggests that Sec. 64.6110, the section we are amending here, is
sufficient. Section 64.6110 of the Commission's rules requires, among
other things, that IPCS providers disclose their rates and fees on
their websites or ``in another reasonable manner readily available to
consumers.'' Compliance with this requirement appears less than ideal.
For example, Securus has a website with an obscure URL, and which
provides only rates, not taxes and fees. Another Securus website,
accessed from a link at the bottom of securustech.net, apparently
requires a user to have an account in order to view the rates.
Additionally, despite ViaPath's contention that it is focused on
transparency, simplification and clarity for consumers, an internet
user would not find rates at https://www.viapath.com/ or https://gtl.com/. Links to rates are given at https://www.gtl.net/. From there,
interstate rates are found via a link to a page entitled ``Federal
Tariffs and Price Lists,'' which directs the user to a tariff-like
document for ViaPath--which the average consumer could readily decide
is too difficult to understand. Section 64.6110 currently does not
apply to intrastate or video service for example, or the terms and
conditions associated with alternate pricing plans which we are
permitting for the first time. Taken together, the rule sections listed
by
[[Page 77340]]
ViaPath do not require the disclosure of all of the terms and
conditions for alternate pricing plans for intrastate, interstate, and
international audio and video IPCS, with the consumer being either an
incarcerated person or a friend or family member, with the disclosure
being made before, during or after enrollment in a plan, and with the
disclosure being made to the public, including the Commission. ViaPath
also cites to sections 208 and 403 of the Communications Act, and Sec.
1.711 of the Commission's rules. However, those sections concern the
Commission's authority to address a provider's actions after the fact.
They do not require disclosures to consumers. Thus, even if IPCS
providers perfectly comply with the rule sections listed by ViaPath,
the rules are insufficient to ensure consumers receive the kind of
information needed to make well-informed decisions about participation
in alternate pricing plans generally, and to inform the public so they
may analyze the provider's compliance with our regulations. We find
that the consumer disclosure requirements specific to alternate pricing
plans that we adopt here are necessary to educate and protect
consumers. PPI suggests that providers reveal information such as a
requirement that the consumer has to pay money regardless of whether
the incarcerated caller is allowed to make calls, or pointing out that
subscriptions are not comparable to wireless plans which allow callers
to communicate with anyone of their choosing. We find our consumer
disclosure requirements sufficiently robust to enable consumers to
determine whether a provider's alternate pricing plan is the right
choice for them. Of course, IPCS providers readily may add additional
information that is truthful and useful to consumers to the information
that they are required to provide, at any time they interact with the
consumers, and on website postings that are available to the public.
521. Timing and Manner of Disclosures. In 2022, the Commission
asked whether it should adopt rules ``governing how providers should
disclose to consumers the rates, terms, and conditions associated with
any'' alternate pricing plan. After reviewing the record, we adopt such
requirements here, and conclude that an IPCS provider must make the
alternate pricing plan disclosures identified above available: (a)
before a consumer enrolls in the program (pre-enrollment); (b) upon
request, at any time after enrollment; (c) with a billing statement or
statement of account, and any related consumer communications; and (d)
at the beginning of each call or communication.
522. Pre-Enrollment Disclosures. Before a consumer first enrolls in
an alternate pricing plan, the provider must ensure that the consumer
is fully informed about the plan and the disclosure must provide all
plan details. For example, if the plan consists of 60 calls per month
for $30.00 plus permissible taxes and fees totaling $2.50, the
disclosure must provide the total dollar amount of $32.50, and the
amount of taxes and fees in detail. The terms and conditions also must
give the total dollar amount that will be charged, in this example
$32.50. The provider also must specify and explain the plan's
``breakeven point,'' discussed above. Prior to the consumer's
enrollment, the IPCS provider also must inform the consumer that usage
and billing data will be available upon request before they enroll and
after they enroll in the alternate pricing plan. These disclosures will
enable a consumer to consider their own IPCS needs and the likelihood
that their usage would reach the breakeven point before making a
decision to enroll in the alternate pricing plan and give them comfort
that they will continue to have access to the information they need
over time to decide whether to remain enrolled in that alternate
pricing plan.
523. Disclosures Upon Request at Any Time. In addition to the
disclosures being crucial to a consumer's decision about whether to
enroll in a plan, having access to the disclosures also is important
while a consumer is enrolled in the plan, and after enrollment has
ended. During enrollment in a plan, a consumer may want to check the
provider's procedures for handling dropped calls, for example, or
compare a billing statement to the terms of the plan. After enrollment,
a consumer may want to check their billing statements against the terms
of the plan to ensure the charges were correct or use the information
to determine if they want to enroll in an alternate pricing plan again.
524. Providers must also make available the number of remaining
minutes, calls or communications under the consumer's alternate pricing
plan without the consumer having to initiate a call or communication
that counts toward the minutes, calls or communications allotted in the
plan. This can be achieved via the consumer's account on the provider's
website or via the provider's mobile or online application, for
example. For those without internet access a provider can give this
information via its customer service line, or by whatever mechanism is
permitted by the facility. This disclosure requirement will allow
consumers to monitor their alternate pricing plan usage without
deducting a minute, call, or communication from their plan. The record
indicates that Securus offered this information to consumers of its
subscription plan, suggesting this requirement will not be burdensome
to providers. Therefore, we include this requirement in our alternate
pricing plan consumer disclosure rules.
525. Disclosures with a Billing Statement or Statement of Account.
Each billing statement or statement of account should explain how the
consumer may access the disclosures. The methods for obtaining the
disclosures must include the ability to request a paper copy. The other
methods could include a link to a website or a toll-free telephone
number, or perhaps a complete copy of the disclosures that would be
included with the billing statement or statement of account. With such
access to the disclosures, consumers will be able to confirm the
charges on the billing statement or statement of account, and make
decisions about their continued use of the alternate pricing plan.
526. Disclosures at the Beginning of a Call or Communication. In
addition to disclosing all of the terms and conditions at other times
and upon request, providers must make available, upon request of the
consumer, specific disclosures at the beginning of a call made via an
alternate pricing plan. For example, a provider could offer the option
of this detailed information if a consumer were to ``press two'' at the
beginning of a call. For example, the availability of the alternate
pricing plan disclosures could be announced as part of the information
at the beginning of a call, and the consumer could be told they can
``press 2'' to hear how to obtain the disclosure information online, or
``press 3'' to hear the disclosures read to them. This is similar to
Pay Tel's use of voice prompts, such as by saying: ``For rate
information, press 1 now.'' The IPCS provider must disclose the number
of minutes, calls or communications remaining for the service period
(for plans that have a finite number of minutes, calls, or
communications). This will ensure that IPCS users have the information
they need to determine whether to tailor their usage of IPCS in a given
instance based on the details of the alternate pricing plan they are
enrolled in. The requirement to provide disclosures at the beginning of
a call is currently in Sec. 64.710 of the Commission's rules. Section
64.710 as currently written, however, is insufficient to provide IPCS
consumers
[[Page 77341]]
with adequate information to make an educated decision prior to making
a call. For example, Sec. 64.710 applies to interstate calls made from
correctional facilities, not intrastate calls, and that section
necessarily does not require the provider to offer the disclosure of
all the terms and conditions of alternate pricing plans which are
permitted for the first time in the Report and Order. Therefore, we add
to our rules disclosure requirements at the beginning of the call or
communication which are specific to alternate pricing plans. Securus
states that, for its subscription plans, consumers were informed of the
number of calls remaining at the beginning of each call. Our rule
amendments require providers to give specific information about the
status of the alternate pricing plan, and are broader than Securus's
practice, to ensure that consumers are fully informed about the status
of their use of the plan.
527. Billing and Usage Data. The alternate pricing plan
disclosures--which primarily focus on the alternate pricing plan
itself--also must inform consumers that their own prior usage and
billing data (whether under per-minute pricing or an alternate pricing
plan) are available upon request. This information will further assist
a consumer in deciding whether to enroll in an alternate pricing plan.
The availability of that information upon request while the consumer is
enrolled in a plan will, in turn, enable IPCS consumers to evaluate
whether to remain enrolled in that alternate pricing plan. It also will
ensure that information is available in a manner that is timely for
IPCS users--i.e., when they otherwise are in a position to make such
evaluations, in the event that they have not retained such information
when it otherwise is made available to them. Because we require
disclosures of key information regarding alternate pricing plans in
other circumstances, we anticipate that in many instances IPCS
consumers already will have the information they need, and will not
find it necessary to avail themselves of this option. That said,
because the limited experience of IPCS consumers with such plans, IPCS
consumers may not know what information they will want to have in order
to make an assessment of whether to remain on an alternate pricing
plan, they might not automatically have retained that particular
information. As a result, we expect a consumer's ability to obtain this
information upon request will provide an important backstop that will
not unduly burden IPCS providers above and beyond the alternate pricing
plan disclosures we otherwise require.
528. The usage and billing data must show what the provider charged
for each of the past three service periods (where feasible), including:
(a) the minutes of use for each of the calls or communications made and
the applicable per-minute rate that was charged (where applicable); (b)
the total number of minutes; and (c) the totals charged including the
details of any taxes and fees. The requirement applies only for those
service periods for which the consumer was a customer of the provider.
A service period could be, for example, a month or a week. If a
consumer had been enrolled in an alternate pricing plan, the data must
include the breakeven point for the alternate pricing plan(s), an
explanation of the breakeven point in plain language, and the total
that would have been due for each service period if the provider's per-
minute rate had been used. The consumer's prior usage and billing data
could be made available when the consumer logs into their account on
the provider's website and the provider's online and mobile
applications, but must also be made available on paper upon request of
the consumer, and be made available at any time, whether before,
during, or after a consumer's enrollment in an alternate pricing plan.
As discussed above, we require disclosures to be available on paper so
that they are accessible to people who do not have internet access.
529. These requirements respond to a record suggestion that ``a
monthly accounting comparing the costs under a pilot program and the
applicable per-minute rate would help IPCS consumers understand whether
they will benefit or are benefitting from an alternative pricing
structure.'' While one commenter advocates for disclosures of a
consumer's historical IPCS usage and expenditures ``over a long
period'' to ``account[ ] for periodic variations in usage,'' we limit
the data IPCS providers must provide to the calling records for the
most recent three service periods (where feasible) so as not to
overwhelm consumers with large quantities of data, or create an overly
burdensome requirement on providers. Although Securus stated that it
made monthly statements of account available for 90 days for services
outside of its subscription plan, we require data for at least the most
recent three ``service periods'' so that the consumer can see their
usage during three similar periods of time, and see the complete
charges and taxes and fees for those service periods. The use of
``three service periods'' also would be a more reasonable request for
alternate pricing plans offered on a weekly basis, rather than
requiring a provider deliver up to 90 days of data (equivalent to
approximately 12 weeks of data) which may be overwhelming to the
consumer and may be onerous for the provider. For an alternate pricing
plan with a service period of one month, the data provided would be for
three months--i.e., approximately 90 days. For an alternate pricing
plan with a service period of one week, the data provided would be for
three weeks--i.e., 21 days.
2. Treatment of Unused Balances in IPCS Accounts
a. Adoption of Permanent Rules
530. We next adopt permanent rules addressing the treatment of
unused funds in IPCS accounts that build upon the interim rules that
the Commission adopted in the 2022 ICS Order. We now update our interim
rules to reflect our expanded authority over IPCS, and adopt permanent
rules to provide IPCS account holders with informational, procedural,
and financial protections that help ensure that IPCS account holders
are able to maintain control over the funds in their accounts and
receive refunds of any unused funds in a timely manner. Collectively,
these measures, consistent with several providers' affirmative
statements that refunds are always available, remove obstacles that, as
a practical matter, have largely prevented account holders from
receiving refunds of unused funds.
531. We take these actions pursuant to our authority under section
276(b)(1)(A) of the Communications Act, as amended by the Martha
Wright-Reed Act, and, to the extent the underlying accounts can be used
for interstate or international telecommunications services, pursuant
to section 201(b) of the Communications Act. We conclude that any
action (whether by a provider, a provider's affiliate, or an entity
acting on the provider's or the affiliate's behalf) inconsistent with
our revised rules for unused IPCS account funds would unreasonably
impede our ability to ensure just and reasonable IPCS rates and
charges, as required by section 276(b)(1)(A), and to the extent
interstate or international telecommunications services are involved,
would constitute an unreasonable practice within the meaning of section
201(b) of the Communications Act. We recognize that the 2022 ICS Order
characterized the Commission's interim rules governing unused balances
as guarding against ``unjust and unreasonable practice[s] within the
meaning of section 201(b) of the [Communications] Act.'' Because
[[Page 77342]]
section 201(b) broadly addresses just and reasonable charges and
practices for or in connection with interstate and international common
carrier services, the Commission had no cause at that time to parse
more closely the precise relationship between those rules and ensuring
just and reasonable rates and charges for IPCS. Examining that issue
more closely now, we conclude that rules addressing the treatment of
unused funds in IPCS accounts bear on the effective rates or charges
that IPCS users pay to establish and maintain an account and use IPCS
services. In particular, we find that the risk that an IPCS user will
lose funds they contributed to an IPCS account effectively increases
the overall cost of IPCS by reducing the IPCS usage they can count on
receiving for a given amount of funds in an IPCS account. We therefore
conclude that these regulations--designed to mitigate that risk--
appropriately are part of a compensation plan designed to ensure just
and reasonable rates and charges for IPCS within the meaning of section
276(b)(1)(A). Notably, no commenter disputes the Commission's legal
authority in this regard.
b. Background
532. In the 2022 ICS Order, in response to allegations of abusive
provider practices, the Commission adopted interim rules that prohibit
providers from seizing or otherwise disposing of funds in inactive
inmate calling services accounts until the accounts have been
continuously inactive for at least 180 calendar days. The record at the
time showed how providers would confiscate, for their own use, funds in
accounts they deemed ``inactive'' after a certain period of time,
resulting in significant windfalls. The Commission was concerned that
by taking possession of unused funds in customers' accounts, providers
were ``depriv[ing] consumers of money that is rightfully theirs.''
Under the interim rules, once the 180-day period has run, providers
must make reasonable efforts to refund all funds in the accounts to the
account holders and, if those efforts are unsuccessful, treat those
funds in accordance with any controlling judicial or administrative
mandate or applicable state law requirements. The Commission found, on
an interim basis, that all funds deposited into any account that can be
used to pay for interstate or international inmate calling services
remain the property of the account holder unless or until they are
either: (a) used to pay for products or services purchased by the
account holder or the incarcerated person for whose benefit the account
was established; or (b) disposed of in accordance with a controlling
judicial or administrative mandate or applicable state law
requirements, including, but not limited to, requirements governing
unclaimed property. The Commission used its authority under section
201(b) of the Communications Act to prohibit unjust and unreasonable
practices, explaining that its ``actions extend to commingled accounts
that can be used to pay for both interstate and international calling
services and nonregulated services such as tablets and commissary
services.''
533. In the 2022 ICS Further Notice, the Commission sought comment
on whether the Commission should adopt additional requirements
regarding inactive accounts to protect consumers as it adopts final
rules. Specifically, the Commission sought comment on the length of the
time before an account could be deemed inactive, and the actions that
would be sufficient to demonstrate activity. It also sought comment on
other issues, including whether to require providers to issue refunds
within a specified period of time once an account has been deemed
inactive, whether providers should be required to collect contact
information from and provide notice to account holders, and what types
of mechanisms providers should use to refund amounts to consumers.
c. Discussion
(i) Consumers' Right to Funds
534. The Commission's interim inactive account rules provide that
``funds deposited into a debit calling or prepaid calling account . . .
shall remain the property of the account holder unless or until the
funds are'' used or disposed of in accordance with our rules, including
as required by controlling adjudicatory decisions or state law.
Building on that general foundation, the permanent rules for inactive
accounts we adopt today are designed to safeguard the funds consumers
deposit in IPCS accounts, thereby ensuring that the effective costs of
IPCS are not unduly increased in a manner that is at odds with our
mandate to ensure just and reasonable rates and charges for IPCS. Our
permanent rules also reaffirm the Commission's interim rules that bar
IPCS providers from improperly ``seiz[ing] or otherwise dispos[ing] of
unused funds'' in inactive accounts,'' and require providers to
undertake ``reasonable efforts'' to refund unused funds.
(ii) Scope of the Inactive Account Rules
535. We now extend our rules to all accounts that can be used to
pay an IPCS-related rate or charge, to the extent the provider or its
affiliate controls the disposition of the funds in the accounts. The
interim rules for inactive accounts apply to ``all funds deposited into
a debit calling or prepaid calling account,'' as those terms are
defined in the Commission's rules. While for all practical purposes our
rules do not distinguish between debit and prepaid calling accounts,
given the prevalence of the use of these terms in the industry, our
rules continue to reference these terms in our definition of ``IPCS
Account.'' We now conclude that our permanent rules for the treatment
of balances in inactive IPCS accounts apply to any type of account,
that can be used to pay for IPCS, to the extent the provider or its
affiliate controls the disposition of the funds in the account. In
other words, we find that our rules are applicable to all IPCS accounts
generally to the extent they are controlled by providers or their
affiliates. Our rules do not generally extend to payment mechanisms
other than accounts. To the extent a provider offers only one payment
mechanism to pay for IPCS rates and charges at a facility, that payment
mechanism is subject to the inactive account requirements even if that
mechanism is not an ``account.'' For example, NCIC asserts that
``[s]ome companies sell virtual calling cards with `no refund'
policies.' '' While we do not generally include prepaid calling cards
for the payment of IPCS in our definition of an IPCS account, we
nonetheless conclude that providers that do not offer consumers an
alternative means of paying ongoing charges other than a prepaid
calling card are nonetheless subject to the inactive account
requirements we impose here.
536. Our definition of ``IPCS account,'' and hence the
applicability of our inactive accounts rules, extends to all accounts
administered by, or directly or indirectly controlled by a provider or
an affiliate, that can be used to pay IPCS rates or charges, including
accounts where the incarcerated person is the account holder,
regardless of whether those accounts can also be used to pay for
nonregulated products or services such as tablets and commissary
services. These accounts are used for ``debit calling'' under our
current rules. This treatment is consistent with the Commission's
decision, in the 2022 ICS Order, to extend its interim inactive account
rules to commingled accounts that could be used to pay for regulated
[[Page 77343]]
and nonregulated charges if providers administered or controlled those
accounts. Consistent with the Commission's analysis in the 2022 ICS
Order, we conclude that where we have authority under section 201(b)
and/or section 276 of the Communications Act to regulate the rates,
charges, or practices associated with communications services, our
authority extends to the nonregulated portion of a mixed service where
it is impossible or impractical to separate the service's regulated and
nonregulated components. Because the 2022 ICS Order was adopted before
the enactment of the Martha Wright-Reed Act, the Commission's decision
was based on section 201(b) of the Communications Act. The now-revised
section 276 of the Communications Act provides additional authority for
our decision here.
537. In the 2020 ICS Order on Remand, the Commission found that
ancillary service charges ``generally cannot be practically segregated
between the interstate and intrastate jurisdiction'' except in a
limited number of cases where the ancillary service charge clearly
applies to an intrastate-only call. Applying the impossibility
exception, the Commission concluded that providers generally may not
impose any ancillary service charges other than those specified in the
Commission's rules and are generally prohibited from imposing charges
in excess of the ancillary service fee caps. Similarly, commingled
accounts offered by providers contain funds that can be used to pay
IPCS rates and charges, over which the Commission has jurisdiction, as
well as charges for nonregulated products and services. Because we
cannot practically segregate the portion of the funds in providers'
commingled accounts that may be used to pay IPCS-related rates and
charges from the portion that may be used to pay nonregulated charges,
we conclude that commingled accounts should be subject to our permanent
rules regarding the treatment of unused funds in inactive accounts. In
the 2020 ICS Order on Remand, the Commission distinguished between
automated payments made to fund an account before calls are completed
and fees are incurred, from automated payments made after a call is
made and therefore the jurisdiction has been determined. The funds at
issue here are akin to the former situation where the funds cannot be
separated by jurisdiction, so the Commission applied the inactive
accounts rules to the corresponding automated payment fees.
(iii) Inactive Period
538. We retain the requirement that 180 consecutive calendar days
must pass before a provider may initiate the process of determining
that an IPCS account has become inactive, except where state law
affirmatively sets a shorter alternative period, or the incarcerated
person for whom the account was established is released from
confinement or transferred to another correctional institution. In
2022, the Commission invited comment on whether the 180-day timeframe
specified in our interim rules is the appropriate time frame before an
IPCS provider may deem an account to be inactive and therefore begin
the process of making reasonable efforts to refund the funds to the
account holder. Consistent with the position of several commenters, we
find that a 180-day time frame offers account holders an adequate
window during which they may exert custody or control before their
account is deemed inactive, without imposing unwarranted burdens on
providers. In contrast, the 364-day inactive period proposed by one
commenter, or any longer alternative period set by state law, would
unnecessarily delay the refund to consumers of unused funds from
accounts deemed inactive while imposing increased burdens on providers.
539. In 2022, the Commission asked for comment on the release and
transfer process ``to better understand the need for rules addressing
those areas.'' Based on the record, we find that if a provider becomes
aware that an incarcerated person has been released or transferred, the
180 days of inactivity will presumptively be deemed to have run,
requiring a provider to begin processing a refund in accordance with
the requirements we adopt in the Report and Order subject to
countervailing direction from the account holder. We agree with Securus
that in situations where accounts ``are not specific to any facility or
incarcerated person and may be used for calls from multiple
facilities,'' the account holder ``may very reasonably wish to keep
funds deposited in their . . . account to continue communicating with
other individuals.'' To ensure that the account holder's preference is
implemented in situations where the provider becomes aware that an
incarcerated person has been released or transferred, we require that
the provider contact the account holder prior to closing the account
and refunding the remaining balance, to determine whether the account
holder wishes to continue using the account, or to close it and obtain
a refund from the provider in accordance with our requirements. If the
account holder so requests, the account will be deemed inactive under
our rules, and the provider must issue a refund in accordance with our
requirements.
540. Consistent with the 2022 ICS Order, our rules do not disturb
the ability of account holders to obtain a refund upon request during
the 180-day period of inactivity. Under no circumstances other than
those described above, however, can a provider dispose of the funds in
an IPCS account prior to 180 days of continuous inactivity without the
account holder's affirmative consent. And, once the account holder
provides that consent, the provider must refund any remaining funds in
accordance with the requirements set forth below. Together, these steps
will help ensure that account holders are not deprived of funds that
are rightfully theirs, thereby effectively saddling account holders
with unjust and unreasonable rates.
541. The interim rules for inactive accounts required that the
inactivity period be continuous and specified the actions by the
account holder or the incarcerated person for whom the account had been
established that would be sufficient to restart the inactivity period--
for example, adding or withdrawing funds from the account, expressing
an interest in retaining the account, or otherwise exerting or
attempting to exert control over the account. In 2022, the Commission
invited comment on whether it should refine these rules and, in
particular, on whether other actions by the account holder or the
incarcerated person should restart the inactivity period. We retain the
requirement that the inactivity period be continuous, as well as the
requirement that the inactivity period restart when the account holder
or the incarcerated person for whom the account is maintained: (a)
deposits, credits, or otherwise adds funds to the account; (b)
withdraws, spends, debits, transfers, or otherwise removes funds from
an account; (c) expresses an interest to the IPCS Provider in
retaining, receiving, or transferring the funds in an account; or (d)
otherwise attempts to exert or exerts ownership or control over the
account or the funds held in the account.
542. We also clarify that an account holder may use any reasonable
means to convey to a provider its interest in retaining, receiving, or
transferring funds in an account, including by calling, emailing, or
writing to the provider, or by affirmatively responding to a provider
inquiry asking whether the
[[Page 77344]]
account should remain open. A means of communication is ``reasonable''
for this purpose if it is a means of communication between the provider
and account holder otherwise used in other situations, or if the
service agreement provides for it as an additional means of
communication in the specific scenario of such communications. This
will guard against the risk that mere difficulty in communicating with
the provider would result in an account qualifying as inactive under
our rules, triggering the need for the account holder to go back
through the steps of (re)establishing an account and risking the
inability to engage in IPCS communications in the meantime. At the same
time, it only holds the provider accountable for using the means of
communications with the account holder that they otherwise are using
already, along with any additional means specified for these purposes
in their service agreement.
543. In addition, the record makes clear that providers often lack
the information they will need to complete the refund process. To
eliminate this potential roadblock, we urge providers to allow the
account holder to specify an individual to which a refund should go to
the extent the provider's existing systems can accommodate such a
change. In the Further Notice, we invite comment on whether we should
require that all providers follow this ``best practice.''
(iv) Required Refunds
544. We now adopt permanent rules that reaffirm the requirement
that, once an IPCS account is deemed inactive, providers must take
proactive steps to issue a refund to the account holder in accordance
with the requirements set forth below. The record makes clear that both
a refund mandate and rules implementing that mandate are needed to keep
providers from continuing to retain the funds in inactive accounts and
appropriating them to their own uses, which increases the effective
cost of IPCS to consumers contrary to our statutory mandate to adopt a
compensation plan for IPCS that ensures just and reasonable rates and
charges. The requirement to initiate a refund for inactive accounts is
consistent with and in addition to the underlying obligation of
providers to refund accounts generally upon request by an account
holder.
545. Both the refund mandate and our implementing rules will apply
to all accounts within our definition of ``IPCS account.'' We find
unavailing Securus's argument that we should not require refunds from
accounts held by incarcerated people because the funds in them are not
considered abandoned while the account holder remains incarcerated and
``are routinely refunded upon transfer or release.'' We commend
correctional institutions and certain providers for having procedures
in place to ensure that all funds in an IPCS account are refunded once
an incarcerated person is released or transferred. And, as Securus
recognizes, providers typically rely on correctional institutions to
advise them when an incarcerated person is released or transferred.
Since correctional institutions do not always share that information
with providers, Securus's argument underscores the need for providers
to take proactive steps to ensure that account holders are aware that
refunds are available once their accounts are deemed inactive. As we do
in circumstances where a provider becomes aware that an incarcerated
person has been transferred or released, we similarly require that when
a refund otherwise becomes due under our rules at the expiration of the
180-day inactivity period, the provider must contact the account holder
prior to closing the account and refunding the remaining balance, to
determine whether the account holder wishes to continue using the
account, or to close it and obtain a refund from the provider in
accordance with our requirements.
546. We disagree with certain commenters' assertions that we should
not require refunds from accounts that ``are never deemed inactive'' or
``never expire.'' While such accounts in theory preserve the value of
consumers' deposits, the longevity of these accounts is of no practical
use to account holders if they are not aware that refunds are
available. And even in situations where account holders are aware of
the availability of refunds, the rules we adopt today ensure that they
have a mechanism enabling them to have the amounts in those accounts
returned to them. Thus, regardless of how providers may characterize
IPCS accounts, under the rules we make permanent today, an account that
can be used to pay for IPCS rates and charges becomes inactive after
180 consecutive calendar days unless certain conditions are met.
547. We conclude that, for purposes of the Commission's inactive
account rules, regardless of whether an account remains open in
perpetuity, the provider must take proactive steps to refund the entire
balance of the account once it is deemed inactive within the meaning of
our rules. The amount refunded must include the entire balance of the
account, and, consistent with our elimination of ancillary service
charges generally, the provider shall not impose fees or charges in
order to process the refund. Additionally, in calculating the refund
balance, the record supports requiring that the provider include in the
refund any deductions it may have made in anticipation of taxes or
other charges that it assessed when funds were deposited and that were
not actually incurred. This will prevent providers from profiting from
practices such as assessing taxes or fees upfront on deposited funds,
rather than at the time of the account holder's actual payment for
service.
(a) Timing of Refunds
548. In 2022, the Commission invited comment on whether it should
adopt a time frame for refunds to be issued and the length of time
needed to process refunds. The Commission also asked for comment on
reasonable time frames to issue refunds in response to requests for
refunds received before an account became inactive, and how much time
was needed to process such requests. Based on the record, we find that,
as part of providers' duty to make reasonable efforts to refund
balances in accounts deemed inactive, refunds must be issued within 30
calendar days of an account being deemed inactive or within 30 calendar
days of a request from an account holder. We find suggestions in the
record that requests for refunds should be issued within five to seven
business days to likely be too short a time period for providers to
process refunds. We therefore find it reasonable instead to allow 30
days for the completion of the refund process. While one commenter
urges us to leave this time period open ended, because we now require
that refunds be issued automatically once an account becomes inactive
and the provider has contacted the account holder to determine whether
the account holder prefers to keep the account active or receive a
refund in accordance with our rules, it is reasonable to expect that
refund issuances will be completed within 30 calendar days. Likewise,
we find that our new requirements that providers gather contact
information and the means of issuing refunds when an account is opened
will streamline the refund process such that a longer, or
indeterminate, time period is not reasonable. We note that a provider's
duty to conduct a timely refund process is not contingent on an
affirmative request by the account holder for a refund. The provider
must make reasonable efforts in the prescribed timeframe, as described
below, to give account holders a reasonable
[[Page 77345]]
opportunity to receive the refund or affirmatively request that the
account be deemed active.
549. Our rules require that ``[a]fter 180 days of continuous
account inactivity have passed, or at the end of any alternative period
set by state law, the provider must make reasonable efforts to refund
the balance in the account to the account holder. In response to
several commenters' suggestions, we take the opportunity to clarify
that ``reasonable efforts'' include, but are not limited to: (a)
notification to the account holder that the account has been deemed
inactive; (b) the collection of contact information needed to process
the refund; and (c) timely responses to account holders' inquiries
regarding the refund process. It is self-evident that taking no steps
to effectuate refunds is not reasonable.
550. We agree with commenters that account balances should be
automatically refunded once accounts have been deemed inactive. We find
that requiring the account holder to affirmatively request a refund is
inconsistent with the fact that the funds in the account are the
account holder's property. As the Commission has recognized, providers
``have strong incentives to retain these funds for themselves.'' Given
these incentives, we find it appropriate to require providers to
initiate and follow through on the refund process, including refunding
all remaining money, once an account becomes inactive.
551. We reject certain providers' suggestions that it is
``impossible'' or overly burdensome for providers to make automatic
refunds. These arguments are based on assertions that some providers
presently lack the information needed to generate automatic refunds or
have not yet established procedures to process automatic refunds. Those
arguments are unavailing. We strongly disagree that ``mandating routine
inactivity refunds rather than refunds upon release or transfer will
impose costs and burdens that far outweigh any demonstrated benefit.''
The record of the abuses by providers retaining account holders' funds
for their own use is extensive. Retention of those funds has functioned
as an additional charge on consumers that, if continued, would
undermine our efforts to establish a compensation plan that ensures
just and reasonable IPCS rates and charges for consumers. While the
benefits of automatic refunds may seem slight to some providers, the
record makes clear the importance consumers place on receiving this
money. In contrast to that substantial evidence of the benefits of such
a requirement, providers have failed to adequately quantify the claimed
burdens of compliance, let alone demonstrate outright impossibility of
complying. To the extent that providers already issue refunds upon
release or transfer, nothing in our rules prevents this practice from
continuing and we support any efforts taken by providers to ensure
refunds are promptly issued. Indeed, the fact that providers have
demonstrated the ability to promptly issue refunds based on certain
triggering events--such as release or transfer--gives us confidence
that it will be reasonably feasible for them to establish the processes
(if not already in place) in order to promptly issue refunds based on
the triggering event of an account's inactivity under our rules. We
thus require providers to collect whatever information and establish
any procedures they will need to process refunds expeditiously as
required by our new rules.
552. We do, however, acknowledge commenters' concerns regarding the
administrative burden of providing automatic refunds for inactive
account balances that are below the cost of issuing the refund. As
Securus explains, ``[i]ssuing refunds on small account balances will
result in the ICS provider incurring costs to administer those funds
exceeding the value of the amount refunded.'' The record contains
relatively little quantitative data regarding the point at which
issuing a refund would cost more than the balance in the account. Pay
Tel suggests that an account balance of $1.00 might be a sufficient
cutoff point, while Securus suggests that the Commission adopt a $1.50
de minimis threshold. Additionally, the record suggests that there may
be circumstances in which providers might effectuate refunds through
third parties such as Western Union and that ``those third parties will
charge for their role in issuing refunds.'' Given these choices, we
adopt the more conservative of the two options provided to us in the
record and therefore do not require automatic refunds where the balance
in an inactive account is $1.50 or less. This de minimis threshold
applies in the absence of ``a consumer's specific request'' for a
refund. Thus, if an account holder requests a refund, providers must
comply with such a request regardless of the amount of money remaining
in the account. And, consistent with our rules, to the extent providers
are unable to issue a refund, the provider shall treat such balances
consistent with appliable state law, including applicable state
unclaimed property law.
(b) Refund Mechanisms
553. The record suggests that there are a variety of methods
available to providers to refund the balances in inactive accounts.
Rather than prescribe a specific mechanism, we suggest several options
which providers may offer to account holders that are supported by the
record. As a general matter, Securus asserts that it ``will tailor its
refund method to the method used by the account holder to fund the
account,'' which suggests that providers are able to offer different
refund mechanisms. Indeed, Securus indicates that if an account is
funded via a payment card, it will ``initiate a refund using the
payment card information on file.'' For accounts funded using a check
or money order, Securus indicates that it ``will issue a paper check
that will be sent via postal mail using the address information on
file.'' Other commenters similarly suggest that ``[r]efunds should be
issued either to the account holder's original form of payment or to a
credit or debit card provided by the account holder at the time of the
request'' or through an electronic fund transfer to a bank account.
Given record evidence of the availability of a variety of refund
mechanisms, we find that providers must issue refunds in the original
form of payment, an electronic transfer to a bank account, a check, or
a debit card. We find that offering multiple refund mechanisms will
ensure that barriers created by certain methods are avoided. While
providers appear to use refund mechanisms that offer similar
optionality to consumers, we emphasize that any refund mechanism that
requires that an account holder affirmatively request a refund after
the account has been inactive for 180 days would violate our rules.
Such requirements may be appropriate when an account holder seeks a
refund while an account is active, but cannot be a barrier to receiving
a refund once an account is deemed inactive.
(v) Required Notices
554. We conclude that additional requirements are needed to ensure
that account holders maintain control over IPCS accounts and receive
refunds in a timely manner. As discussed above, we impose certain
disclosure requirements on providers, including requiring the posting
of their terms and conditions of service on their publicly available
websites, the posting of their obligation to refund unused balances
upon request, and other more detailed disclosure requirements related
to their inactive
[[Page 77346]]
account balance procedures. We now also require providers to provide
account holders, through their billing statements and statements of
account, notice of the status of IPCS accounts prior to their being
deemed inactive. This notice shall initially be provided at least 60
days prior to an account being deemed inactive. It shall be included in
each billing statement, or statement of account, the provider sends, or
makes available to, the account holder until either some action by the
account holder results in the inactivity period being restarted or the
account is deemed inactive. We agree with ViaPath that notices should
be provided to the account holder only. This notice must describe how
the account holder can keep the account active, as well as how the
account holder may update the refund information associated with the
account. We emphasize that providers may supplement their compliance
with these requirements with any additional measures they deem
appropriate to keep account holders informed of the status of their
accounts and how to update their account information.
(vi) Controlling Judicial or Administrative Mandate
555. We also adopt an exception to our permanent rules regarding
the disposition of funds in inactive accounts that allows a provider to
dispose of funds in inactive accounts in compliance with a controlling
judicial or administrative mandate. Our interim rules included an
identical exception, which the Commission proposed to retain in 2022,
and was supported in the record. We also update the definition of
``controlling judicial or administrative mandate'' from the interim
rules to make clear that this exception to our rules regarding the
disposition of funds in inactive accounts applies to all incarcerated
people's communications services now subject to our authority. This
revised definition encompasses any final court order that requires an
incarcerated person to pay restitution, any fine imposed as part of a
criminal sentence, and any fee imposed in connection with a criminal
conviction to the extent that these payments are required to be made
from an account that could be used to pay IPCS rates or charges. The
revised definition also includes applicable state law requirements,
including, but not limited to, requirements concerning unclaimed
property in such accounts. Finally, the definition excludes from the
scope of our final rules acts taken pursuant to a final court or
administrative agency order adjudicating a valid contract between an
IPCS provider and an IPCS account holder, entered into prior to the
release date of the Report and Order, that allows or requires the
provider to act in a manner that would otherwise violate our rules
regarding the disposition of funds in inactive accounts.
556. In 2022, we invited comment on ``the ultimate disposition of
unclaimed funds in a debit calling or prepaid calling account in
circumstances where a provider's refund efforts fail and state law does
not affirmatively require any particular disposition.'' We conclude
that the provider's inability to refund money remaining in an inactive
account does not alter the account holder's entitlement to use them or
ultimately have them refunded as a matter of our rules. Consequently,
the account holder's preexisting entitlement to those funds would be
altered only where controlling judicial or administrative mandate or
state law affirmatively requires otherwise. Therefore, as advocated by
some commenters, we find that if reasonable efforts by providers to
refund the funds in inactive accounts fail, the ``provider should be
required to treat remaining funds consistent with applicable state
law,'' including applicable state unclaimed property laws. While some
commenters urge us to adopt specific unclaimed property requirements to
be applied at the state level, we find compliance with state law to be
presumptively reasonable. We note, however, concerns raised in the
record that providers will forum shop for favorable unclaimed property
laws outside of the location where the account holder resides. We find
instead that providers will be subject to the standards the courts have
articulated for resolving choice-of-law questions generally and rely on
courts to address abuse by providers regarding choice-of-law matters.
H. Other Matters
1. Rule Revisions
557. In the Report and Order, we revise our rules pursuant to the
direction of the Martha Wright-Reed Act. In particular, we amend our
rules to make consistent use of the terms ``incarcerated people's
communications services,'' ``IPCS,'' and ``incarcerated people,'' as
opposed to ``inmate calling services,'' ``ICS,'' and ``inmates,'' terms
previously used in this proceeding. In 2023, the Commission proposed to
revise its rules to use the term ``incarcerated people's communications
services'' or ``IPCS'' instead of ``inmate calling services'' or
``ICS'' to refer to ``the broader range of communications services
subject to the Commission's jurisdiction as a result of the [Martha
Wright-Reed] Act.'' The Commission also proposed to ``change[ ]
references to `inmates' to `incarcerated people,' '' as public interest
advocates urge. Nearly all commenters addressing the subject support
these revisions. Indeed, several commenters use the term ``IPCS'' in
place of ``ICS'' in their comments, following the Commission's proposed
approach. Additionally, we note that these changes are consistent with
and advance the Commission's goal of digital equity for all.
558. Securus argues that the ``the replacement of `calling
services' with the broader, and [in Securus's view] somewhat ambiguous
term `communications services' '' may ``engender confusion.'' Securus's
concern appears to focus on ``retaining the distinction'' between audio
communications and video communications, ``to avoid any suggestion that
they may be subject to the same regulatory framework when in fact they
are quite different services.'' Securus therefore suggests that we
adopt the terms ``incarcerated calling services'' and ``incarcerated
video services'' to refer to these respective types of communications
services. We are not convinced that incorporating the term
``incarcerated people's communications services'' into our rules would
have this effect. First, the Act explicitly contemplates a unified
regulatory framework for these services by granting the Commission
authority over ``any audio or video communications service used by
inmates.'' The language of section 276, as modified by the Act, also
refers to these types of services collectively. Second, these
respective services share, to a substantial extent, similar operating
conditions as well as being commonly subject to critical aspects of our
regulatory framework (consistent with the Act), which warrants the use
of a single term that encompasses all services under our jurisdiction.
To the extent that the treatment of these two types of services differ
under our regulatory framework, this distinction is effectively
encapsulated by our use of the terms ``audio IPCS'' and ``video IPCS.''
Accordingly, we revise our rules to change all references to ``inmate
calling services'' or ``ICS'' to instead refer to ``incarcerated
people's communications services'' or ``IPCS,'' respectively, and to
change all references to ``inmates'' to ``incarcerated people.'' We
will, however, continue to use the term ``inmate calling services'' or
``ICS'' to refer to historic Commission actions in WC Docket No. 12-
375. We encourage
[[Page 77347]]
commenters and other participants in this proceeding to adopt these
changes in their submissions going forward.
559. We also revise our rules to incorporate terms used in the
Martha Wright-Reed Act and to implement our actions in this Order.
These revisions include changes to certain definitions in Sec. 64.6000
of our rules, and reflect the extension of the application of our rules
to intrastate IPCS, the addition of new rules addressing alternate
pricing plans, and changes to our disability access, rate cap,
ancillary service charge, annual report and certification, inactive
account, and consumer rules.
2. Definitions of Prison and Jail
560. In 2022, the Commission sought comment on modifying the
definitions of ``Jail'' and ``Prison'' in its rules ``to ensure that
they capture the full universe of confinement facilities'' such as
civil commitment, residential, group and nursing facilities. Two
commenters, the Accessibility Coalition and UCC Media Justice, filed ex
partes agreeing that the Commission should expand the definitions of
``Prison'' and ``Jail'' as suggested. In addition, the Commission
sought comment on its authority to apply the inmate calling services
rules, including those addressing communications access for people with
disabilities, to these facilities. In addition, the Commission asked
commenters to address whether residents of such facilities are able to
access voice and other communications services through providers of
their own choice, as opposed to being limited to the providers selected
by third parties. In 2023, the Commission again invited comment about
whether to expand the definitions of ``Jail'' and ``Prison'' to include
these facilities, or any additional facilities, as part of the
definitions of ``Jail,'' ``Prison,'' or ``Correctional Facility.''
561. Numerous commenters support expanding the definition of
``Jail'' to cover ``civil commitment facilities, residential
facilities, group facilities, and nursing facilities in which people
with disabilities, substance abuse problems, or other conditions are
routinely detained.'' One commenter urges the Commission to continue to
``expand protections for vulnerable populations subject to various
forms of detention.'' Another asserts that ``[j]ust as incarcerated
people with disabilities in prisons and jails, as currently defined in
the Commission's rules, face inequitable access to communications
services, so too do those confined to civil commitment facilities.''
Two commenters raise concerns that the definition of ``Jail,'' as
amended in the 2022 ICS Order, ``did not fully capture the Commission's
intent to include every type of facility where individuals can be
incarcerated or detained,'' in particular immigrations detention
facilities. Specifically, they point out that, although the Commission
incorporated into its definition of ``Jail'' ``facilities used to
detain individuals, operated directly by the Federal Bureau of Prisons
or U.S. Immigration and Customs Enforcement, or pursuant to a contract
with those agencies,'' it failed to include similar facilities operated
by Customs and Border Protection (CBP) or the U.S. Marshals Service
(USMS). Given the similar nature of these agencies and their
corresponding facilities, theses commenters urge us to add detention
facilities operated by, or pursuant to a contract with, CBP or USMS to
the definition of ``Jail'' in our rules.
562. Other commenters oppose expanding our definition of ``Jail''
as proposed. The National Sheriffs' Association questions whether the
types of facilities the Commission sought comment on including in its
definition of ``Jail'' fall within the scope of section 276 of the Act
which applies to ``the provision of inmate telephone service in
correctional institutions.'' One provider argues that our IPCS
regulations ``should apply only to facilities that contract with ICS
providers to install and maintain secure, corrections-type
communications systems.'' The National Sheriffs' Association also
contends that ``it is unlikely that calling services in [civil
commitment, residential, group, and nursing] facilities have the same
cost characteristics of providing calling services in jails and
prisons.''
563. Consistent with the Commission's intention in the 2022 ICS
Order, we modify the definition of ``Jail'' to cover all immigration
detention facilities. This definition therefore encompasses every
immigration detention facility operated by, or pursuant to a contract
with, ICE, CBP, USMS, or any other federal, state, city, county, or
regional authority. This modification to the definition of ``Jail''
addresses this unintended gap in our rules and also follows the Martha
Wright-Reed Act's directive that we ensure ``just and reasonable
charges for telephone and advanced communications services in
correctional and detention facilities.''
564. We decline at this time to make further modifications to the
definitions of ``Prison'' and ``Jail'' in our rules. While we agree
with certain commenters that individuals in certain other facilities
should benefit from the protections of the IPCS rate caps and other
rules we adopt here, based on the current record, we find we lack
sufficient information and data to address the issues raised in the
record. Given our lack of data, particularly on the costs providers
incur in providing service in these types of facilities, we do not find
we have sufficient confidence at this time that the rate caps we adopt
herein would fairly compensate providers for providing service to such
facilities. We seek additional comment on these issues in the attached
Notice.
3. Annual Reporting and Certification Requirement
565. Since 2013, the Commission has required providers of
communications service to incarcerated people to file certain pricing
and related data and information annually to promote transparency and
heighten providers' accountability. These annual reports enable the
Commission and the public to monitor pricing practices and trends in
the IPCS marketplace generally. Pursuant to our rules, ICS providers
must file annual reports and certifications by April 1 of each year.
The reports contain information and data about the services provided
for the preceding calendar year, and an officer or director of the
provider must certify that the information and data are accurate and
complete. We now modify the scope and content of our annual reports to
reflect the Martha Wright-Reed Act's expansion of Commission
jurisdiction over other communications services in carceral facilities,
including video IPCS and other advanced communications services, as
well as intrastate IPCS, and the providers that offer these services.
a. Background
566. The Commission's annual reporting requirements for providers
of communications services to incarcerated people have changed over
time reflecting the Commission's evolving perspective on the need for
marketplace data. The Commission first adopted annual reporting and
certification requirements for providers in its 2013 ICS Order. The
information and data required in the reports included interstate and
intrastate ICS rates, ancillary service charges, and the number of
disconnected calls. An officer or director was required to certify to
the accuracy of the data and information, ``including the requirement
that ICS providers may not levy or collect an additional charge for any
form of TRS call, and the requirement that ancillary charges be cost-
based.'' The Commission found that the certification requirement would
facilitate
[[Page 77348]]
enforcement and ensure that ICS providers' rates and practices were
just, reasonable, and fair, and in compliance with that Order. The
Commission subsequently included additional reporting requirements
relevant to industry oversight in 2015, and further amended its rules
in 2022 to require data concerning various services for individuals
with disabilities. The Commission added requirements to report data on:
(a) site commissions; (b) the number of TTY-based ICS calls, the number
of those calls that were dropped, and the number of complaints related
to ICS made by TTY and TRS users; and (c) the usage, rates and
ancillary service charges for video visitation services. In 2017, the
D.C. Circuit vacated the reporting requirement for video visitation
services, considering the requirement ``too attenuated to the
Commission's statutory authority.'' In the 2020 ICS Order, the
Commission removed Sec. 64.6060(a)(4)--the paragraph that had required
ICS providers to submit data on video visitation services. The
Commission required providers to report the number of calls and number
of dropped calls for TTY-to-TTY ICS, for direct video calls placed or
received by ASL users, and for each TRS available at a facility, as
well as the number of complaints about dropped calls and poor call
quality for these services. Additionally, the Commission determined
that it was no longer necessary to collect data on dropped calls, so it
adopted the proposed Sec. 64.6060(a)(5) to (6) without the requirement
to report on dropped calls, and made a conforming modification to Sec.
64.6060(a)(7) which requires reports about complaints from TTY and TRS
users. The changes to the three paragraphs, Sec. 64.6060(a)(5) to (7),
have not yet gone into effect.
567. In the 2023 IPCS Order, the Commission reaffirmed and updated
its prior delegation of authority to WCB and Consumer and Governmental
Affairs Bureau (CGB) ``to modify, supplement, and update [the annual
reporting] instructions and . . . template as appropriate to supplement
the information [it would] be receiving in response to the Mandatory
Data Collection.'' The Word and Excel templates are FCC Form 2301(a),
and the certification is FCC Form 2301(b). The Commission also
``delegate[d] to WCB and CGB the authority to conduct the requisite
Paperwork Reduction Act analysis for any changes to the annual report
requirements that were implemented pursuant to [the 2023 IPCS Order].''
In the accompanying 2023 IPCS NPRM, the Commission asked what rule
changes or new rules would be necessary to effectuate the Martha
Wright-Reed Act. No commenter addresses possible changes to the annual
reporting and certification requirement.
568. In the Aug. 3, 2023 IPCS Public Notice, WCB and CGB proposed
revisions to the instructions and templates for the annual reports and
annual certifications to implement the Martha Wright-Reed Act and
reflect the changes that were adopted in the 2022 ICS Order. Commenters
generally supported the Commission's efforts to track trends in the
IPCS marketplace as long as the reporting requirements were not unduly
burdensome. However, one commenter argued that it was premature to
require reports on video and the expanded TRS obligations, because the
Commission had not adopted video IPCS regulations, and the expanded TRS
regulations had not yet gone into effect. In response, the Commission
refrained from adopting any changes to the annual reporting
requirements prior to this Order. The Apr. 1, 2024 annual reports and
certifications used the same forms as were used previously.
b. Discussion
569. We now modify our annual reporting and certification
requirements, consistent with the Commission's expanded authority under
the Martha Wright-Reed Act, to include the full scope of IPCS and all
providers of IPCS. These modifications will provide greater visibility
into the IPCS marketplace and provide an objective foundation for
future Commission action to ensure IPCS rates are just and reasonable
and IPCS providers are fairly compensated. We also provide WCB and CGB
the flexibility to propose, seek comment on, and adopt further revised
requirements in response to this Order and future IPCS marketplace
developments in a timely fashion. Collectively, these modifications to
our annual reporting requirements and our delegation of authority to
WCB and CGB to implement these changes will enable the Commission to
better ensure it meets its statutory directives.
570. First, we make several modifications to the annual reporting
and certification rule. Specifically, we revise Sec. 64.6060(a) so the
annual reporting requirement now applies to IPCS providers, rather than
ICS providers. Consistent with the revised definition of IPCS, this
change makes providers of video IPCS and advanced communications
services not previously covered by our IPCS rules subject to the annual
reporting and certification rule. We also remove Sec. 64.6060(a)(2) to
(3) which referred to ancillary service charges and site commissions to
reflect the prohibition on those charges adopted in this Order. We
retain the reporting requirements concerning TRS and related
communications services in Sec. 64.6060(a)(5) to (7), but renumber
them as Sec. 64.6060(2) to (4). These requirements were originally
adopted in the 2022 ICS Order but have not yet gone into effect. When
these paragraphs were adopted, the Commission found that the annual
reports would provide ``valuable data showing to what extent the [TRS-
related] rules adopted [in that order] are successfully implemented.''
These requirements will allow us to monitor incarcerated peoples'
access to TRS and related communications services. Finally, we modify
the certification requirement in Sec. 64.6060(b) to now include
examples of several executives of the provider that may make the
certification, and for consistency. The current Annual Reporting and
Certification Instructions, Word Template, Excel Template and
Certification Form were adopted by WCB pursuant to authority delegated
by the Commission and after public requests for comment and comment.
571. Next, we give WCB and CGB flexibility in revising and updating
the annual reports, as necessary to provide useful transparency into
industry practices and guide Commission efforts to regulate the
industry. We direct that WCB pay particular attention to how best to
capture developments in the rapidly changing, but nascent video IPCS
marketplace in updating the requirements for the annual reports. We
also direct CGB to pay attention to not only the availability of TRS,
but growth of both the user base and the use of TRS, capturing data on
the number of individuals with disabilities who are requesting access
to the additional forms of TRS in carceral facilities, changes in the
monthly minutes of use for each type of TRS, and other useful metrics.
WCB and CGB therefore will be able to respond to regulatory and
marketplace conditions more readily than if every specific annual
report change needed to be adopted first by the Commission. We direct
WCB and CGB to seek comment on and adopt all necessary revisions to
annual report instructions, templates and certifications consistent
with past practices. For example, on December 15, 2021, WCB released a
Public Notice proposing to revise the annual reports to reflect rule
amendments adopted in the 2021 ICS Order. After considering the
comments and replies submitted in
[[Page 77349]]
response to the Public Notice, WCB adopted an order that revised the
instructions, reporting templates, and certification. The instructions,
reporting template, and certification were made available online.
572. We also reaffirm and update the Commission's prior delegation
of authority to WCB and CGB to revise the annual reports. Accordingly,
WCB and CGB can modify, supplement, and update the required contents of
the annual reports and the manner in which they are to be submitted,
including all necessary instructions, templates and the required
certification form, to ensure the reports reflect the Commission's
expanded authority under the Martha Wright-Reed Act and the other
actions taken in this Order. For example, this delegation includes
authority to WCB and CGB to modify the annual reports to include data
and information regarding the provision of TRS and related
communications services to reflect the expanded requirements adopted in
the 2022 ICS Order, and our removal of Sec. 64.6060(a)(5) to (7) in
this Order. We further delegate authority to WCB and CGB, independently
or collectively, to require IPCS providers to submit information
related to their IPCS offerings and practices upon request, to provide
WCB and CGB flexibility to monitor compliance with our rules in a
timely manner. Such requests for information could result from
complaints being filed by providers or by consumers, or on the
Commission's or WCB's own motion. In delegating authority to WCB and
CGB in this regard, we do not directly or indirectly limit or modify
the otherwise-existing authority delegated to the Enforcement Bureau.
We find that this delegation is necessary because it is difficult in
advance to determine what information will be needed on a case-by-case
basis by the Commission to decide whether providers are in compliance
with our rules. Our delegations of authority to WCB and CGB will be
effective upon publication of this Order in the Federal Register,
enabling WCB and CGB to move expeditiously in modifying, supplementing,
and updating the annual reports and certification for the next
reporting period and thereafter, to facilitate the Commission's
implementation of the Martha Wright-Reed Act and this Order. We also
direct the Bureaus to conduct and submit the requisite Paperwork
Reduction Act analysis for any changes to the annual report and
certification requirements that are implemented pursuant to this Order.
4. Reporting and Recordkeeping
573. Additional Data Collection. We adopt an additional data
collection obligation to collect the data and other information we will
need to set permanent rate caps for video IPCS, reevaluate our rate
caps for audio IPCS if necessary, and learn more about service quality,
particularly the prevalence of dropped calls or communications. As the
Commission explained in the 2023 IPCS Order, the Martha Wright-Reed Act
contemplates, among other things, the collection and analysis of
advanced communications services' costs and related data, including for
video communications, among other information. The Commission therefore
directed WCB and OEA to initiate an additional data collection--the
2023 Mandatory Data Collection--to obtain the data and other
information needed to implement the statute. Also, the record in this
proceeding indicates that poor IPCS quality of service is a recurring
issue. Therefore, in the accompanying Notice, we seek comment on
adopting IPCS quality of service standards. Collecting more-detailed
information about service quality, for example the frequency of dropped
calls or communications, responds to concerns in the record and will
help inform any future action the Commission may take regarding IPCS
quality of service. We conclude that an additional data collection will
be needed to set permanent rate caps for video IPCS and to update audio
IPCS rate caps if necessary, including, as applicable, for the smallest
size tier of jails. We therefore delegate to WCB and OEA the authority
to conduct this data collection and direct them to structure an
additional data collection as appropriate to enable us to accomplish
these tasks.
574. In designing and structuring this additional data collection,
WCB and OEA should consider how best and when to collect data that
demonstrate the evolving nature of the video IPCS marketplace. As our
rate cap analysis recognizes, the video IPCS data from the 2023
Mandatory Data Collection reflect conditions typical of a nascent
market, including relatively high initial investment costs and
relatively low initial demand. We anticipate that, as the video IPCS
marketplace evolves, per-unit costs of providing video IPCS will fall
significantly--a factor that we take into account in setting our
interim rate caps for video IPCS. Given the importance of ensuring that
the rate caps for video IPCS are just and reasonable and fairly
compensatory over the longer term, WCB and OEA should collect not just
updated data on video IPCS costs and demand, but also (to the extent
practicable) how those costs and demand might change over time. In the
2023 Mandatory Data Collection the Commission sought information on the
``number of complaints regarding problems experienced with disability-
related calls.'' We now give WCB and OEA the flexibility to add more
generally applicable questions regarding IPCS quality of service to the
next data collection.
575. Consistent with the above, we reaffirm the Commission's prior
delegation of data collection authority to WCB and OEA to conduct an
additional data collection to collect detailed data and other
information, at the provider, contract and facility level, on audio and
video IPCS from all providers subject to our expanded authority under
the Martha Wright-Reed Act and the Communications Act. As part of their
review of the providers' submissions in response to the additional
collection, WCB and OEA should evaluate whether our permanent rate caps
for audio IPCS remain just and reasonable and fairly compensatory. To
allow for consistent data reporting, we direct WCB and OEA to make any
appropriate modifications to the template and instructions for the 2023
Mandatory Data Collection. We also grant WCB and OEA authority to
determine the timing and scope of the data collection, provided that
such collection shall be conducted as soon as practicable understanding
the need to ensure that the Commission obtains data representative of a
more mature video IPCS marketplace and an audio IPCS marketplace that
has fully adapted to our actions in this Order. As part of their review
of providers' submissions, WCB and OEA may require any provider to
clarify and supplement its response to the data collection where
appropriate to enable a full and meaningful evaluation of the
providers' cost, demand, and revenue data and costing methodology.
576. No Recurring Data Collection. We decline, at this time, to
adopt a recurring data submission obligation for IPCS providers, as
suggested in 2020 and 2021. The Commission invited comment on whether
it should conduct data collections on a more routine, periodic basis,
as opposed to relying on ad hoc data collections. While we agree with
several commenters that a recurring data collection would potentially
aid us in ensuring that IPCS rates and charges remain just and
reasonable and fairly compensatory, we find that the burdens of a
recurring data collection on providers would exceed any potential
benefits. We also find that
[[Page 77350]]
the information we will obtain from our additional data collection,
coupled with the information to be provided in the IPCS Annual Reports
as revised pursuant to this Order, will allow us to respond to any
changes in the IPCS marketplace in a timely manner without unduly
burdening IPCS providers. We therefore conclude that, on balance, a
recurring collection is not warranted at this time.
577. No Accounting Requirements. We also decline, at this time, to
impose accounting requirements on IPCS providers, as suggested in 2021.
In that Notice, the Commission sought comment on specific types of
accounting requirements that may be useful if it were to adopt a
recurring data collection. Given that we decide not to adopt recurring
data collections, we also conclude that we should refrain from imposing
accounting requirements on IPCS providers at this time.
5. Payphones Outside the Incarceration Context
578. We decline, at this time, to adopt new rules applicable to the
provision of payphones outside the incarceration context. In 2023, the
Commission observed that certain amendments that the Martha Wright-Reed
Act made to section 276 of the Communications Act apply to payphones
generally, including traditional payphones used outside the
incarceration context. The Commission invited comment on whether
section 3(a) of the Martha Wright-Reed Act required the adoption of new
regulations applicable to traditional payphone services. In response,
one commenter stated that the Commission did not need to address its
traditional payphone compensation rules in this proceeding, but urged
us to revisit our traditional payphone rules generally in a separate
proceeding. We find that no modifications to our traditional payphone
rules are necessary to implement the Martha Wright-Reed Act and its
amendments to the Communications Act, and therefore decline to address
those regulations in this proceeding.
6. Cost Benefit Analysis of Revised Interstate and Intrastate Rate Caps
579. We perform an analysis of the relative costs and benefits of
establishing revised, final rate caps for audio IPCS and new interim
rate caps for video IPCS, and find that the benefits of our actions
greatly exceed their cost. As in the 2021 ICS Order, we proceed by
outlining the non-quantifiable but significant benefits to incarcerated
persons and their families, the quantifiable benefits of expanded audio
and video communications, and the likely implementation costs of our
actions.
580. Expected Non-Quantifiable Benefits. In the 2021 ICS Order, the
Commission detailed the vast, but difficult-to-quantify, benefits of
expanded incarcerated people's calling at lower IPCS rates, including
maintaining incarcerated people's mental health, facilitating reentry,
and improving the health and well-being of incarcerated people's
families. We enlarge and extend all of these benefits as we again lower
rate caps for interstate calls and mandate new, lower rate caps for
intrastate and international calls, as well as video calls across all
jurisdictions. Although we do not alter the termination component that
can be added to the interstate rate cap in the case of international
calls, because we are lowering the interstate rate cap that serves as
the foundation for international rates, we anticipate an effective
reduction in international rates as a result. Although we make no
change to our rule allowing providers to add an amount to the rate caps
to defray the costs of terminating international calls, because we are
lowering the interstate rate caps that serve as the foundation for the
international rate caps, we anticipate an effective reduction in
international audio rates.
581. Expected Quantitative Benefits of Expanded Call and Video
Volumes. In the 2021 ICS Order, staff used available empirical evidence
to estimate the responsiveness of incarcerated people's calling volumes
to changes in inmate calling services rates, known as the price
elasticity of demand for calling services. The available estimates led
the Commission to conclude, conservatively, that inmate calling
services have a demand elasticity of at least 0.3. No commenter
disputed our elasticity estimate or the methodology underlying it. For
the sake of consistency and simplicity, we continue to rely on this
demand elasticity estimate and apply the same demand elasticity to
audio and video incarcerated people's communications service. By the
same token, we continue to rely on the conclusion drawn in the 2021 ICS
Order that the incremental per-unit cost of audio IPCS is likely less
than $0.01, and may be de minimis. A similar principle applies to video
IPCS, where many of its direct costs are also ``independent of the need
to carry additional call minutes,'' especially given its proportionally
greater share of capital expenses versus operating expenses. Thus,
although video IPCS exhibits greater costs per minute than audio IPCS,
the incremental per-unit costs of both services should be less than
their average costs--such that the increased demand driven by a
reduction in prices should, holding other factors equal, reduce
providers' average costs for both audio and video IPCS.
582. The new, lower IPCS rate caps fall across two broad categories
of call traffic--audio and video. The new rates for audio are: $0.06
per minute for prisons, $0.06 per minute for large jails, $0.07 per
minute for medium-size jails, $0.09 per minute for small jails, and
$0.12 per minute for very small jails. The new rates for video are:
$0.16 per minute for prisons, $0.11 per minute for large jails, $0.12
per minute for medium-size jails, $0.14 per minute for small jails, and
$0.25 per minute for very small jails. Our benefit estimation
methodology for the new rate caps differs slightly from that used in
the 2021 ICS Order. Previously, staff estimated welfare gains using the
difference between the previous interim interstate rate caps and the
then new, lower interim, interstate rate caps. The current rate
structure in the IPCS industry is more complex. Some interstate IPCS
traffic subject to the rate caps is priced below the caps, while the
price of intrastate, international, and video IPCS call traffic that
was previously beyond the reach of our rate caps can vary widely. To
capture this complexity, we measure the welfare gains from increased
call volumes using the difference between existing weighted average
revenue per unit (ARPU) for the different call-traffic categories and
the new rate caps. Staff computed the average revenues per unit (ARPUs)
by dividing the total billed revenue for each type of traffic at each
size facility by total billed minutes to yield average revenue per
minute for intrastate audio calls for prisons, average revenue per
minute for intrastate calls at large jails, and so on, enabling the
compilation of a complete list of rate categories by traffic and
facility type. Staff then computed percentage changes in price and
quantity for each rate category using the differences between the ARPUs
and the rate caps and our price elasticity. The net welfare gain (loss)
is the gain (loss) in IPCS consumer surplus not captured by IPCS
service providers. We divide 2022 billed revenues by billed minutes to
determine the effective rate for IPCS, or ARPU. We then compare this
effective rate to the new rate cap for IPCS to determine the change in
price, because going forward billed customers will be billed a rate
equal to this rate cap (assuming the provider sets its rate at the
cap). We assume site commissions
[[Page 77351]]
are only paid to the extent they do not result in rates that exceed our
caps. With this methodological change, we estimate a total net welfare
gain to incarcerated persons and their friends, families, and legal
teams of about $386 million. Of this, $362 million is a transfer from
correctional facilities and providers, leaving $24 million as a welfare
gain from which implementation costs must be subtracted.
Unsurprisingly, the largest contribution of $12.5 million is from
intrastate audio calls (5.6 billion minutes), not currently subject to
rate caps, followed by: $7.8 million from interstate audio (4.8 billion
minutes); $2.9 million from video (407 million minutes); and $0.5
million from international audio (54 million minutes). We do not
separately estimate welfare gains for video IPCS by jurisdiction
because providers do not have a way to reliably record the jurisdiction
associated with a video communication. Further, nothing in the record
suggests providers charge video IPCS rates that vary by jurisdiction.
As a matter of practice, providers charge a single rate without regard
to the communication endpoint. The present value of a five-year stream
of $24-million worth of benefits at a two percent discount rate exceeds
$113 million.
583. Benefits Weighted By Income Strata. Weighting according to OMB
guidelines greatly increases the welfare gain. OMB Circular A-4 enables
us to weight the benefits distributed to incarcerated persons by the
ratio of median incarcerated people's income to the U.S. median income,
raised to the negative power of the absolute value of the elasticity of
income. To account for the diminishing marginal utility of goods and
income, the revised circular suggests that agencies apply weights to
the benefits and costs accruing to different groups when estimating
aggregate net benefits. To determine the weights, OMB recommends a
constant elasticity for subgroups defined by income. The weight for
each group is: [Omega]i = (Ii/IUS)-[gamma] where [Omega]i is the weight
for subgroup i, Ii is the median income for subgroup i, IUS is the U.S.
median income, and [gamma] is the absolute value of the elasticity of
marginal utility. Based on an average gleaned from the empirical
literature, OMB recommends a constant elasticity of marginal utility of
1.4. The impact of this could be large. Analyzing Bureau of Justice
Statistics 2014 survey data for the month just prior to incarceration,
researchers for the Prison Policy Initiative estimated a 2014 median
annual income of $19,185 for incarcerated persons. U.S. median
individual income for 2014 was $28,760. The resulting weight for
incarcerated people's welfare gains is 1.76 (= ($19,185/
$28,760)-1.4), meaning that every dollar in welfare gain
directly attributable to incarcerated people was worth $1.76 in 2014.
If incarcerated people share equally in the total estimated net welfare
gain, then about $12 million, or half, of the estimated $24 million is
directly attributable to them, as opposed to friends and families. At
the same time, if the average income of families and friends of
incarcerated persons was that of the average American, then, under
these assumptions, the net welfare gain is effectively worth about $33
million (= ($12 million * 1.76) + $12 million = $21 million + $12
million). This is likely an underestimate, as the average income of the
families and friends of incarcerated persons is likely below the
national average, but we do not know what this average is.
584. Other Quantitative Benefits. In the 2021 ICS Order, the
Commission estimated that expanded inmate calling services call volumes
at the lowered interstate rate caps would help curtail recidivism,
saving the U.S. economy $23 million over ten years and reducing costly
foster-child placements. While we are certain that lowering IPCS rate
caps further will increase these cost savings, we elect not to proffer
precise estimates here, partly to avoid double-counting previous
estimates.
585. Costs of Reducing Rates for Interstate, Intrastate, and
International Incarcerated People's Communications Services. In the
2021 ICS Order, the Commission estimated that the cost of contract
revisions needed to implement reduced interstate inmate calling
services rates would total approximately $6 million. Adjusting for
inflation, the industry cost for the same set of contract revisions--
simultaneously lowering interstate, intrastate, and international
incarcerated people's communications services rates--would be about $7
million as of April 2024. Lowering video calling rates, which we
conservatively assume are contracted separately, would entail another
$7 million in costs. We, therefore, estimate total implementation costs
of $14 million.
586. Comparison of Benefits and Costs. The benefits of lowering
IPCS interstate rate caps and extending IPCS rate caps to intrastate
and international audio and video call traffic far exceed the
accompanying costs. Without either weighting by income strata or
summing and discounting future benefits, readily quantifiable benefits
exceed costs by $10 million (= $24-$14) in the inaugural year.
Weighting by income strata and summing and discounting future benefits
further increase the value of benefits relative to costs.
Table 1--Audio and Video Call Traffic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Intrastate Interstate International
Rate cap -----------------------------------------------------------------------------------------------------------------
Minutes ARPU Gain Minutes ARPU Gain Minutes ARPU Gain
--------------------------------------------------------------------------------------------------------------------------------------------------------
Audio Call Traffic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prisons, $0.06........................ 3,095,089,972 $0.060 $884 3,179,735,362 $0.070 $704,910 34,290,298 $0.147 $266,659
Large Jails, $0.06.................... 878,094,584 0.099 1,990,573 686,852,024 0.102 1,761,431 4,767,832 0.174 53,188
Medium Jails, $0.07................... 850,607,843 0.154 5,798,496 640,947,740 0.144 3,635,531 10,718,912 0.158 79,202
Small Jails, $0.09.................... 587,159,107 0.182 4,094,384 243,197,254 0.173 1,461,041 3,373,724 0.250 51,747
Very Small Jails, $0.12............... 207,201,790 0.180 628,327 72,774,874 0.180 217,658 743,867 0.264 8,743
-----------------------------------------------------------------------------------------------------------------
Total............................. 5,618,153,296 ........ 12,512,663 4,823,507,254 ........ 7,780,571 53,894,633 ........ 459,539
--------------------------------------------------------------------------------------------------------------------------------------------------------
Video Call Traffic
---------------------------------------
Prisons, $0.16........................ 85,787,195 0.257 471,462
Large Jails, $0.11.................... 60,592,954 0.230 567,352
Medium Jails, $0.12................... 123,936,702 0.273 1,597,262
Small Jails, $0.14.................... 105,461,580 0.292 1,257,099
Very Small Jails, $0.25............... 31,454,733 0.294 30,692
----------------------------------------
[[Page 77352]]
Total............................. 407,233,163 ........ 2,885,053
--------------------------------------------------------------------------------------------------------------------------------------------------------
7. Effective Dates and Compliance Dates
587. Our reforms eliminating site commissions and our new permanent
audio and interim video rate caps will take effect 60 days after notice
of them is published in the Federal Register, but compliance with those
reforms will be required on a staggered basis, as set forth below:
January 1, 2025 for all prisons and for jails with average
daily populations of 1,000 or more incarcerated people, and April 1,
2025 for jails with average daily populations of less than 1,000
incarcerated people, subject to the following special provisions:
Where a contract existing as of June 27, 2024 includes
terms and conditions that would require material alteration through
renegotiation due to a conflict with our new rules involving rates,
contractually prescribed site commissions, or passthrough charges
included in the rates, and the contract expires on or after January 1,
2025 for prisons and for jails with average daily populations of 1,000
or more incarcerated people, or on or after April 1, 2025 for jails
with average daily populations of less than 1,000 incarcerated people,
the compliance dates will be the earlier of the contract expiration
date or January 1, 2026 for prisons and for jails with average daily
populations of 1,000 or more incarcerated people, or the earlier of the
contract expiration date or April 1, 2026 for jails with average daily
populations of less than 1,000 incarcerated people. We choose a date
certain, which is the date of public draft of the Report and Order. The
public draft version set forth the Commission's new IPCS rate caps and
site commission reforms, none of which have changed since that time.
For purposes of the Report and Order, a contract expires after the
expiration of its initial term in the contract without regard to any
automatic extensions that might extend its validity.
Where a contract existing as of June 27, 2024 includes
terms and conditions that would require renegotiation due to a
provision incorporating legally mandated site commission payments and
the contract expires on or after July 1, 2025 for any size facility,
the compliance date will be the earlier of the contract expiration date
or April 1, 2026. To the extent any contract referenced here includes
provisions that trigger automatic changes to contract terms in response
to changes in the regulatory environment or, more specifically, changes
in the Commission's rules such that renegotiation of contract terms
would not be required, the compliance date extensions referenced in
this paragraph do not apply.
588. These timeframes recognize that, as a general matter, IPCS
providers, governmental officials, and correctional officials may need
additional time beyond January 1, 2025 or April 1, 2025 (depending on
the type of facility and the terms of the contract) to renegotiate
contracts in response to our actions today. They also recognize that
jails with average daily populations below 1,000 may need more time
than prisons and larger jails to implement the Commission's new IPCS
rate caps and to transition away from site commission payments,
particularly since the smaller facilities were largely not impacted by
the Commission's 2021 interim rate cap reforms. The reforms applicable
to jails with average daily populations of less than 1,000 adopted in
the 2021 ICS Order were relatively modest, with ``the only rate cap
change'' being a reduction of per-minute charges for collect calls from
$0.25 to $0.21 per minute. In addition, by delaying the compliance date
of our site commission and rate caps reforms at those correctional
facilities where providers currently pay legally mandated site
commissions, we recognize that more time may be needed to accommodate
the legislative process to amend state or local laws and regulations
that currently require site commission payments.
589. We conclude that the compliance dates we adopt for our new
audio and video rate caps and site commission reforms ``strike[ ] a
reasonable balance between [ ] competing interests.'' On the one hand,
we recognize the need to ``help alleviate the burden of unreasonably
high . . . rates on incarcerated people and those they [communicate
with].'' On the other hand, and as the Commission has previously
recognized, IPCS providers and correctional officials ``will need more
than 30 days to execute any contractual amendments necessary to
implement the new . . . rate caps and otherwise adapt to those caps.''
And smaller facilities likely need more time than larger facilities to
implement rate cap and other changes. Furthermore, we recognize that
those facilities where IPCS providers currently pay legally mandated
site commissions may likely need additional time to come into
compliance with our reforms. Thus, requiring compliance with the
Commission's rate cap and site commission reforms on a staggered basis
properly balances the need for expedited reform contemplated by the
Martha Wright-Reed Act with the need to allow IPCS providers and
correctional facilities sufficient time to adapt to our rules.
590. Except for those facilities where IPCS providers pay legally
mandated site commissions, for prisons and jails with ADPs of 1,000 or
more, we find that there will be ample time between adoption of this
Order and January 1, 2025 for such prisons and jails with existing
contracts expiring before the end of this year to comply with today's
reforms and that the possible extension of this compliance date to
January 1, 2026 as outlined above will be more than sufficient to
accommodate the contract renegotiation process. In the 2021 ICS Order,
the Commission established a 90-day transition period following Federal
Register publication for all facilities. The Commission also adopted a
90-day transition period for prisons in connection with implementing
the reforms in the 2015 ICS Order. One provider supports adopting a 90-
day transition period. Here, given the comprehensive nature of the
reforms we adopt to rate caps and site commissions, we adopt a
transition period of slightly more than five months from the adoption
date of the Report and Order and we permit additional time based on the
extent there are existing contracts as of June 27, 2024 that require
renegotiation due to a conflict with our new rules. This will allow
providers and facilities significantly longer than the 30-day timeframe
the Commission has previously recognized would be necessary to amend
IPCS contracts.
591. We also find that delaying the compliance date of our rate
caps and site commission reforms for jails with ADPs below 1,000 except
at those
[[Page 77353]]
correctional facilities where IPCS providers pay legally mandated site
commissions until April 1, 2025 or, in the alternative, until April 1,
2026 as described above, will afford IPCS providers and correctional
officials sufficient extra time to adapt to these new rules. In the
IPCS context, the Commission's use of the term ``smaller'' is focused
on average daily population, and ``is not meant to imply'' that such
facilities ``are small in any absolute sense.'' Here, we delay the
compliance date of our rate cap and site commission reforms for
correctional facilities with average daily populations below 1,000
except at those correctional facilities where IPCS providers pay
legally mandated site commissions by slightly more than eight months
from the date of adoption of the Report and Order, which, to the extent
there are existing contracts as of June 27, 2024 that require
renegotiation due to a conflict with our new rules, can be extended.
These timeframes will be more than sufficient to ensure that IPCS
providers and correctional facilities are able to amend their contracts
to account for our reforms today.
592. Recent experience at the state level suggests that IPCS
providers and correctional facilities should be able to adapt to
regulatory changes in the allotted timeframes. For example,
Massachusetts recently made IPCS free to consumers, and in doing so the
state gave the industry and the state's prisons and jails less than
five months to implement those changes--from July 31, 2023 to December
1, 2023--to account for budgetary impacts. On July 31, 2023, the
Massachusetts legislature enacted a bill requiring unlimited free phone
calls to incarcerated people retroactive to July 1, 2023, as part of
the state's appropriations bill for Fiscal Year 2024. The free calling
bill, H.4052, was enacted as sections 50, 85, and 111 of the
appropriations bill, H.4040. The governor returned portions of the
appropriations bill, including the portions relating to free calling
for incarcerated people noting that making those provisions retroactive
to July 1 ``pos[ed] serious implementation challenges'' and were also
``underfunded by $20M in the budget.'' The governor thereafter proposed
that the effective date be delayed to December 1, 2023, which would
avoid ``the need for retroactive reimbursements, provide[ ] time for
the Department of Corrections and the Sheriff's Departments to manage
vendor contracts more effectively, and address[ ] fiscal challenges
while also ensuring that families will be able to connect with their
incarcerated loved ones during the holiday season.'' The Massachusetts
legislature eventually reenacted the free calling bill with a December
1, 2023 effective date and the governor signed it on November 15, 2023.
While one commenter advocates for a phase-out of site commission
payments, partially in recognition of the fact many local governments
continue to rely on site commission revenues, other commenters argue
that implementing changes ``should be a relatively easy and
straightforward process'' such that a more immediate compliance date
might be appropriate. We find, on balance, that the record supports a
longer transition period for smaller jails. The timeframe we adopt for
smaller facilities is more generous than the timeframes the Commission
has adopted for such facilities previously. Insofar as the transition
we adopt for smaller jails today is longer than previous transitions
the Commission has adopted, we are persuaded that this additional time
is necessary but sufficient for both IPCS providers and correctional
officials to adapt to our rules while also ensuring the most
expeditious relief possible for incarcerated people and their loved
ones, consistent with the Martha Wright-Reed Act.
593. For all correctional facilities where IPCS providers currently
pay legally mandated site commissions, we conclude that a longer
transition period is justified such that compliance with our site
commission reforms and our new rate caps will be required by July 1,
2025 unless a contract existing as of June 27, 2024 includes terms and
conditions that would require renegotiation due to a provision
incorporating legally mandated site commission payments and the
contract expires on or after July 1, 2025, in which case the compliance
date will be the earlier of the contract expiration date or April 1,
2026. For such facilities, in addition to any additional time necessary
to facilitate contract renegotiation where applicable, additional time
is also necessary to accommodate states' and localities' legislative
and budgetary processes to make the adjustments necessary to comply
with the Report and Order, including by amending or repealing relevant
laws pursuant to state or local statutes or other formal legal
processes. Because such processes may involve more than amending IPCS
contracts, we expect that July 1, 2025 or, if applicable, April 1,
2026, will afford sufficient time for all parties involved to make the
necessary legislative and contractual arrangements sufficient to
implement our reforms. This determination is distinct from the actions
we take today in preempting state and local laws or regulations that
require or allow site commission payments. We provide this extra time
for state and local authorities to comply with legal or administrative
processes that may be required to repeal existing laws or regulations.
The lack of such a process does not negate our preemption actions in
connection with site commission payments.
594. We disagree that we should delay our compliance dates for site
commission reform, in particular, beyond the timeframes established
herein. We note that PPI's comments were made prior to the enactment of
the Martha Wright-Reed Act, which gave the Commission authority over
intrastate communications. Given that development and the fact that our
reforms today sweep broadly to apply to all communications over which
we now have jurisdiction, including intrastate communications, we
conclude that the opportunities for the kind of arbitrage identified by
PPI to be greatly reduced. IPCS providers and correctional authorities
have been on notice since at least the 2014 ICS Notice that the
Commission might eliminate site commissions. Against that regulatory
backdrop, to the extent IPCS providers and correctional authorities
have continued to rely on revenues from site commissions, they have
done so at their own risk. In addition, as discussed above, a number of
jurisdictions have eliminated site commissions, which presumably
triggered state budgetary processes to account for the lost revenues.
Our extended implementation deadlines here attempt to account for these
state and local budgetary processes to the extent possible. Any further
delays in requiring compliance with our rate cap and site commission
reforms risks perpetuating unjust and unreasonable rates and charges
for IPCS consumers or yielding unfair compensation for IPCS providers,
contrary to the directives of the Martha Wright-Reed Act. Section
276(b)(1)(A) of the Communications Act, as amended by the Martha
Wright-Reed Act, directs the Commission to establish a compensation
plan to ensure IPCS providers are ``fairly compensated'' and that ``all
rates and charges are just and reasonable.''
595. Other Deadlines. Except for rules and requirements subject to
OMB review under the Paperwork Reduction Act, all other rules and
requirements adopted in this Order also will take effect 60 days after
notice is published in the Federal Register, except the removal of
Sec. 64.6090, which will not
[[Page 77354]]
take effect until other rules requiring OMB review take effect. These
timeframes are consistent with the terms of the Martha Wright-Reed Act,
which requires the Commission to promulgate regulations necessary to
implement the Act not earlier than 18 months and not later than 24
months after the date of enactment. Martha Wright-Reed Act Sec. 3(a).
Section 64.6090 prohibits flat-rate calling and will be removed to
permit the offering of alternate pricing plans. With regard to reforms
other than those related to our new rate caps and site commission
prohibition that are not subject to the PRA, such as our rules
pertaining to the seizing of balances in inactive accounts by
providers, we find that making these changes effective 60 days after
notice is published in the Federal Register best balances the need to
bring these important, pro-consumer rules into effect expeditiously
while affording IPCS providers sufficient time to implement any changes
necessary to comply with our rules. Unlike our rate cap and site
commission reforms, which may take longer to implement due to the need
for contractual amendments or municipal budget adjustments, we do not
view these other reforms as involving similar complexities such that a
longer effective date period is necessary.
596. Our delegations of authority to WCB and CGB to revise the
annual reports will be effective upon publication of the Report and
Order in the Federal Register, as will our delegations of authority to
WCB and OEA to conduct an additional data collection.
8. Enforcement
597. We will be vigilant in monitoring compliance with the reforms
we adopt today and will take action to vigorously enforce our rules
where appropriate. Compliance with the Commission's IPCS rules is
essential to ensuring that incarcerated people and their loved ones
receive the full range of benefits resulting from today's reforms. As
NCIC illustrates, certain providers took advantage of our prior
regulatory regime to engage in practices or other behavior in
contravention of our rules. Robust enforcement is therefore necessary.
To that end, we direct the Enforcement Bureau to work with CGB to
develop a new IPCS complaint category, in addition to the existing
informal consumer complaint process, within its existing intake system
to ensure that IPCS industry providers, watchdogs, and other
stakeholders have a mechanism for CGB to immediately bring any
potential rule violations to the Enforcement Bureau's attention for
investigation. We clarify that informal IPCS-related consumer inquiries
and complaints should continue to be made to CGB, using established
practices and procedures. Should the Commission observe or be made
aware of practices, conduct, or other behavior that evades or is
designed to evade our rules, we will not hesitate to take appropriate
remedial action up to and including enforcement action, which may
subject IPCS providers to, among other penalties, the imposition of
monetary forfeitures. Thus, practices such as price gouging through,
for example, charging rates above our rate caps, imposing ancillary
service charges, or attempting to recover costs associated with the
payment of site commissions, whether monetary or in-kind, through
regulated rates may subject IPCS providers to investigation by the
Commission's Enforcement Bureau and enforcement action. Similarly,
practices that deprive consumers of funds in their IPCS accounts,
circumvent the safeguards we adopt today governing alternate pricing
plans or the Commission's disability access rules pertaining to IPCS
may also subject IPCS providers to investigation and enforcement action
by the Enforcement Bureau. At the same time, IPCS providers and other
stakeholders are encouraged to provide the Commission with information
at any time, whether through an informal complaint or otherwise,
regarding attempts to skirt our rules or possible violations of our
rules. In addition, the Commission will monitor providers' annual
reports, which are due April 1 each year, for developments that may
suggest noncompliance with our rules. Close scrutiny of these and other
practices and behaviors, including through enforcement action where
appropriate, will ensure that the reforms we adopt today are fully
implemented.
I. Severability
598. The rules and policies adopted in this Order are designed to
ensure that the rates and charges for IPCS are both just and reasonable
for consumers and provide fair compensation for providers, in
accordance with section 276, as amended by the Martha Wright-Reed Act,
along with section 201(b) of the Communications Act. Other rules and
policies seek to improve communications services for incarcerated
people with disabilities. Each of the separate reforms we undertake
here serves a particular function towards these goals. Therefore, it is
our intent that each of the rules and policies adopted herein shall be
severable. If any of the rules or policies is declared invalid or
unenforceable for any reason, the unaffected rules shall remain in full
force and effect. We find premature ViaPath's request that we make
clear that the rules and policies we adopt that are ``related to IPCS
rates and charges'' are not severable from each other. In the unlikely
event any of those rules or policies is declared invalid or
unenforceable, interested parties are free to bring the matter to our
attention or raise such arguments in court, as appropriate.
IV. Procedural Matters
599. Final Regulatory Flexibility Analysis. As required by the
Regulatory Flexibility Act of 1980, as amended (RFA), the Commission
has prepared a Final Regulatory Flexibility Analysis (FRFA) relating to
the Report and Order and this Order on Reconsideration, Clarification
and Waiver. The FRFA is set forth in below.
600. Congressional Review Act. The Commission has determined, and
the Administrator of the Office of Information and Regulatory Affairs,
Office of Management and Budget, concurs that this rule is ``major''
under the Congressional Review Act, 5 U.S.C. 804(2). The Commission
will send a copy of this 2024 IPCS Order and 2024 IPCS Notice to
Congress and the Government Accountability Office pursuant to 5 U.S.C.
801(a)(1)(A).
601. Paperwork Reduction Act Analysis. The 2024 IPCS Order may
contain new or modified information collection requirements subject to
the Paperwork Reduction Act of 1995 (PRA), Public Law 104-13. All such
requirements will be submitted to the Office of Management and Budget
(OMB) for review under Section 3507(d) of the PRA. OMB, the general
public, and other federal agencies will be invited to comment on any
new or modified information collection requirements contained in this
proceeding. In addition, we note that pursuant to the Small Business
Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C.
3506(c)(4), we previously sought specific comment on how the Commission
might further reduce the information collection burden for small
business concerns with fewer than 25 employees.
602. In this present document, we have assessed the effects of the
information collection burdens imposed on small businesses and, in
particular, businesses with fewer than 25 employees as a result of the
Report and Order. Those requirements include consumer disclosure and
inactive account requirements. We find that those requirements,
including the posting of certain information on
[[Page 77355]]
publicly available websites, do not impose undue burdens on smaller
businesses. We also find that obligations to collect and maintain
consumer information in order to refund inactive account balances are
commensurate with the number of customers served and therefore impose
proportionate burdens on smaller businesses given the scale of their
operations.
603. Providing Accountability Through Transparency Act. Consistent
with the Providing Accountability Through Transparency Act, Public Law
118-9, a summary of the 2024 IPCS Order will be available on https://www.fcc.gov/proposed-rulemakings.
604. OPEN Government Data Act. The OPEN Government Data Act,
requires agencies to make ``public data assets'' available under an
open license and as ``open Government data assets,'' i.e., in machine-
readable, open format, unencumbered by use restrictions other than
intellectual property rights, and based on an open standard that is
maintained by a standards organization. Congress enacted the OPEN
Government Data Act as Title II of the Foundations for Evidence-Based
Policymaking Act of 2018. This requirement is to be implemented ``in
accordance with guidance by the Director'' of the OMB. OMB has not yet
issued final guidance. The term ``public data asset'' means ``a data
asset, or part thereof, maintained by the Federal Government that has
been, or may be, released to the public, including any data asset, or
part thereof, subject to disclosure under [the Freedom of Information
Act (FOIA)].'' A ``data asset'' is ``a collection of data elements or
data sets that may be grouped together,'' and ``data'' is ``recorded
information, regardless of form or the media on which the data is
recorded.'' We delegate authority to the Wireline Competition Bureau,
in consultation with the agency's Chief Data and Analytics Officer and
after seeking public comment to the extent it deems appropriate, to
determine whether any data assets maintained or created by the
Commission pursuant to the rules adopted in the 2024 IPCS Order are
``public data assets'' and if so, to determine when and to what extent
such information should be published as ``open Government data
assets.'' In doing so, WCB shall take into account the extent to which
such data assets should not be made publicly available because they are
not subject to disclosure under the Freedom of Information Act. See,
e.g., 5 U.S.C. 552(b)(4), (6) to (7) (exemptions concerning
confidential commercial information, personal privacy, and information
compiled for law enforcement purposes, respectively). We also seek
comment in the 2024 IPCS Notice on whether any of the information
proposed to be collected in the Notice would constitute ``data assets''
for purposes of the OPEN Government Data Act and, if so, whether such
information should be published as ``open Government data assets.''
605. People with Disabilities. To request materials in accessible
formats for people with disabilities (Braille, large print, electronic
files, audio format), send an email to [email protected] or call the
Consumer and Governmental Affairs Bureau at 202-418-0530.
606. Availability of Documents. Comments, reply comments, and ex
parte submissions will be publicly available online via ECFS.
607. Further Information. For further information, contact Stephen
Meil, at (202) 418-7233 or [email protected] or [email protected].
V. Final Regulatory Flexibility Analysis
608. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), Initial Regulatory Flexibility Analyses (IRFAs) were
incorporated in the Incarcerated People's Communications Services;
Implementation of the Martha Wright-Reed Act; Rates for Interstate
Inmate Calling Services, Notice of Proposed Rulemaking (Notice) in WC
Docket Nos. 23-62 and 12-375 (released in March 2023), in the Sixth
Further Notice of Proposed Rulemaking in WC Docket No. 12-375 (released
in September 2022), and in the Fifth Further Notice of Proposed
Rulemaking in WC Docket No. 12-375 (released in May 2021). The Federal
Communications Commission (Commission) sought written public comment on
the proposals in those Notices, including comment on the IRFAs. No
comments were filed addressing the IRFA. This present Final Regulatory
Flexibility Analysis (FRFA), relating to the Report and Order and the
Order on Reconsideration, Clarification and Waiver (collectively,
Report and Order), conforms to the RFA.
A. Need for, and Objectives of, the Report and Order
609. The Report and Order implements the expanded authority granted
to the Commission by the Martha Wright-Reed Act to establish a
compensation plan that ensures both just and reasonable rates and
charges for incarcerated people's audio and video communications
services and fair compensation for incarcerated people's communication
services (IPCS) providers. The Report and Order fundamentally reforms
the regulation of IPCS in all correctional facilities, regardless of
the technology used to deliver these services, and significantly lowers
the IPCS rates that incarcerated people and their loved ones will pay.
610. The reforms adopted by the Report and Order: (1) utilize the
expanded authority granted the Commission, in conjunction with the
Commission's preexisting statutory authority, to adopt just and
reasonable IPCS rates and charges for all intrastate, interstate, and
international audio and video IPCS, including video visitation
services, that ensure fair compensation for providers; (2) lower
existing per-minute rate caps for audio IPCS, based on industry-wide
cost data submitted by IPCS providers, while permitting states to
maintain IPCS rates lower than the Commission's rate caps; (3) lower
the overall prices consumers pay for IPCS and simplify the pricing
structure by incorporating the costs of ancillary services in the rate
caps and prohibiting providers from imposing any separate ancillary
service charges on IPCS consumers; (4) prohibit IPCS providers from
making site commission payments for IPCS and preempt state and local
laws and regulations requiring such commissions; (5) limit the costs
associated with safety and security measures that can be recovered in
the per-minute rates to only those costs that the Commission finds used
and useful in the provision of IPCS; (6) allow, subject to conditions,
IPCS providers to offer alternate pricing plans for IPCS that comply
with the rate caps we establish; (7) revise and strengthen
accessibility requirements for IPCS for incarcerated people with
disabilities; (8) revise and strengthen existing consumer disclosure
and inactive account requirements; and (9) revise the existing annual
reporting and certification requirements. The Report and Order also
addresses petitions for reconsideration, clarification and waiver
pending in this proceeding.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
611. There were no comments filed that specifically addressed the
proposed rules and policies presented in the IRFA.
C. Response to Comments by the Chief Counsel for Advocacy of the Small
Business Administration
612. Pursuant to the Small Business Jobs Act of 2010, which amended
the RFA, the Commission is required to respond to any comments filed by
the Chief Counsel for Advocacy of the Small
[[Page 77356]]
Business Administration (SBA), and to provide a detailed statement of
any change made to the proposed rules as a result of those comments.
The Chief Counsel did not file any comments in response to the proposed
rules in this proceeding.
D. Description and Estimate of the Number of Small Entities to Which
Rules Will Apply
613. 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 rules they adopt. 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 Small Business
Administration (SBA).
614. Small Businesses, Small Organizations, Small Governmental
Jurisdictions. Our actions, over time, may affect small entities that
are not easily categorized at present. We therefore describe, at the
outset, three broad groups of small entities that could be directly
affected herein. First, while there are industry specific size
standards for small businesses that are used in the regulatory
flexibility analysis, according to data from the Small Business
Administration's (SBA) Office of Advocacy, in general a small business
is an independent business having fewer than 500 employees. These types
of small businesses represent 99.9% of all businesses in the United
States, which translates to 33.2 million businesses.
615. Next, the type of small entity described as a ``small
organization'' is generally ``any not-for-profit enterprise which is
independently owned and operated and is not dominant in its field.''
The Internal Revenue Service (IRS) uses a revenue benchmark of $50,000
or less to delineate its annual electronic filing requirements for
small exempt organizations. Nationwide, for tax year 2022, there were
approximately 530,109 small exempt organizations in the U.S. reporting
revenues of $50,000 or less according to the registration and tax data
for exempt organizations available from the IRS.
616. Finally, the small entity described as a ``small governmental
jurisdiction'' is defined generally as ``governments of cities,
counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' U.S. Census
Bureau data from the 2022 Census of Governments indicate there were
90,837 local governmental jurisdictions consisting of general purpose
governments and special purpose governments in the United States. Of
this number, there were 36,845 general purpose governments (county,
municipal, and town or township) with populations of less than 50,000
and 11,879 special purpose governments (independent school districts)
with enrollment populations of less than 50,000. Accordingly, based on
the 2022 U.S. Census of Governments data, we estimate that at least
48,724 entities fall into the category of ``small governmental
jurisdictions.''
617. Wired Telecommunications Carriers. The U.S. Census Bureau
defines this industry as establishments primarily engaged in operating
and/or providing access to transmission facilities and infrastructure
that they own and/or lease for the transmission of voice, data, text,
sound, and video using wired communications networks. Transmission
facilities may be based on a single technology or a combination of
technologies. Establishments in this industry use the wired
telecommunications network facilities that they operate to provide a
variety of services, such as wired telephony services, including VoIP
services, wired (cable) audio and video programming distribution, and
wired broadband internet services. By exception, establishments
providing satellite television distribution services using facilities
and infrastructure that they operate are included in this industry.
Wired Telecommunications Carriers are also referred to as wireline
carriers or fixed local service providers.
618. The SBA small business size standard for Wired
Telecommunications Carriers classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau data for 2017 show that there
were 3,054 firms that operated in this industry for the entire year. Of
this number, 2,964 firms operated with fewer than 250 employees.
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 4,590 providers
that reported they were engaged in the provision of fixed local
services. Of these providers, the Commission estimates that 4,146
providers have 1,500 or fewer employees. Consequently, using the SBA's
small business size standard, most of these providers can be considered
small entities.
619. Local Exchange Carriers (LECs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically
applicable to local exchange services. Providers of these services
include both incumbent and competitive local exchange service
providers. Wired Telecommunications Carriers is the closest industry
with an SBA small business size standard. Wired Telecommunications
Carriers are also referred to as wireline carriers or fixed local
service providers. The SBA small business size standard for Wired
Telecommunications Carriers classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau data for 2017 show that there
were 3,054 firms that operated in this industry for the entire year. Of
this number, 2,964 firms operated with fewer than 250 employees.
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 4,590 providers
that reported they were fixed local exchange service providers. Of
these providers, the Commission estimates that 4,146 providers have
1,500 or fewer employees. Consequently, using the SBA's small business
size standard, most of these providers can be considered small
entities.
620. Incumbent Local Exchange Carriers (Incumbent LECs). Neither
the Commission nor the SBA have developed a small business size
standard specifically for incumbent local exchange carriers. Wired
Telecommunications Carriers is the closest industry with an SBA small
business size standard. The SBA small business size standard for Wired
Telecommunications Carriers classifies firms having 1,500 or fewer
employees as small. U.S. Census Bureau data for 2017 show that there
were 3,054 firms in this industry that operated for the entire year. Of
this number, 2,964 firms operated with fewer than 250 employees.
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 1,212 providers
that reported they were incumbent local exchange service providers. Of
these providers, the Commission estimates that 916 providers have 1,500
or fewer employees. Consequently, using the SBA's small business size
standard, the Commission estimates that the majority of incumbent local
exchange carriers can be considered small entities.
621. Competitive Local Exchange Carriers (CLECs). Neither the
[[Page 77357]]
Commission nor the SBA has developed a size standard for small
businesses specifically applicable to local exchange services.
Providers of these services include several types of competitive local
exchange service providers. Wired Telecommunications Carriers is the
closest industry with a SBA small business size standard. The SBA small
business size standard for Wired Telecommunications Carriers classifies
firms having 1,500 or fewer employees as small. U.S. Census Bureau data
for 2017 show that there were 3,054 firms that operated in this
industry for the entire year. Of this number, 2,964 firms operated with
fewer than 250 employees. Additionally, based on Commission data in the
2022 Universal Service Monitoring Report, as of December 31, 2021,
there were 3,378 providers that reported they were competitive local
service providers. Of these providers, the Commission estimates that
3,230 providers have 1,500 or fewer employees. Consequently, using the
SBA's small business size standard, most of these providers can be
considered small entities.
622. Interexchange Carriers (IXCs). Neither the Commission nor the
SBA have developed a small business size standard specifically for
Interexchange Carriers. Wired Telecommunications Carriers is the
closest industry with a SBA small business size standard. The SBA small
business size standard for Wired Telecommunications Carriers classifies
firms having 1,500 or fewer employees as small. U.S. Census Bureau data
for 2017 show that there were 3,054 firms that operated in this
industry for the entire year. Of this number, 2,964 firms operated with
fewer than 250 employees. Additionally, based on Commission data in the
2022 Universal Service Monitoring Report, as of December 31, 2021,
there were 127 providers that reported they were engaged in the
provision of interexchange services. Of these providers, the Commission
estimates that 109 providers have 1,500 or fewer employees.
Consequently, using the SBA's small business size standard, the
Commission estimates that the majority of providers in this industry
can be considered small entities.
623. Local Resellers. Neither the Commission nor the SBA have
developed a small business size standard specifically for Local
Resellers. Telecommunications Resellers is the closest industry with a
SBA small business size standard. The Telecommunications Resellers
industry comprises establishments engaged in purchasing access and
network capacity from owners and operators of telecommunications
networks and reselling wired and wireless telecommunications services
(except satellite) to businesses and households. Establishments in this
industry resell telecommunications; they do not operate transmission
facilities and infrastructure. Mobile virtual network operators (MVNOs)
are included in this industry. The SBA small business size standard for
Telecommunications Resellers classifies a business as small if it has
1,500 or fewer employees. U.S. Census Bureau data for 2017 show that
1,386 firms in this industry provided resale services for the entire
year. Of that number, 1,375 firms operated with fewer than 250
employees. Additionally, based on Commission data in the 2022 Universal
Service Monitoring Report, as of December 31, 2021, there were 207
providers that reported they were engaged in the provision of local
resale services. Of these providers, the Commission estimates that 202
providers have 1,500 or fewer employees. Consequently, using the SBA's
small business size standard, most of these providers can be considered
small entities.
624. Toll Resellers. Neither the Commission nor the SBA have
developed a small business size standard specifically for Toll
Resellers. Telecommunications Resellers is the closest industry with a
SBA small business size standard. The Telecommunications Resellers
industry comprises establishments engaged in purchasing access and
network capacity from owners and operators of telecommunications
networks and reselling wired and wireless telecommunications services
(except satellite) to businesses and households. Establishments in this
industry resell telecommunications; they do not operate transmission
facilities and infrastructure. Mobile virtual network operators (MVNOs)
are included in this industry. The SBA small business size standard for
Telecommunications Resellers classifies a business as small if it has
1,500 or fewer employees. U.S. Census Bureau data for 2017 show that
1,386 firms in this industry provided resale services for the entire
year. Of that number, 1,375 firms operated with fewer than 250
employees. Additionally, based on Commission data in the 2022 Universal
Service Monitoring Report, as of December 31, 2021, there were 457
providers that reported they were engaged in the provision of toll
services. Of these providers, the Commission estimates that 438
providers have 1,500 or fewer employees. Consequently, using the SBA's
small business size standard, most of these providers can be considered
small entities.
625. Other Toll Carriers. Neither the Commission nor the SBA has
developed a definition 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. Wired Telecommunications Carriers is the closest
industry with a SBA small business size standard. The SBA small
business size standard for Wired Telecommunications Carriers classifies
firms having 1,500 or fewer employees as small. U.S. Census Bureau data
for 2017 show that there were 3,054 firms in this industry that
operated for the entire year. Of this number, 2,964 firms operated with
fewer than 250 employees. Additionally, based on Commission data in the
2022 Universal Service Monitoring Report, as of December 31, 2021,
there were 90 providers that reported they were engaged in the
provision of other toll services. Of these providers, the Commission
estimates that 87 providers have 1,500 or fewer employees.
Consequently, using the SBA's small business size standard, most of
these providers can be considered small entities.
626. Payphone Service Providers (PSPs). Neither the Commission nor
the SBA have developed a small business size standard specifically for
payphone service providers, a group that includes incarcerated people's
services providers. Telecommunications Resellers is the closest
industry with a SBA small business size standard. The
Telecommunications Resellers industry comprises establishments engaged
in purchasing access and network capacity from owners and operators of
telecommunications networks and reselling wired and wireless
telecommunications services (except satellite) to businesses and
households. Establishments in this industry resell telecommunications;
they do not operate transmission facilities and infrastructure. Mobile
virtual network operators (MVNOs) are included in this industry. The
SBA small business size standard for Telecommunications Resellers
classifies a business as small if it has 1,500 or fewer employees. U.S.
Census Bureau data for 2017 show that 1,386 firms in this industry
provided resale services for the entire year. Of that number, 1,375
firms operated with fewer than 250 employees.
[[Page 77358]]
Additionally, based on Commission data in the 2022 Universal Service
Monitoring Report, as of December 31, 2021, there were 36 providers
that reported they were engaged in the provision of payphone services.
Of these providers, the Commission estimates that 32 providers have
1,500 or fewer employees. Consequently, using the SBA's small business
size standard, most of these providers can be considered small
entities.
627. Telecommunications Relay Service (TRS) Providers.
Telecommunications relay services enable individuals who are deaf, hard
of hearing, deafblind, or who have a speech disability to communicate
by telephone in a manner that is functionally equivalent to using voice
communication services. Internet-based TRS connects an individual with
a hearing or a speech disability to a TRS communications assistant
using an internet Protocol-enabled device via the internet, rather than
the public switched telephone network. Video Relay Service (VRS) one
form of internet-based TRS, enables people with hearing or speech
disabilities who use sign language to communicate with voice telephone
users over a broadband connection using a video communication device.
Internet Protocol Captioned Telephone Service (IP CTS) another form of
internet-based TRS, permits a person with hearing loss to have a
telephone conversation while reading captions of what the other party
is saying on an internet-connected device. A third form of internet-
based TRS, Internet Protocol Relay Service (IP Relay), permits an
individual with a hearing or a speech disability to communicate in text
using an Internet Protocol-enabled device via the internet, rather than
using a text telephone (TTY) and the public switched telephone network.
Providers must be certified by the Commission to provide VRS and IP CTS
and to receive compensation from the TRS Fund for TRS provided in
accordance with applicable rules. Analog forms of TRS, text telephone
(TTY), Speech-to-Speech Relay Service, and Captioned Telephone Service,
are provided through state TRS programs, which also must be certified
by the Commission.
628. Neither the Commission nor the SBA have developed a small
business size standard specifically for TRS Providers. All Other
Telecommunications is the closest industry with a SBA small business
size standard. Internet Service Providers (ISPs) and Voice over
Internet Protocol (VoIP) services, via client-supplied
telecommunications connections are included in this industry. The SBA
small business size standard for this industry classifies firms with
annual receipts of $35 million or less as small. U.S. Census Bureau
data for 2017 show that there were 1,079 firms in this industry that
operated for the entire year. Of those firms, 1,039 had revenue of less
than $25 million. Based on Commission data there are 14 certified
internet-based TRS providers and two analog forms of TRS providers. The
Commission however does not compile financial information for these
providers. Nevertheless, based on available information, the Commission
estimates that most providers in this industry are small entities.
629. All Other Telecommunications. This industry is comprised of
establishments primarily engaged in providing specialized
telecommunications services, such as satellite tracking, communications
telemetry, and radar station operation. This industry also includes
establishments primarily engaged in providing satellite terminal
stations and associated facilities connected with one or more
terrestrial systems and capable of transmitting telecommunications to,
and receiving telecommunications from, satellite systems. Providers of
internet services (e.g., dial-up ISPs) or Voice over Internet Protocol
(VoIP) services, via client-supplied telecommunications connections are
also included in this industry. The SBA small business size standard
for this industry classifies firms with annual receipts of $40 million
or less as small. U.S. Census Bureau data for 2017 show that there were
1,079 firms in this industry that operated for the entire year. Of
those firms, 1,039 had revenue of less than $25 million. Based on this
data, the Commission estimates that the majority of ``All Other
Telecommunications'' firms can be considered small.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements for Small Entities
630. IPCS providers, including any that may be small entities, will
need to change their operations, recordkeeping, and reporting to comply
with the requirements of the Report and Order. These requirements
include compliance with the rate caps the Report and Order establishes
for IPCS. While the new rate cap structure is lower than the
preexisting per-minute rate caps, given that the rate caps are based on
cost data provided by IPCS providers, including smaller providers,
small entities are likely to be able to recover their costs in the same
manner as larger providers. Additionally, because the rate caps apply
to both interstate and intrastate IPCS, the new rate cap structure
reduces the recordkeeping and reporting burdens of complying with the
Commission's rules with regards to audio IPCS because providers will no
longer need to determine the jurisdictional nature of each call. The
Report and Order's requirements also include a prohibition on the
assessment of ancillary service charges associated with IPCS, which
will greatly reduce the recordkeeping burdens on providers and simplify
their billing operations.
631. The Report and Order prohibits IPCS providers from paying site
commissions of any kind associated with IPCS and eliminates the
requirement under the Commission's rules for providers to label, and
disclose the source of, those payments on consumers' bills. The Report
and Order requires that, where facilities claim to incur costs related
to IPCS, providers are to determine whether those costs are in fact
used and useful in the provision of IPCS and are, therefore,
reimbursable under the Commission's rules. These changes will reduce
the burdens of the Commission's billing rules, while requiring that
IPCS providers make determinations regarding whether cost claims
submitted to them by facilities are consistent with Commission
requirements.
632. The Report and Order allows providers the option to offer
alternate pricing plans in addition to providing IPCS at per-minute
rates. IPCS providers may elect whether to offer such plans, and should
they elect to do so, they may determine the format of such plans,
provided that these plans comply with the Commission's generally
applicable IPCS rules, certain specified limitations, and other
safeguards adopted in the Report and Order. The Report and Order
establishes additional requirements for alternative pricing plans
regarding dropped communications, automatic renewals, and consumer
cancellation.
633. The Report and Order adopts consumer disclosure requirements
applicable to all IPCS, including requirements that providers disclose
their IPCS rates, charges, and associated practices on their publicly
available websites in a manner that is easily accessible and available
to all members of the public. Providers must also make these
disclosures available via their online and mobile applications, if
consumers use such applications to enroll, and on paper, upon a
consumer's request. The Report and Order further requires providers to
make available billing statements and statements of account to account
holders on a monthly basis, and details regarding the timing, manner,
and content
[[Page 77359]]
requirements for these and other disclosure documents for alternate
pricing plans. The Report and Order also ensures that the consumer
disclosure rules, as amended, apply to all IPCS providers subject to
the Commission's expanded jurisdiction under the Martha Wright-Reed
Act.
634. The Report and Order extends the Commission's rules regarding
inactive accounts to apply to all accounts that can be used to pay an
IPCS-related rate or charge, to the extent they are controlled by IPCS
providers or their affiliates. The Report and Order reaffirms that
providers are barred from improperly disposing of unused funds in
inactive accounts (which includes disposing of such funds before 180
calendar days of continuous account inactivity has passed), and are
required to undertake reasonable efforts to refund unused funds. The
Report and Order expands upon these rules, including by requiring
providers to (1) contact the relevant account holder if and when they
become aware that an incarcerated person has been released or
transferred or upon the expiration of the 180-day inactivity period,
(2) issue refunds within 30 calendar days of a request from an account
holder, or of an account being deemed inactive (even in the absence of
such a request), and (3) notify account holders of the status of IPCS
accounts prior to their being deemed inactive. However, the Report and
Order limits the requirement for automatic refunds (i.e., in the
absence of a consumer's specific request) to account balances of
greater than $1.50. The Report and Order also clarifies what
``reasonable efforts'' entail, the procedures to follow if ``reasonable
efforts'' to refund inactive accounts fail, and which refund mechanisms
providers may use. Additionally, the Report and Order reaffirms and
clarifies the exception to these rules that allows a provider to
dispose of funds in inactive accounts in compliance with a controlling
judicial or administrative mandate.
635. The Report and Order modifies the scope and content of the
annual reporting requirements, to reflect the Commission's expanded
jurisdiction under the Martha Wright-Reed Act, to include the full
scope of IPCS and all providers of IPCS, and to reflect the changes to
the Commission's rules adopted in the Report and Order. The Report and
Order also amends the Commission's Part 14 rules as appropriate to
reflect the Martha Wright-Reed Act's expansion of the Communications
Act's definition of ``advanced communication service.'' It also
modifies the Commission's rules to allow a form of enterprise
registration for the use of Internet Protocol Captioned Telephone
Service (IP CTS) in carceral facilities and clarifies that internet-
based IPCS providers may provide access to traditional (TTY-based) TRS
via real-time text. The Report and Order on Reconsideration also amends
the Commission's rules to require that VRS and IP CTS providers update
an incarcerated person's registration information within 30 days of
receiving written notification from such person, the correctional
authority, or IPCS provider of an incarcerated person's release or
transfer.
F. Steps Taken To Minimize the Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
636. The RFA requires an agency to provide, ``a description of the
steps the agency has taken to minimize the significant economic impact
on small entities . . . including a statement of the factual, policy,
and legal reasons for selecting the alternative adopted in the final
rule and why each one of the other significant alternatives to the rule
considered by the agency which affect the impact on small entities was
rejected.''
637. In the Report and Order, the Commission adopts a new, more
comprehensive set of rate caps that differentiate between prisons and
jails, and between four different sizes of jails--large, medium, small
and very small--based on average daily population (ADP). The use of
four different size tiers is supported in the record and accounts for
differences in costs incurred by providers serving these different
facility sizes. The Commission conducts a cost analysis specific to
each size tier using data submitted by IPCS providers and adopts new
rate caps for each of these facility size and type categories for both
audio and video IPCS. The Commission believes that these actions
properly recognize that some jails may be more costly for providers to
serve than prisons, and similarly that jails with smaller ADPs may be
more costly for providers to serve than those with larger ADPs.
638. Compliance with the Commission's new audio and video rate caps
and its rules eliminating site commission payments will be required by
January 1, 2025 for prisons and for jails with ADPs of 1,000 or above
incarcerated persons where no site commissions mandated by law are
currently paid; by April 1, 2025 for jails with ADPs less than 1,000
where no site commissions mandated by law are currently paid; and by
July 1, 2025 for all size facilities where site commissions mandated by
law are currently paid. The Commission extended the compliance deadline
for providers serving smaller jails to account for the additional time
that these facilities, and the providers that serve them, may need to
adapt to the changes adopted in the Report and Order.
639. The Commission recognizes that it cannot foreclose the
possibility that in certain limited instances, certain providers,
possibly smaller providers with less ability to spread their costs over
a larger number of facilities or minutes of use, may not be able to
recover their costs of providing IPCS under the rate caps adopted in
the Report and Order. To minimize the burden on such providers, the
Commission retains, with modifications, its waiver process, which
allows providers to seek relief from its rules at the facility or
contract level if they can demonstrate that they are unable to recover
their used and useful IPCS-related costs at that facility or for that
contract. The Commission modifies this process to reflect the
provisions of the Martha Wright-Reed Act, including its new authority
thereunder. The waiver process will allow the Commission to review
individual providers' data and potentially allow these providers to
charge rates that enable them to recover their costs of providing IPCS
at that facility or under that contract. This waiver process should
benefit any IPCS providers that may be small businesses unable to
recover their costs under the new rate caps.
640. In the Report and Order, the Commission prohibits providers
from assessing ancillary service charges in addition to per-minute
rates for IPCS. The Commission incorporates the costs of providing
ancillary services in its rate caps to allow providers the opportunity
to recover their average costs of providing these ancillary services,
while eliminating the burden of administering independent billing
processes for each of these services. At the same time, eliminating all
separately assessed ancillary service charges prevents providers from
engaging in rent-seeking activity in their application of these
charges, helping to ensure that IPCS rates and charges are just and
reasonable.
641. The Commission revises its rules to make clear that IPCS
providers may meet the requirement to provide access to traditional TRS
via real-time text, as an alternative to TTY transmissions, if real-
time text transmission is supported by the available devices and
reliable
[[Page 77360]]
service can be provided by this method. Permitting this alternative
affords providers further flexibility in conducting their operations,
and accommodates the needs of smaller providers that may have
insufficient resources to expand or otherwise adjust their service
format and infrastructure to enable TTY transmission.
642. The Commission revises its rules to permit providers to
implement alternate pricing plans, other than per-minute pricing,
subject to rules and conditions to protect IPCS consumers. Any provider
that adopts these plans must offer them as a voluntary alternative to
per-minute pricing. Providers are not required to offer such plans, but
should they elect to do so, they will have the flexibility to determine
the format of the plans they offer. Permitting this additional means of
providing IPCS affords providers, including smaller providers, further
flexibility in conducting their operations.
643. The Commission's rate caps incorporate the costs of only a
subset of the safety and security measures reported by providers. The
rate caps incorporate the costs of the two categories that the
Commission finds to be both used and useful in the provision of IPCS:
Communications Assistance for Law Enforcement Act (CALEA) compliance
measures and communications security services. Because cost recovery
through the rate caps is only accommodated for a more limited set of
such measures, providers, particularly smaller providers, may not need
to be capable of offering more sophisticated safety and security
services in order to successfully compete for IPCS contracts.
G. Report to Congress
644. The Commission will send a copy of the Report and Order,
including this FRFA, in a report to be sent to Congress pursuant to the
Congressional Review Act. In addition, the Commission will send a copy
of the Report and Order, including this FRFA, to the Chief Counsel for
Advocacy of the SBA. A copy of the Report and Order and FRFA (or
summaries thereof) will also be published in the Federal Register.
VI. Ordering Clauses
645. Accordingly, it is ordered that, pursuant to the authority
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255,
276, 403, and 716 of the Communications Act of 1934, as amended, 47
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed Just and Reasonable Communications
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the Report and
Order, Order on Reconsideration, Clarification and Waiver, and Further
Notice of Proposed Rulemaking are adopted.
646. It is further ordered that, pursuant to the authority
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255,
276, 403, and 716, of the Communications Act of 1934, as amended, 47
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed Just and Reasonable Communications
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the Report and
Order shall be effective sixty (60) days after publication of a summary
of it in the Federal Register, except as stated below. Amendments to
sections 64.611(l)(2), (3), (5), (6); 64.6040(f); 64.6060; 64.6110;
64.6120; 64.6130(d), (e), (f), (h) to (k); 64.6140(c), (d), (e)(2) to
(4), (f)(2), and (f)(4) will not become effective until the Office of
Management and Budget (OMB) completes any review that the Wireline
Competition Bureau or the Consumer and Governmental Affairs Bureau
determine is required under the Paperwork Reduction Act (PRA). The
removal of Sec. 64.6090 will not become effective until after OMB
completes any review of Sec. 64.6140. The Commission directs the
Wireline Competition Bureau and Consumer and Governmental Affairs
Bureau to announce effective dates for these sections by publication in
the Federal Register and by subsequent Public Notice.
647. It is further ordered that, pursuant to the authority
contained in sections 1, 2, 4(i) to (j), 201(b), 218, 220, 225, 255,
276, 403, and 716, of the Communications Act of 1934, as amended, 47
U.S.C. 151, 152, 154(i) to (j), 201(b), 218, 220, 225, 255, 276, 403,
and 617, and the Martha Wright-Reed Just and Reasonable Communications
Act of 2022, Public Law 117-338, 136 Stat 6156 (2022), the delegations
of authority to the Wireline Competition Bureau, Office of Economics
and Analytics, and the Consumer and Governmental Affairs Bureau shall
be effective upon publication in the Federal Register.
648. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of the Report and Order and Further Notice of Proposed Rulemaking,
including the Initial Regulatory Flexibility Analysis and the Final
Regulatory Flexibility Analyses, to the Chief Counsel for Advocacy of
the Small Business Administration.
649. It is further ordered that the Office of the Managing
Director, Performance Evaluation and Records Management, shall send a
copy of the Report and Order and Further Notice of Proposed Rulemaking
in a report to be sent to Congress and the Government Accountability
Officer pursuant to the Congressional Review Act, 5 U.S.C.
801(a)(1)(A).
List of Subjects in 47 CFR Parts 14 and 64
Advanced Services, Communications, Communications common carriers,
Communications equipment, Computer technology, Individuals with
disabilities, Prisoners, Reporting and recordkeeping requirements,
Security measures, Telecommunications, Telephone, Video, Waivers.
Federal Communications Commission.
Marlene Dortch,
Secretary.
Final Rules
For the reasons set forth above, the Federal Communications
Commission amends parts 14 and 64 of Title 47 of the Code of Federal
Regulations as follows:
PART 14--ACCESS TO ADVANCED COMMUNICATIONS SERVICES AND EQUIPMENT
BY PEOPLE WITH DISABILITIES
0
1. The authority citation for part 14 continues to read as follows:
Authority: 47 U.S.C. 151-154, 255, 303, 403, 503, 617, 618, 619
unless otherwise noted.
0
2. Amend Sec. 14.10 by revising paragraph (c) to read as follows:
* * * * *
(c) The term advanced communications services means:
(1) Interconnected VoIP service, as that term is defined in
paragraph (l) of this section;
(2) Non-interconnected VoIP service, as that term is defined in
paragraph (q) of this section;
(3) Electronic messaging service, as that term is defined in
paragraph (i) of this section;
(4) Interoperable video conferencing service, as that term is
defined in paragraph (m) of this section; and
(5) Any audio or video communications services used by inmates for
the purposes of communicating with individuals outside the correctional
institution where the inmate is held, regardless of technology used.
* * * * *
[[Page 77361]]
PART 64--MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
0
3. The authority citation for part 64 is revised to read as follows:
Authority: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220,
222, 225, 226, 227, 227b, 228, 251(a), 251(e), 254(k), 255, 262,
276, 403(b)(2)(B), (c), 616, 620, 716, 1401-1473, unless otherwise
noted; Pub. L. 115-141, Div. P, sec. 503, 132 Stat. 348, 1091; Pub.
L. 117-338, 136 Stat. 6156.
0
4. The authority citation for subpart F is revised to read as follows:
Authority: 47 U.S.C. 151-154, 225, 255, 303(r), 616, and 620;
Pub. L. 117-338, 136 Stat. 6156.
0
5. Amend section 64.601 by redesignating paragraphs (a)(21) through
(a)(56) as paragraphs (a)(23) through (a)(58) and adding paragraphs
(a)(21) and (a)(22) to read as follows:
* * * * *
(a) * * *
(21) Incarcerated People's Communications Service or IPCS. The term
``Incarcerated People's Communications Service'' or ``IPCS'' has the
meaning given such term under Sec. 64.6000.
(22) Incarcerated Person or Incarcerated People. The term
``Incarcerated Person'' or ``Incarcerated People'' has the meaning
given such term under Sec. 64.6000.
* * * * *
0
6. Amend section 64.611 by revising paragraph (k) and adding paragraph
(l) to read as follows:
Sec. 64.611 Internet-based TRS registration.
* * * * *
(k) Individual registration for use of TRS in correctional
facilities--(1) Registration information and documentation. If an
individual eligible to use TRS registers with an internet-based TRS
provider while incarcerated, the provider shall collect and transmit to
the TRS User Registration Database the information and documentation
required by the applicable provisions of this section, except that:
(i) The residential address specified for such Incarcerated Person
shall be the name of the correctional authority with custody of that
person along with the main or administrative address of such authority;
(ii) A Registered Location need not be provided; and
(iii) If an Incarcerated Person has no Social Security number or
Tribal Identification number, an identification number assigned by the
correctional authority along with the facility identification number,
if there is one, may be provided in lieu of the last four digits of a
Social Security number or a Tribal Identification number.
(2) Verification of VRS and IP CTS registration data. An
Incarcerated Person's identity and address may be verified pursuant to
Sec. 64.615(a)(6) of this chapter, for purposes of VRS or IP CTS
registration, based on documentation, such as a letter or statement,
provided by an official of a correctional authority that states the
name of the person; the person's identification number assigned by the
correctional authority; the name of the correctional authority; and the
address of the correctional facility. The VRS or IP CTS provider shall
transmit such documentation to the TRS User Registration Database
administrator.
(3) Release or transfer of an Incarcerated Person. Upon release (or
transfer to a different correction authority) of an Incarcerated Person
who has registered for VRS or IP CTS, the VRS or IP CTS provider with
which such person has registered shall update the person's registration
information within 30 days of receiving written notification from such
person or the correctional authority of such release or transfer. Such
updated information shall include, in the case of release, the
individual's full residential address, Registered Location (if required
by this section or part 9 of this chapter), and any other registration
information required by this section and not previously provided, and
in the case of transfer shall include the information required by
paragraph (k)(2) of this section.
(4) Dial-around calls for VRS. VRS providers shall not allow dial-
around calls by Incarcerated People.
(l) Enterprise registration for the use of TRS in correctional
facilities.
(1) Notwithstanding the other provisions of this section, a TRS
provider may provide VRS, IP Relay, or IP CTS to an Incarcerated
Person, without individual user registration, if the TRS provider has
completed enterprise registration of the correctional facility or
correctional authority for which service will be provided.
(2) [Reserved]
(3) [Reserved]
(4) Confidentiality. The TRS provider shall maintain the
confidentiality of any registration and certification information
obtained by the TRS provider, and shall not disclose such registration
and certification information, or the content of such registration and
certification information, except as required by law or regulation.
0
7. Delayed indefinitely, amend Sec. 64.611 by adding paragraphs
(l)(2), (3), (5) and (6) to read as follows:
Sec. 64.611 Internet-based TRS registration.
* * * * *
(l) * * *
(2) Signed certification--(i) VRS and IP Relay. For enterprise
registration to use VRS or IP Relay, the TRS provider shall obtain a
signed certification from the individual responsible for the devices
used to access VRS or IP Relay (who may be an employee of the
correctional authority or a provider of Incarcerated People's
Communications Services), attesting that:
(A) The individual understands the functions of the devices used to
access the service and that the cost of this relay service is financed
by the federally regulated Interstate TRS Fund; and
(B) The correctional authority (or the provider of Incarcerated
People's Communications Services, if the individual is employed by such
a provider) will make reasonable efforts to ensure that only persons
with a hearing or speech disability are permitted to use the service.
(ii) IP CTS. For enterprise registration to use IP CTS, the TRS
provider shall obtain a signed certification from the individual
responsible for the devices used to access IP CTS (who may be an
employee of the correctional authority or of a provider of Incarcerated
People's Communications Services), attesting that:
(A) The individual understands the functions of IP CTS and that the
cost of IP CTS is supported by the federally regulated Interstate TRS
Fund; and
(B) The correctional authority (or the provider of Incarcerated
People's Communications Services, if the individual is employed by such
a provider) will make reasonable efforts to ensure that only persons
with hearing loss that necessitates the use of IP CTS to communicate by
telephone are permitted to use IP CTS.
(iii) Electronic signatures. The certification required by
paragraph (l)(2) of this section shall be made on a form separate from
any other agreement or form, and must include a separate signature
specific to the certification. For the purposes of this paragraph
(l)(2)(iii), an electronic signature, defined by the Electronic
Signatures in Global and National Commerce Act as an electronic sound,
symbol, or process, attached to or logically associated with a contract
or other record and executed or adopted by a person with the intent to
sign the record, has the same legal effect as a written signature. For
the purposes of this paragraph (l)(2)(iii), an
[[Page 77362]]
electronic record, defined by the Electronic Signatures in Global and
National Commerce Act as a contract or other record created, generated,
sent, communicated, received, or stored by electronic means,
constitutes a record.
(3) Consent for transmission of registration information. A VRS or
IP CTS provider shall obtain consent from the individual making the
certification described in paragraph (l)(2) of this section to transmit
the information required by this section to the TRS User Registration
Database. Before obtaining such consent, the TRS provider shall
describe, using clear, easily understood language, the specific
information being transmitted, that the information is being
transmitted to the TRS User Registration Database to ensure proper
administration of the TRS program, and that failure to provide consent
will result in denial of service. The TRS provider shall obtain and
keep a record of affirmative acknowledgment of such consent.
* * * * *
(5) Registration data. To complete enterprise registration, a VRS
or IP CTS provider shall collect and transmit to the TRS User
Registration Database, in a format prescribed by the Database
administrator:
(i) The TRS provider's name;
(ii) The telephone numbers or unique identifiers assigned to the
relevant TRS device(s) at the correctional facility or correctional
authority;
(iii) The name and address of the affected correctional facility or
correctional authority;
(iv) The date of initiation of service and;
(v) The name of the individual executing the certification required
by paragraph (l)(2) of this section, and the date the certification was
obtained.
(6) When a VRS or IP CTS provider ceases providing relay service to
a correctional authority via enterprise registration, the provider
shall transmit the date of termination of such service to the TRS User
Registration Database Administrator.
0
8. Revise the heading to subpart FF to read as follows:
Subpart FF--Incarcerated People's Communications Services
0
9. Revise Sec. 64.6000 to read as follows:
Sec. 64.6000 Definitions.
As used in this subpart:
Alternate Pricing Plan or Plan means the offering of Incarcerated
People's Communications Services to Consumers using a pricing structure
other than per-minute pricing.
Ancillary Service Charge means any charge to Consumers associated
with the provision or use of Incarcerated People's Communications
Services that is not:
(1) Included in the per-minute charges assessed, in accordance with
Sec. Sec. 64.6010 and 64.6030, for individual Incarcerated People's
Communications Services;
(2) Included in the charges assessed, in accordance with Sec.
64.6140, in connection with an Alternate Pricing Plan; or
(3) An Authorized Fee, a Mandatory Fee, or a Mandatory Tax.
Authorized Fee means a government authorized, but discretionary,
fee which a Provider must remit to a federal, state, or local
government, and which a Provider is permitted, but not required, to
pass through to Consumers for or in connection with intrastate,
interstate, or international Incarcerated People's Communications
Services. An Authorized Fee may not include a markup, unless the markup
is specifically authorized by a federal, state, or local statute, rule,
or regulation.
Average Daily Population or ADP means the sum of all Incarcerated
People in a Correctional Facility for each day of the preceding
calendar year divided by the number of days in that year, calculated
each year on or before April 30.
Billing Statement or Statement of Account means the vehicle by
which IPCS Account information is provided to the Consumer on a monthly
basis, regardless of IPCS Account type, including: (a) the amount of
any deposits in the IPCS Account; (b) the duration of any call(s) or
communication(s) for which a charge is assessed; and (c) the balance
remaining in the IPCS Account after deduction of those charges.
Breakeven Point means, for purposes of an Alternate Pricing Plan,
the usage amount:
(1) Below which a Consumer would pay more under the Alternate
Pricing Plan than the Consumer would have paid under the Provider's
per-minute rates, and
(2) At or above which the cost of the Alternate Pricing Plan would
be less than or equal to what the Consumer would pay under the
Provider's per-minute rates.
Collect Calling means an arrangement whereby the called party takes
affirmative action clearly indicating that it will pay the charges
associated with a communication originating from an Incarcerated
Person's Communications Device.
Consumer means the party paying a Provider of Incarcerated People's
Communications Services.
Controlling Judicial or Administrative Mandate means:
(1) A final court order requiring an Incarcerated Person to pay
restitution;
(2) A fine imposed as part of a criminal sentence;
(3) A fee imposed in connection with a criminal conviction; or
(4) A final court or administrative agency order adjudicating a
valid contract between the Provider and the IPCS Account holder,
entered into prior to July 22, 2024 that allows or requires that a
Provider of Incarcerated People's Communications Services act in a
manner that would otherwise violate Sec. 64.6130.
Correctional Facility, Facility, or Correctional Institution means
a Jail or a Prison.
Debit Calling means a presubscription or comparable service which
allows an Incarcerated Person, or someone acting on an Incarcerated
Person's behalf, to fund an IPCS Account set up through a Provider that
can be used to pay for Incarcerated People's Communications Services
originated by the Incarcerated Person.
Facility-Related Rate Component means either the Legally Mandated
Facility Rate Component or the Contractually Prescribed Facility Rate
Component identified in Sec. 64.6030(d).
Incarcerated Person or Incarcerated People means a person or
persons detained at a Jail or Prison, regardless of the duration of the
detention.
Incarcerated People's Communications Service or IPCS means the
provision of telephone service; interconnected VoIP service; non-
interconnected VoIP service; interoperable video conferencing service;
and any audio or video communications service used by Incarcerated
People for the purpose of communicating with individuals outside the
Facility where the Incarcerated Person is held, regardless of the
technology used and regardless of interstate, intrastate or
international jurisdiction.
Incarcerated People's Communications Service Account or IPCS
Account means any type of account administered, or directly or
indirectly controlled by a Provider or an affiliate of a Provider that
can be used to pay IPCS rates and charges, including accounts where the
Incarcerated Person is the account holder.
Incarcerated Person's Communications Device means a telephone
instrument or other device capable of initiating communications, set
aside by authorities of a Correctional Facility for use by one or more
Incarcerated People.
[[Page 77363]]
Interconnected Voice over Internet Protocol or Interconnected VoIP
means a service that:
(1) Enables real-time, two-way voice communications;
(2) Requires a broadband connection from the user's location;
(3) Requires internet protocol-compatible customer premises
equipment; and
(4) permits users generally to receive calls that originate on the
public switched telephone network and to terminate calls to the public
switched telephone network.
Interoperable Video Conferencing Service means a service that
provides real-time video communications, including audio, to enable
users to share information of the user's choosing.
International Communications means communications that originate in
the United States and terminate outside the United States.
International Destination means the rate zone in which an
International Communication terminates. For countries that have a
single rate zone, International Destination means the country in which
an International Communication terminates.
Inmate means a person detained at a Jail or Prison, regardless of
the duration of the detention;
Inmate Calling Service means a service that allows Inmates to make
calls to individuals outside the Correctional Facility where the Inmate
is being held, regardless of the technology used to deliver the
service;
Inmate Telephone means a telephone instrument, or other device
capable of initiating calls, set aside by authorities of a Correctional
Facility for use by Inmates;
Jail means a Facility of a local, state, or federal law enforcement
agency that is used to primarily hold individuals who are:
(1) Awaiting adjudication of criminal charges;
(2) Post-conviction and committed to confinement sentences of one
year or less; or
(3) Post-conviction and awaiting transfer to another Facility. The
term also includes city, county, or regional facilities that have
contracted with a private company to manage day-to-day operations;
privately owned and operated Facilities primarily engaged in housing
city, county or regional Incarcerated People; immigration detention
facilities operated by, or pursuant to contracts with, federal, state,
city, county, or regional agencies; juvenile detention centers; and
secure mental health facilities.
Jurisdiction means:
(1) The state, city, county, or territory where a law enforcement
authority is operating or contracting for the operation of a
Correctional Facility; or
(2) The United States for a Correctional Facility operated by or
under the contracting authority of a Federal law enforcement agency.
Jurisdictionally Mixed Charge means any charge Consumers may be
assessed for use of Incarcerated People's Communications Services that
is not included in the per-minute charges assessed for individual
communications and that are assessed for, or in connection with, uses
of Incarcerated People's Communications Service to make such
communications that have interstate or international and intrastate
components that are unable to be segregated at the time the charge is
incurred.
Mandatory Tax or Mandatory Fee means a fee that a Provider is
required to collect directly from Consumers, and remit to federal,
state, or local governments. A Mandatory Tax or Mandatory Fee that is
passed through to a Consumer for, or in connection with, Incarcerated
People's Communications Services may not include a markup, unless the
markup is specifically authorized by a federal, state, or local
statute, rule, or regulation.
Non-interconnected VoIP means a service, other than an
Interconnected VoIP service, that enables real-time voice
communications that originate from, or terminate to, the end-user's
location using Internet Protocol or any successor protocol and that
requires Internet Protocol compatible customer premises equipment.
Per-Call, Per-Connection, or Per-Communication Charge means a one-
time fee charged to a Consumer of IPCS at call or communication
initiation.
Prepaid Calling means a presubscription or comparable service in
which a Consumer, other than an Incarcerated Person, funds an account
set up through a Provider of Incarcerated People's Communications
Services. Funds from the account can then be used to pay for
Incarcerated People's Communications Services that originate with the
same Incarcerated Person.
Prepaid Collect Calling means a calling arrangement that allows an
Incarcerated Person to initiate an Incarcerated People's Communications
Services communication without having a pre-established billing
arrangement and also provides a means, within that communication, for
the called party to establish an arrangement to be billed directly by
the Provider of Incarcerated People's Communications Services for
future communications from the same Incarcerated Person.
Prison means a Facility operated by a territorial, state, or
Federal agency that is used primarily to confine individuals convicted
of felonies and sentenced to terms in excess of one year. The term also
includes public and private facilities that provide outsource housing
to other agencies such as the State Departments of Correction and the
Federal Bureau of Prisons; and facilities that would otherwise fall
under the definition of a Jail but in which the majority of
Incarcerated People are post-conviction and are committed to
confinement for sentences of longer than one year.
Provider of Incarcerated People's Communications Services or
Provider means any communications service provider that provides
Incarcerated People's Communications Services, regardless of the
technology used.
Provider-Related Rate Component means the interim per-minute rate
specified in either Sec. 64.6030(b) or (c) that Providers at Jails
with Average Daily Populations of 1,000 or more Incarcerated People and
all Prisons may charge for interstate Collect Calling, Debit Calling,
Prepaid Calling, or Prepaid Collect Calling.
Site Commission means any form of monetary payment, in-kind
payment, gift, exchange of services or goods, fee, technology
allowance, or product that a Provider of Incarcerated People's
Communications Services or affiliate of a Provider of Incarcerated
People's Communications Services may pay, give, donate, or otherwise
provide to an entity that operates a Correctional Institution, an
entity with which the Provider of Incarcerated People's Communications
Services enter into an agreement to provide Incarcerated People's
Communications Services, a governmental agency that oversees a
Correctional Facility, the city, county, or state where a Facility is
located, or an agent of any such Facility.
0
10. Add Sec. 64.6010 to read as follows:
Sec. 64.6010 Incarcerated People's Communications Services rate caps.
(a) A Provider must offer each Incarcerated People's Communications
Service it provides at a per-minute rate. A Provider may also offer an
Incarcerated People's Communications Service under one or more
Alternate Pricing Plans, pursuant to Sec. 64.6140.
(b) A Provider must not charge a per-minute rate for intrastate or
interstate audio Incarcerated People's Communications Services in
excess of the following rate caps on or after the dates specified
below:
[[Page 77364]]
(1) $0.06 per minute for each Prison;
(2) $0.06 per minute for each Jail having an Average Daily
Population of 1,000 or more Incarcerated People;
(3) $0.07 per minute for each Jail having an Average Daily
Population of between and including 350 and 999 Incarcerated People;
(4) $0.09 per minute for each Jail having an Average Daily
Population of between and including 100 and 349 Incarcerated People;
and
(5) $0.12 per minute for each Jail having an Average Daily
Population of below 100 Incarcerated People.
(c) A Provider must not charge a per-minute rate for video
Incarcerated People's Communications Services in excess of the
following interim rate caps except as set forth in paragraph (d) of
this section:
(1) $0.16 per minute for each Prison;
(2) $0.11 per minute for each Jail having an Average Daily
Population of 1,000 or more Incarcerated People;
(3) $0.12 per minute for each Jail having an Average Daily
Population of between and including 350 and 999 Incarcerated People;
(4) $0.14 per minute for each Jail having an Average Daily
Population of between and including 100 and 349 Incarcerated People;
and
(5) $0.25 per minute for each Jail having an Average Daily
Population of below 100 Incarcerated People.
(d) A Provider must charge the rate caps described in paragraphs
(b) and (c) of this section beginning January 1, 2025 for all Prisons
and for Jails with Average Daily Populations of 1,000 or more
Incarcerated People, and April 1, 2025 for Jails with Average Daily
Populations of less than 1,000 Incarcerated People, subject to the
following special provisions.
(1) Where a contract existing as of June 27, 2024 includes terms
and conditions that would require material alteration through
renegotiation due to a conflict with our new rules involving rates,
contractually-negotiated Site Commission payments or passthrough
charges included in the rates, and the contract expires on or after
January 1, 2025 for Prisons and for Jails with Average Daily
Populations of 1,000 or more Incarcerated People, or on or after April
1, 2025 for Jails with Average Daily Populations of less than 1,000
Incarcerated People, the compliance dates for the rate caps set forth
in paragraphs (b) and (c) of this section and the Site Commission rules
set forth in Sec. 64.6015 will be the earlier of the contract
expiration date or January 1, 2026 for Prisons and for Jails with
Average Daily Populations of 1,000 or more Incarcerated People, or the
earlier of the contract expiration date or April 1, 2026 for Jails with
Average Daily Populations of less than 1,000 Incarcerated People.
(2) Where a contract existing as of June 27, 2024 includes terms
and conditions that would require renegotiation due to a provision
incorporating legally-mandated Site Commission payments and the
contract expires on or after July 1, 2025 for any size Facility, the
compliance date for paragraphs (b) and (c) of this section and the Site
Commission rules set forth in Sec. 64.6015 will be the earlier of the
contract expiration date or April 1, 2026.
(e) A Provider must not charge a per-minute rate for international
audio Incarcerated People's Communications Services in each Prison or
Jail it serves in excess of the applicable interstate and intrastate
cap set forth in paragraph (b) of this section plus the average amount
that the Provider paid its underlying international service providers
for audio communications to the International Destination of that
communication, on a per-minute basis. A Provider shall determine the
average amount paid for communications to each International
Destination for each calendar quarter and shall adjust its maximum
rates based on such determination within one month of the end of each
calendar quarter.
0
11. Add Sec. 64.6015 to read as follows:
Sec. 64.6015 Prohibition against Site Commissions.
A Provider must not pay any Site Commissions associated with its
provision of Incarcerated People's Communications Services on or after
the dates specified below:
(a) Providers must comply with this section beginning January 1,
2025 for all Prisons and for Jails with Average Daily Populations of
1,000 or more Incarcerated People, and April 1, 2025 for Jails with
Average Daily Populations of less than 1,000 Incarcerated People,
subject to the special provisions in paragraphs (b) and (c) of this
section.
(b) Where a contract existing as of June 27, 2024 includes terms
and conditions that would require material alteration through
renegotiation due to a conflict with our new rules involving rates,
contractually-negotiated Site Commission payments or pass-through
charges included in the rates, and the contract expires on or after
January 1, 2025 for Prisons and for Jails with Average Daily
Populations of 1,000 or more Incarcerated People, or on or after April
1, 2025 for Jails with Average Daily Populations of less than 1,000
Incarcerated People, the compliance dates for this section will be the
earlier of the contract expiration date or January 1, 2026 for Prisons
and for Jails with Average Daily Populations of 1,000 or more
Incarcerated People, or the earlier of the contract expiration date or
April 1, 2026 for Jails with Average Daily Populations of less than
1,000 Incarcerated People.
(c) Where a contract existing as of June 27, 2024 includes terms
and conditions that would require renegotiation due to a provision
incorporating legally-mandated Site Commission payments and the
contract expires on or after July 1, 2025 for any size Facility, the
compliance date for this section will be the earlier of the contract
expiration date or April 1, 2026.
0
12. Revise Sec. 64.6020 to read as follows:
Sec. 64.6020 Ancillary Service Charges.
A Provider of Incarcerated People's Communications Services must
not charge any Ancillary Service Charge, as defined in Sec. 64.6000 of
this chapter.
0
13. Revise Sec. 64.6030 by adding paragraph (f) to read as follows:
Sec. 64.6030 Inmate Calling Services interim rate caps.
* * * * *
(f) Paragraphs (a) through (e) of this section shall cease to be
effective upon the individual compliance dates prescribed in the
revisions to Sec. 64.6010 and the addition of Sec. 64.6015 for the
Providers serving the Facilities subject to each such date.
0
14. Amend Sec. 64.6040 by revising paragraph (b)(1) and adding
paragraph (e) to read as follows:
Sec. 64.6040 Communications access for Incarcerated People with
disabilities.
* * * * *
(b)(1) A Provider shall provide access for Incarcerated People with
hearing or speech disabilities to Traditional (TTY-Based) TRS and STS.
As an alternative to supporting transmissions from a TTY device, where
broadband internet access service is available, an IPCS Provider may
provide access to Traditional TRS via real-time text, in accordance
with 47 CFR part 67, if real-time text is supported by the available
devices and reliable access to a provider of traditional TRS service
can be provided by this method.
* * * * *
(e)(1) Paragraphs (a) through (c) of this section apply to services
offered pursuant to an Alternate Pricing Plan, as defined in Sec.
64.6000.
(2) Except as provided in this paragraph (e) of this section, in
the
[[Page 77365]]
context of a Provider offering an Alternate Pricing Plan, the Provider
shall not levy or collect any charge or fee, or count any minute(s) of
use, or call(s) or communication(s), toward the amount included in an
Alternate Pricing Plan, on or from any party to a TRS call to or from
an Incarcerated Person, or any charge for the use of a device or
transmission service when used to access TRS from a Correctional
Facility, or any charge for the internet or other connections needed
for services covered by this section.
(3) When providing access to IP CTS or CTS within the context of a
Provider offering an Alternate Pricing Plan:
(i) If the Alternate Pricing Plan consists of a fixed number of
calls or communications, the IP CTS or CTS call shall count as one call
or communication.
(ii) If the Alternate Pricing Plan offers a fixed number of
minutes, the IP CTS or CTS call shall count as the number of minutes
used for the voice portion of the IP CTS or CTS call.
(iii) If the Alternate Pricing Plan offers an unlimited number of
minutes, calls or communications, the IP CTS or CTS call shall be
counted as part of the unlimited number of minutes, calls or
communications.
(iv) There shall be no charge or fee for any internet or data
portion of an IP CTS or CTS call.
(4) When providing access to a point-to-point video service, as
defined in Sec. 64.601(a), within the context of a Provider offering
an Alternate Pricing Plan for Incarcerated People with hearing or
speech disabilities who can use ASL:
(i) If the Alternate Pricing Plan consists of a fixed number of
calls or communications, the point-to-point call shall be counted as
one video communication (if only video is included in the Alternate
Pricing Plan), or one audio call (if audio is included in the Alternate
Pricing Plan).
(ii) If the Alternate Pricing Plan offers a fixed number of
minutes, then the point-to-point call shall count as the number of
minutes used and shall apply to the minutes provided for video, if only
video is including in the Alternate Pricing Plan, or shall apply to the
minutes provided for audio, if audio is included in the Alternate
Pricing Plan.
(iii) If the Alternate Pricing Plan offers an unlimited number of
minutes, calls or communications, the point-to-point call shall count
as a video communication (if only video is provided as part of the
Alternate Pricing Plan) or as an audio call (if audio is provided as
part of the Alternate Pricing Plan).
(iv) Regardless of the format of the Alternate Pricing Plan, there
shall be no charge or fee for the use of the equipment.
(5) When providing access for TTY-to-TTY use within the context of
a Provider offering an Alternate Pricing Plan that includes audio
service:
(i) If the Plan consists of a fixed number of calls, the TTY-to-TTY
call shall count as one call;
(ii) If the Plan offers a fixed number of minutes, then the TTY-to-
TTY call shall count as no more than one-fourth of the minutes used;
and
(iii) If the Plan offers an unlimited number of minutes, or calls,
the TTY-to-TTY call shall count as an audio call.
0
15. Delayed indefinitely, amend Sec. 64.6040 by adding paragraph (f)
to read as follows:
Sec. 64.6040 Communications access for Incarcerated People with
disabilities.
* * * * *
(f)(1) A Provider shall ensure that the information and
documentation that it provides to current or potential Consumers of
Incarcerated People's Communications Services is accessible. Such
information and documentation includes, but is not limited to,
disclosures of charges, user guides, bills, installation guides for end
user devices, and product support communications.
(2) The term ``accessible'' has the same meaning given such term
under Sec. 14.10 of this chapter, as such section may be amended from
time to time.
(3) The requirement to ensure the information is accessible also
includes ensuring access, at no extra cost, to call centers and
customer support regarding the products and services for current or
potential Consumers of Incarcerated People's Communications Services.
0
16. Revise Sec. 64.6050 to read as follows:
Sec. 64.6050 Billing-related call blocking.
No Provider shall prohibit or prevent completion of a Collect
Calling IPCS communication or decline to establish or otherwise degrade
any Collect Calling IPCS communication solely for the reason that it
lacks a billing relationship with the called party's communications
service provider unless the Provider offers Debit Calling, Prepaid
Calling, or Prepaid Collect Calling for IPCS communications.
0
17. Delayed indefinitely, revise Sec. 64.6060 to read as follows:
Sec. 64.6060 Annual reporting and certification requirement.
(a) Each Provider must submit a report to the Commission, by April
1 of each year, regarding intrastate, interstate and international
audio and video IPCS for the prior calendar year. The report shall be
categorized both by service type and Facility type and size and shall
contain:
(1) Current intrastate, interstate, and international rates for
Incarcerated People's Communications Services.
(2) For each Facility served, the kinds of TRS that may be accessed
from the Facility.
(3) For each Facility served, the number of calls completed during
the reporting period in each of the following categories:
(i) TTY-to-TTY calls;
(ii) Point-to-point video calls placed or received by ASL users as
those terms are defined in Sec. 64.601(a) of this chapter; and
(iii) TRS calls, broken down by each form of TRS that can be
accessed from the Facility.
(4) For each Facility served, the number of complaints that the
reporting Provider received in each of the categories set forth in
paragraph (a)(3) of this section.
(5) Such other information as the Consumer and Governmental Affairs
Bureau or the Wireline Competition Bureau may require.
(b) The Chief Executive Officer, Chief Financial Officer, or other
senior executive of the reporting Provider, with first-hand knowledge
of the truthfulness, accuracy, and completeness of the information
provided pursuant to paragraph (a) of this section, must certify that
the reported information and data are true, accurate and complete to
the best of his or her knowledge, information, and belief.
0
18. Revise Sec. 64.6070 to read as follows:
Sec. 64.6070 Taxes and fees.
(a) A Provider must not charge a Consumer any tax or fee associated
with Incarcerated People's Communications Services other than a
Mandatory Tax, a Mandatory Fee, or an Authorized Fee, as defined in
Sec. 64.6000 of this chapter.
0
19. Revise Sec. 64.6080 to read as follows:
Sec. 64.6080 Per-Call, Per-Connection or Per-Communication Charges.
A Provider must not impose a Per-Call, Per-Connection, or Per-
Communication Charge on a Consumer for any Incarcerated People's
Communications Services communication.
Sec. 64.6090 [Removed and reserved].
0
20. Delayed indefinitely, remove and reserve Sec. 64.6090.
[[Page 77366]]
0
21. Revise Sec. 64.6100 to read as follows:
Sec. 64.6100 Minimum and maximum Prepaid Calling and Debit Calling
account balances.
(a) No Provider shall institute a minimum balance requirement for a
Consumer to use Debit or Prepaid Calling for Incarcerated People's
Communications Services.
(b) No Provider shall prohibit a Consumer from depositing at least
$50 per transaction to fund a Debit or Prepaid Calling account that can
be used for Incarcerated People's Communications Services.
0
22. Delayed indefinitely, revise and republish Sec. 64.6110 to read
as follows:
Sec. 64.6110 Consumer Disclosure of Incarcerated People's
Communications Services Rates.
(a) Providers must clearly, accurately, and conspicuously disclose
their intrastate, interstate, and international Incarcerated People's
Communications Services rates, charges and associated practices on
their publicly available websites. In connection with international
rates, Providers shall also separately disclose the rate component for
terminating calls to each International Destination where that Provider
terminates International Communications.
(1) In addition to the information required in paragraph (a) of
this section, the Provider must disclose information on:
(i) How to manage an IPCS Account;
(ii) How to fund an IPCS Account;
(iii) How to close an IPCS Account and how to obtain a refund of
any unused balance in that account; and
(iv) How to obtain a refund of any unused balance in inactive
accounts pursuant to Sec. 64.6130 of this chapter.
(b) Providers must clearly label the Facility-Related Rate
Component (either the Legally Mandated Facility Rate Component or the
Contractually Prescribed Facility Rate Component) identified in Sec.
64.6030(d) as a separate line item on Consumer bills for the recovery
of permissible facility-related costs contained in Site Commission
payments. To be clearly labeled, the Facility-Related Rate Component
shall:
(1) Identify the Provider's obligation to pay a Site Commission as
either imposed by state statutes or laws or regulations that are
adopted pursuant to state administrative procedure statutes where there
is notice and an opportunity for public comment that operates
independently of the contracting process between Correctional
Institutions and Providers or subject to a contract with the
Correctional Facility;
(2) Where the Site Commission is imposed by state statute, or law
or regulation adopted pursuant to state administrative procedure
statutes where there is notice and an opportunity for public comment
and that operates independently of the contracting process between
Correctional Institutions and Providers, specify the relevant statute,
law, or regulation.
(3) Identify the amount of the Site Commission payment, expressed
as a per-minute or per-call charge, a percentage of revenue, or a flat
fee; and
(4) Identify the amount charged to the Consumer for the call or
calls on the bill.
(c) Providers must clearly label all charges for International
Communications in Sec. 64.6010(d) of this chapter as a separate line
item on Consumer Billing Statements and Statements of Account. To be
clearly labeled, Providers must identify the amount charged to the
Consumer for the International Communication, including the costs paid
by the provider to its underlying international providers to terminate
the International Communication to the International Destination of the
call.
(d) Providers shall make disclosures pursuant to this section
available:
(1) Via the Provider's website in a form generally accessible to
the public without needing to have an IPCS Account with the Provider;
(2) Via the Provider's online or mobile application, if Consumers
use that application to create an IPCS Account with the Provider; and
(3) On paper, upon request of the Consumer.
(e) Billing Statements and Statements of Account:
(1) Providers must make available Billing Statements and Statements
of Account to all IPCS Account holders on a monthly basis via:
(i) The Provider's website;
(ii) The Provider's online or mobile application; or
(iii) On paper, upon request of the Consumer.
(2) Billing Statements and Statements of Account shall include:
(i) The amount of any deposits to the account;
(ii) The duration of any calls and communications for which a
charge is assessed; and
(iii) The balance remaining in the IPCS Account after the deduction
of those charges.
(f) All disclosures made pursuant to this section, and Sec. Sec.
64.6130 and 64.6140 shall be clear, accurate, and conspicuous, and
shall be available in accessible formats for people with disabilities.
(g) Paragraph (b) of this section shall cease to be effective upon
the individual compliance dates prescribed in the revisions to Sec.
64.6010 and the addition of Sec. 64.6015.
23. Delayed indefinitely, revise Sec. 64.6120 to read as follows:
Sec. 64.6120 Waiver process.
(a) A Provider may seek a waiver of the rate caps established in
Sec. 64.6010 on a Correctional Facility or contract basis if the
applicable rate caps prevent the Provider from recovering the costs of
providing Incarcerated People's Communications Services at a
Correctional Facility or at the Correctional Facilities covered by a
contract.
(b) At a minimum, a Provider seeking such a waiver must submit:
(1) The Provider's total company costs, including the nonrecurring
costs of the assets it uses to provide Incarcerated People's
Communications Services, and its recurring operating expenses for these
services at the Correctional Facility or under the contract;
(2) The methods the Provider used to identify its direct costs of
providing Incarcerated People's Communications Services, to allocate
its indirect costs between its Incarcerated People's Communications
Services and other operations, and to assign its direct costs to and
allocate its indirect costs among its Incarcerated People's
Communications Services contracts and Correctional Facilities;
(3) The Provider's demand for Incarcerated People's Communications
Services at the Correctional Facility or at each Correctional Facility
covered by the contract;
(4) The revenue or other compensation the Provider receives from
the provision of Incarcerated People's Communications Services at the
Correctional Facility or at each Correctional Facility covered by the
contract;
(5) A complete and unredacted copy of the contract for the
Correctional Facility or Correctional Facilities, and any amendments to
such contract;
(6) Copies of the initial request for proposals and any amendments
thereto, the Provider's bid in response to that request, and responses
to any amendments (or a statement that the Provider no longer has
access to those documents because they were executed prior to the
effective date of this rule);
(7) A written explanation of how and why the circumstances
associated with that Correctional Facility or contract differ from the
circumstances at similar Correctional Facilities the Provider
[[Page 77367]]
serves, and from other Correctional Facilities covered by the same
contract, if applicable; and
(8) An attestation from a company officer with knowledge of the
underlying information that all of the information the Provider submits
in support of its waiver request is complete and correct.
(c) A Provider seeking a waiver pursuant to section 64.6120(a) must
provide any additional information requested by the Commission during
the course of its review.
24. In Sec. 64.6130 revise paragraphs (a) through (c) to read as
follows:
Sec. 64.6130 Interim protections of consumer funds in inactive
accounts
(a) All funds deposited into an IPCS Account shall remain the
property of the account holder unless or until the funds are either:
(1) Used to pay for products or services purchased by the account
holder or the Incarcerated Person for whose benefit the account was
established;
(2) Disposed of in accordance with a Controlling Judicial or
Administrative Mandate; or
(3) Disposed of in accordance with applicable state law, including,
but not limited to, laws governing unclaimed property.
(b) No Provider may dispose of unused funds in an IPCS Account
until at least 180 calendar days of continuous account inactivity have
passed, or at the end of any longer, alternative period set by state
law, except as provided in paragraphs (a) and (d) of this section or
through a refund to the IPCS Account holder or such other individual as
the account holder may have designated to receive a refund.
(c) The 180-day period, or any longer alternative period set by
state law, must be continuous. Any of the following actions by the IPCS
Account holder or the Incarcerated Person for whose benefit the account
was established ends the period of inactivity and restarts the 180-day
period:
(1) Depositing, crediting, or otherwise adding funds to an IPCS
Account;
(2) Withdrawing, spending, debiting, transferring, or otherwise
removing funds from an IPCS Account; or
(3) Expressing an interest in retaining, receiving, or transferring
the funds in an IPCS Account, or otherwise attempting to exert or
exerting ownership or control over the account or the funds held within
the IPCS Account.
* * * * *
0
25. Delayed indefinitely, revise and republish Sec. 64.6130 to read as
follows:
Sec. 64.6130 Protection of consumer funds in inactive accounts.
(a) All funds deposited into an IPCS Account shall remain the
property of the account holder unless or until the funds are either:
(1) Used to pay for products or services purchased by the account
holder or the Incarcerated Person for whose benefit the account was
established;
(2) Disposed of in accordance with a Controlling Judicial or
Administrative Mandate; or
(3) Disposed of in accordance with applicable state law, including,
but not limited to, laws governing unclaimed property.
(b) No Provider may dispose of unused funds in an IPCS Account
until at least 180 calendar days of continuous account inactivity have
passed, or at the end of any longer, alternative period set by state
law, except as provided in paragraphs (a) and (d) of this section or
through a refund to the IPCS Account holder or such other individual as
the account holder may have designated to receive a refund.
(c) The 180-day period, or any longer alternative period set by
state law, must be continuous. Any of the following actions by the IPCS
Account holder or the Incarcerated Person for whose benefit the account
was established ends the period of inactivity and restarts the 180-day
period:
(1) Depositing, crediting, or otherwise adding funds to an IPCS
Account;
(2) Withdrawing, spending, debiting, transferring, or otherwise
removing funds from an IPCS Account; or
(3) Expressing an interest in retaining, receiving, or transferring
the funds in an IPCS Account, or otherwise attempting to exert or
exerting ownership or control over the account or the funds held within
the IPCS Account.
(d) After 180 days of continuous account inactivity have passed, or
at the end of any longer alternative period set by state law, the
Provider must:
(1) Contact the account holder prior to closing the account and
refunding the remaining balance to determine whether the account holder
wishes to continue using the IPCS Account, or to close it and obtain a
refund; and
(2) Make reasonable efforts to refund the balance in the IPCS
Account to the account holder or such other person as the account
holder has specified. Reasonable efforts include, but are not limited
to:
(i) Notification to the account holder that the account has been
deemed inactive;
(ii) The collection of contact information needed to process the
refund; and
(iii) Timely responses to inquiries from an account holder.
(e) If a Provider's reasonable efforts to refund the balance of the
IPCS Account fail, the Provider must dispose of remaining funds in
accordance with applicable state consumer protection law concerning
unclaimed funds or the disposition of such accounts.
(f) If a Provider becomes aware that an Incarcerated Person has
been released or transferred, the 180-day inactivity period shall be
deemed to have run and the Provider shall begin processing a refund in
accordance with this section. The Provider shall contact the account
holder prior to closing the IPCS Account and refunding the remaining
balance in the IPCS Account, to determine whether the account holder
wishes to continue using the IPCS Account, or to close it and obtain a
refund from the Provider.
(g) Any refund made pursuant to this section must include the
entire balance of the IPCS Account, including any deductions the
Provider may have made in anticipation of taxes or other charges that
it assessed when funds were deposited and that were not actually
incurred. The Provider shall not impose any fees or charges for
processing the refund.
(h) Any refund made pursuant to this section shall be issued within
30 calendar days of the IPCS Account being deemed inactive or within 30
calendar days of a request for a refund from an account holder or other
such individual as the account holder may have specified to receive a
refund.
(i) In the absence of a Consumer's request for a refund, the
requirement to provide a refund in accordance with this section shall
not apply where the balance in an inactive IPCS Account is $1.50 or
less. To the extent a Provider is unable to issue a refund requested by
a Consumer, the Provider shall treat such balances consistent with
applicable state consumer protection law concerning unclaimed funds or
the disposition of such accounts.
(j) Providers shall issue refunds required pursuant to this section
through:
(1) The IPCS Account holder's original form of payment;
(2) An electronic transfer to a bank account;
(3) A check; or
(4) A debit card.
(k) Providers shall clearly, accurately, and conspicuously disclose
to IPCS Account holders, through their Billing Statements or Statements
of Account,
[[Page 77368]]
notice of the status of IPCS Accounts prior to their being deemed
inactive.
(1) This notice shall initially be provided at least 60 calendar
days prior to an IPCS Account being deemed inactive.
(2) The notice shall be included in each Billing Statement or
Statement of Account the Provider sends, or makes available to, the
account holder until the IPCS Account holder takes one of the actions
sufficient to restart the 180-day period in paragraph (c) of this
section or the IPCS Account becomes inactive pursuant to this section.
(3) All notices provided pursuant to this paragraph shall describe
how the IPCS Account holder can keep the IPCS Account active and how
the IPCS Account holder may update the refund information associated
with the IPCS Account.
0
26. Add Sec. 64.6140 to read as follows:
Sec. 64.6140 Alternate Pricing Plans.
(a) General Parameters. (1) A Provider offering IPCS via an
Alternate Pricing Plan must comply with this section as well as Sec.
64.710 and this subpart FF.
(2) Enrollment in an Alternate Pricing Plan must be optional for
the Consumer.
(3) A service period for an Alternate Pricing Plan shall be no
longer than one month.
(4) When determining the format of an Alternate Pricing Plan,
Providers must consider:
(i) Any limits on the number of and length of calls or
communications imposed by the Correctional Facility;
(ii) The availability of correctional staff to manage the use of
IPCS at the Correctional Facility; and
(iii) Equipment availability for the calls or communications at the
Correctional Facility.
(b) Alternate Pricing Plan Rates. (1) An Alternate Pricing Plan
must be offered at a rate such that the Breakeven Point is at or below
the applicable rate cap(s).
(i) A consumer complaint about an IPCS Provider's Alternate Pricing
Plan rates will not be entertained under the rules in this section
unless the consumer's usage meets or exceeds the Breakeven Point(s) for
the Alternate Pricing Plan.
(2) If a Consumer believes that the rates under an Alternate
Pricing Plan exceed the applicable per-minute rates for that
Correctional Facility, the Consumer must show that their usage meets or
exceeds the Breakeven Point for the Alternate Pricing Plan. It is the
Provider's burden to demonstrate that the rate charged to that Consumer
under its Alternate Pricing Plan is less than or equal to the
applicable rate cap.
(3) After a Consumer uses all of the minutes, calls, or
communications available during a service period of an Alternate
Pricing Plan, the charge for subsequent minutes, calls, or
communications during the remaining part of the service period shall
not exceed the Provider's per-minute rate for the corresponding
service.
(c) [Reserved]
(d) [Reserved]
(e) Automatic Renewals and Related Consumer Disclosures. (1) If a
Provider of an Alternate Pricing Plan offers automatic renewals, the
automatic renewals must be optional to the Consumer.
(2) [Reserved]
(f) Cancellation by the Consumer and Related Consumer Disclosures.
(1) A Provider must allow a Consumer using an Alternate Pricing Plan to
cancel their participation in the Alternate Pricing Plan at any time
during the relevant service period and revert to per-minute pricing.
The Consumer may end their participation in the Alternate Pricing Plan
on the date of their choosing. The process for cancelling an Alternate
Pricing Plan must be readily accessible to the Consumer and must
include the method that the Consumer used to enroll in the Alternate
Pricing Plan.
(2) [Reserved]
(3) The refund amount provided to the Consumer upon the Consumer's
cancellation of an Alternate Pricing Plan for the special circumstances
provided in paragraph (f)(2) of this section must be at least the pro-
rated amount that corresponds to the unused portion of the service
period.
(g) Application to Telecommunications Relay Service (TRS) and
Related Communications Services. A Provider that offers an Alternate
Pricing Plan shall make TRS and related communications services
available via the Alternate Pricing Plan, pursuant to Sec. 64.6040 of
this chapter.
0
27. Delayed indefinitely, amend Sec. 64.6140 by adding paragraphs (c),
(d), (e)(2) through (4), (f)(2) and (f)(4) to read as follows:
Sec. 64.6140 Alternate Pricing Plans.
* * * * *
(c) Consumer Disclosures. (1) A Provider offering an Alternate
Pricing Plan must comply with the consumer disclosure requirements in
Sec. 64.6110 as well as the requirements in this section.
(2) Before a Consumer enrolls in an Alternate Pricing Plan; upon
request, at any time after Alternate Pricing Plan enrollment; with a
Billing Statement or Statement of Account, and any related
communications; and at the beginning of each call or communication, the
Provider also must make disclosures that include the following
information for each Alternate Pricing Plan offered by the Provider:
(i) The rates and any added Mandatory Taxes or Mandatory Fees, a
detailed explanation of the Mandatory Taxes and Mandatory Fees, total
charge, quantity of minutes, calls or communications included in the
Plan, the service period, and the beginning and end dates of the
service period;
(ii) Terms and conditions, including those concerning dropped calls
and communications in paragraph (d) of this section, automatic renewals
in paragraph (e) of this section and cancellations in paragraph (f) of
this section;
(iii) An explanation that per-minute rates are always available as
an option to an Alternate Pricing Plan and that per-minute rates apply
if the Consumer exceeds the calls/communications allotted in the Plan;
(iv) The Breakeven Point indicating at the amount of Alternate
Pricing Plan usage above which the Consumer will save money compared to
the Provider's applicable per-minute rate for the same type and amount
of service at the Correctional Facility; and
(v) The ability to obtain prior usage and billing data, upon
request, for each of the most recent three service periods (where
feasible), including total usage and total charges including taxes and
fees.
(3) The Provider must make the disclosures for Alternate Pricing
Plans pursuant to this paragraph (c) of this section available: to the
public on the Provider's website; on the Provider's online or mobile
application, if Consumers use the application to enroll in the Plan;
via paper upon request; and via the methods for general IPCS
disclosures pursuant to Sec. 64.6110 before, during, and after a
Consumer's enrollment in a Plan.
(4) In every communication between the Provider and a Consumer (or
the Incarcerated Person, if they are not the Consumer) concerning the
Alternate Pricing Plan, the Provider must either include the
disclosures for Alternate Pricing Plans pursuant to paragraph (c) of
this section, or provide clear, easy to follow, instructions for how
the consumer (or Incarcerated Person, if not the Consumer) may
immediately obtain access to those disclosures.
(5) Before a Consumer enrolls in a Plan, and at any time upon
Consumer request, the Provider must also provide to the Consumer:
(i) The rates, Breakeven Point, and total cost including any
Mandatory
[[Page 77369]]
Taxes or Mandatory Fees associated with the Plan; and
(ii) An explanation that the Consumer's prior usage and billing
data is available upon request through a readily accessible means and
must include:
(A) For the Provider's most recent three service periods (where
feasible): the minutes of use for each of the calls or communications
made by the Consumer and the applicable per-minute rate that was
charged; the total number of minutes; and the totals charged for each
service period including the details of any Mandatory Taxes and
Mandatory Fees; and
(B) This prior usage and billing data must be made available to the
Consumer via the Provider's website or online or mobile application or
via paper upon request of the Consumer.
(6) After the Consumer enrolls in a Plan, the Provider must provide
Billing Statements and Statements of Account for the Plan via the same
method the Consumer used to sign up for the Plan, and via paper upon
Consumer request. The Billing Statements and Statements of Account must
include information specific to the Alternate Pricing Plan for the
service period but the Consumer must be able to receive, upon request,
information for the past three service periods (where feasible). The
Billing Statement or Statement of Account must include for each service
period:
(i) Call details, including the duration of each call made, and the
total minutes used for that service period, and the total charge
including Mandatory Taxes and Mandatory Fees, with explanations of each
Mandatory Tax or Mandatory Fee;
(ii) The charges that would have been assessed for each call using
the Provider's per-minute rate, and the total of those charges;
(iii) The calculated per-minute rate for the service period under
the Alternate Pricing Plan, calculated as the charge for the service
period divided by the total minutes used by that Consumer, with an
explanation of that rate;
(iv) The Breakeven Point with an explanation of the Breakeven
Point; and
(v) Information about deposits made to the Consumer's IPCS Account
and the IPCS Account balance.
(7) The Provider must make available the number of minutes, calls,
or communications remaining under a Consumer's Alternate Pricing Plan
for the service period without the Consumer having to initiate a call
or communication that would count toward a fixed allotment of minutes,
calls, or communications in an Alternate Pricing Plan.
(d) Dropped Calls or Communications and Related Consumer
Disclosures. (1) A Provider offering an Alternate Pricing Plan must
explain its policies regarding dropped calls or communications in plain
language in its consumer disclosures.
(2) The consumer disclosures must include:
(i) The types of dropped calls and communications that a Consumer
can seek a credit or refund for;
(ii) How the Provider will calculate a credit or refund for a
dropped call or communication; and
(iii) The method the Consumer must use to request a credit or
refund for a dropped call or communication, and that method must be
easy for the Consumer to complete.
(e) * * *
(2) A Provider offering an Alternate Pricing Plan must explain the
terms and conditions of the automatic renewal in plain language in its
consumer disclosures when it initially offers the automatic renewal
option and before any automatic renewal is about to occur by whatever
method the Provider has established for consumer notifications to the
Consumer.
(3) The consumer disclosures must include an explanation that if a
Consumer who requested automatic renewals does not later want the
Alternate Pricing Plan to be renewed, the Consumer may cancel their
participation in the Alternate Pricing Plan.
(4) The Provider must give notice of an upcoming renewal for an
Alternative Pricing Plan directly to the Consumer no later than three
business days prior to the renewal date. Along with providing the
notice, the Provider must explain, in plain language, the terms and
conditions of the automatic renewal using, at a minimum, the method of
communication the Consumer agreed to at the time they enrolled in the
Alternate Pricing Plan.
(f) * * *
(2) A Provider must issue a refund for the remaining balance on an
Alternate Pricing Plan if:
(i) The Incarcerated Person is released;
(ii) The Incarcerated Person is transferred to another Correctional
Facility; or
(iii) The Incarcerated Person is not permitted to make calls or
communications for a substantial portion of the subscription period.
* * * * *
(4) Consumer disclosures related to Consumer cancellation of an
Alternate Pricing Plan must include:
(i) An explanation that a Consumer enrolled in an Alternate Pricing
Plan may cancel at any time and where applicable, the Provider will
begin billing the Consumer at the Provider's per-minute rates by the
first day after the termination date;
(ii) An explanation of the process for requesting cancellation of
the Alternate Pricing Plan;
(iii) An explanation that the Consumer can end the Alternate
Pricing Plan on a specific termination date of their choosing; and
(iv) The special circumstances for which a Consumer who has
cancelled their enrollment shall receive a refund and how that refund
will be calculated.
* * * * *
Note: The following appendices will not appear in the Code of
Federal Regulations.
Appendix D: Data Collection
1. This appendix and the other technical appendices that follow
outline the data compilation and analysis that the Commission staff
(staff) conducted using the 2023 Mandatory Data Collection as part
of the Commission's efforts to determine just and reasonable and
fairly compensatory rate caps for incarcerated people's
communications services (IPCS). Collectively, the appendices
provide: a description of the database compilation (Appendix A); a
description of methods (Appendix B); summary statistics (Appendix
C); a least absolute shrinkage and selection operator (Lasso)
analysis to determine what characteristics of IPCS provision have a
meaningful association with providers' reported per-minute expenses
(Appendix D); our upper bound analysis (Appendix E); our lower bound
analysis, including validation analyses (Appendix F); and a
validation analysis of the rate caps adopted in the Order (Appendix
G).
2. Description of Data Collection. On July 26, 2023, the
Wireline Competition Bureau and the Office of Economics and
Analytics released an Order implementing the 2023 Mandatory Data
Collection regarding IPCS. All providers of IPCS were required to
respond to the data request by October 31, 2023. For the purposes of
the 2023 Mandatory Data Collection, a provider is defined as any
contractor or subcontractor that provides IPCS, regardless of
whether that entity has a contract directly with the facility or
with another provider. The aim of this collection was to acquire
IPCS providers financial and operating data as part of the
Commission's efforts to set just and reasonable and fairly
compensatory rate caps. Generally, the data collection required IPCS
providers to report, for 2022, billed and unbilled demand (minutes
and communications) and billed revenues for audio and video IPCS and
ancillary services; monetary and in-kind site commission payments,
both legally mandated and contractually prescribed; and investments
and expenses for audio and video IPCS, safety and security measure
services,
[[Page 77370]]
ancillary services, and all other products and services. Throughout
Appendices D through J, we use terms defined in the 2023 Mandatory
Data Collection. Unless otherwise specified, we observe the
following conventions: ``minutes'' refers to Billed and Unbilled
Minutes sometimes also written ``billed and unbilled minutes'';
``IPCS minutes'' refers to the sum of Audio IPCS Billed and Unbilled
Minutes and Video IPCS Billed and Unbilled Minutes; ``audio IPCS
services'' is typically shortened to ``audio services''; ``video
IPCS services'' is typically shortened to ``video services'';
``audio minutes'' refer to Audio IPCS Billed and Unbilled Minutes;
``video minutes'' refer to Video IPCS Billed and Unbilled Minutes;
the same conventions for minutes apply to communications, which
generally can be thought of as calls; ``revenues'' refer to Billed
Revenues; ``safety and security measure services'' are typically
shortened to ``safety and security services''; and ancillary
services refer to the five types of services defined in the data
collection as ``Permissible Ancillary Services,'' for which the
Commission's rules allowed providers to assess charges: (i)
automated payment services, (ii) live agent services, (iii) paper
bill/statement services, (iv) single-call and related services, and
(v) third-party financial transaction services (all other ancillary
services are defined as ``Other Ancillary Services''). To minimize
the burden of the collection, we required providers to supply
information based on their internal accounts, while remaining
consistent with their financial reports and GAAP.
3. The data collection requested information from providers at
company-wide and facility levels, as well as by various categories
of investments and expenses. We required reports at the company
level for two reasons: such reports may be compared with company
financial statements and doing so constrains the investments and
expenses to be allocated among IPCS and IPCS-related services and
non-IPCS. We required reports at the facility level to give us
insight into how costs might vary with facility size and type. Staff
also prepared a detailed set of instructions for providers, which
required providers to allocate their reported investments and
expenses among IPCS and IPCS-related services and other products and
services and to further allocate the IPCS investments and expenses
among facilities. Specifically, we required providers to allocate
their investments and expenses, to the extent possible, in the
following order: direct assignment; direct attribution based on
factors that cause a particular business activity and thus
investments or expenses to increase or decrease; indirect
attribution in proportion to related categories of investments or
expenses that are directly assigned or directly attributed; or
allocation based on the share of the total of all investments or
expenses already directly assigned or attributed.
4. Structure of the Collection. To collect these financial and
operating data, and to help the Commission understand the data at
different levels and across different categories, staff developed an
Excel template and a Word template, which we required providers to
populate. Providers were required to report information at the
company-wide level (worksheets C1-C2), including total company
investments, capital expenses, operating expenses, and revenues.
Investments (capital assets) categories include: tangible assets;
capitalized research and development; purchased software; internally
developed software; trademarks; capitalized site commissions; other
identifiable intangible assets; and goodwill. Gross investment,
accumulated depreciation or amortization, and net investment are
reported separately for each of these categories of assets. The
remaining investment categories are: accumulated deferred federal
income taxes, accumulated deferred state income taxes, customer
prepayments or deposits, cash working capital, and net capital
stock. None of these categories is specific to any category of
capital assets. The Excel template calculates net capital stock--
gross investment in assets, net of accumulated depreciation and
amortization, accumulated deferred federal and state income taxes,
and customer prepayments or deposits, plus an allowance for cash
working capital. Capital expenses categories include: depreciation--
tangible assets; amortization--capitalized research and development;
amortization--purchased software; amortization--internally developed
software; amortization--trademarks; amortization--capitalized site
commissions (includes amortization recognized as an offset against
gross revenues); amortization--other identifiable intangible assets;
amortization--goodwill; return; interest other than interest paid on
customer prepayments or deposits; interest paid on customer
prepayments or deposits; federal income tax; state income tax. The
Excel template calculates return by multiplying net capital stock by
the provider's claimed weighted average cost of capital or the
default after-tax rate of return of 9.75%. Federal and state income
taxes are not allocated. The Excel template uses the provider's
reported federal and state income tax rates and tax-deductible
interest expense to calculate the federal and state income tax
income taxes that correspond to the taxable fraction of the return.
Operating expenses categories are: maintenance, repair, and
engineering of site plant, equipment, and facilities; payments to
telecommunications carriers or other entities for interstate,
international, or intrastate communications other than extra
payments to telecommunications carriers or other entities for
international communications; extra payments to telecommunications
carriers or other entities for international communications; field
services; network operations; call center; data center and storage;
payment of site commissions recognized as an expense or an offset
against gross revenues when paid or when the commissions-related
transaction occurred; billing, collection, client management, and
customer care; sales and marketing; general and administrative;
other overhead; taxes other than income taxes; transactions related
to mergers and acquisitions; and bad debt. Annual total expenses is
the sum of annual operating expenses and annual capital expenses
(including a return on net capital stock to cover the cost of
capital). Providers were also required to allocate their data across
ten (10) categories of services: audio IPCS, video IPCS, safety and
security measures, permissible ancillary services (automated payment
services, live agent services, paper bill/statement services,
single-call and related services, and third-party financial
transaction services), other ancillary services, and other products
and services. Site commissions are reported only for the entire
company; they are not allocated among services or facilities.
Ancillary service reports are not split out as between audio and
video. Providers also were required to report their revenues from
each of the 10 service categories.
5. Providers were further required to allocate their company-
wide investments and expenses to the facility level for audio and
video IPCS costs, respectively (worksheet D1). These data are
providers' allocations of the annual expenses they incurred to
supply IPCS to each facility. Providers were also required to report
revenues and demand for audio IPCS, video IPCS, and ancillary
services at the facility level, by reporting billed revenues and
total billed and unbilled minutes of use for each facility. For
audio and video IPCS, providers reported billed, unbilled, and the
total of billed and unbilled communications and minutes and billed
revenues for each facility. In addition to the billed totals, billed
communications, minutes, and revenues are reported separately for
interstate, international, and intrastate communications for each
facility. For ancillary services, providers reported billed demand
separately for automated payment service (number of uses), live
agent service (uses), paper bill/statement service (uses), single-
call and related services (number of transactions), and third-party
financial transaction service (transactions), and billed revenues
separately for each these services for each facility. Providers were
required to report company-wide annual safety and security expenses
among seven different safety and security categories: (i) the
Communications Assistance for Law Enforcement Act (CALEA) compliance
measures; (ii) law enforcement support services; (iii) communication
security services; (iv) communication recording services; (v)
communication monitoring services; (vi) voice biometrics services;
and (vii) other safety and security measures (worksheet C3). Safety
and security expenses were allocated across four different service
categories: (a) audio IPCS; (b) video IPCS; (c) ancillary services;
and (d) other products and services. The company-wide safety and
security expenses for audio and video IPCS were then allocated among
facilities as well (worksheet D2.c). Providers were directed simply
to use estimates to allocate their safety and security expenses.
6. Providers also were required to report site commissions
attributable to all company products and services. They were further
required to report company-wide ``IPCS and associated ancillary
services,'' to report site commissions as either legally-mandated or
contractually-prescribed, and were further required to sub-
categorize these commissions as monetary, in-kind, fixed, upfront,
and
[[Page 77371]]
variable site commissions (worksheet C3). Throughout Appendices D-J,
the term ``site commissions'' without further modification means all
site commissions of all forms. These company-wide site commission
figures were also required to be allocated among facilities
(worksheet D2.b). There was no requirement to allocate site
commissions between audio IPCS, and video IPCS and associated
ancillary services separately.
7. Providers were required to identify any affiliates or third
parties they used to provide ancillary services, to report any
payments to third parties for ancillary services, and to quantify
any third-party fees they paid for ancillary services that they
passed through to their customers (worksheet C3). Providers were
also required to report any IPCS or ancillary services revenues
passed through to their affiliates and any payments made to their
affiliates to complete international communications. Similarly,
providers were required to supply these responses at a facility
level (worksheet D2.e).
8. Breadth of the Collection. Twenty-one providers submitted
responses to the 2023 Mandatory Data Collection. The list of filers
with associated short names or acronyms used for these providers in
appendices D through J: Ameelio, Inc. (Ameelio); ATN, Inc. (ATN);
City Tele-Coin Co. (City Tele-Coin); Correct Solutions, LLC
(Correct); Combined Public Communications (CPC); Crown Correctional
Telephone, Inc. (Crown); Consolidated Telecom, Inc. (Consolidated);
Custom Teleconnect (Custom); Encartele, Inc. (Encartele); Global
Tel*Link Corporation d/b/a ViaPath (ViaPath); HomeWAV, LLC
(HomeWAV); ICSolutions, LLC (ICSolutions); iWebVisit.com, LLC
(iWeb); NCIC Inmate Communications (NCIC); Pay Tel Communications,
Inc. (Pay Tel); Prodigy Solutions, Inc. (Prodigy); Reliance
Telephone of Grand Forks, Incorporated (Reliance); Securus
Technologies, LLC (Securus); Smart Communications (Smart); Talton
Communications, Inc. (Talton); and TKC Telecom, LLC (TKC). Of this
group, twelve provided data, or revisions to their data, before May
1, 2024, which, as explained below, we were able to process and
include in our provider database: ATN, City Tele-Coin, CPC,
ICSolutions, HomeWAV, NCIC, Pay Tel, Prodigy, Securus, Smart, TKC,
and ViaPath. Staff made the IPCS database available to Reviewing
Parties in accordance with the relevant Protective Orders and Public
Notice. The resulting IPCS database covers 2,750 contracts and 4,537
facilities, accounting for an average daily population of 2,112,042
incarcerated people and 11.3 billion billed and unbilled minutes of
audio and 563 million billed and unbilled minutes of video. Unless
otherwise indicated, our analyses and tables that follow are derived
from this database.
9. The IPCS database provides a helpful depiction of the IPCS
industry. The database's twelve providers represent the vast
majority of the IPCS industry, and their worksheets, though not
audited, are broadly consistent with their submitted financial
accounts. For seven providers beyond these twelve, staff were able
to capture data such as minutes and/or revenues, though not the same
data from each. The additional seven are from Ameelio, Correct,
Crown, Consolidated, Custom, iWeb, and Talton. For the remaining two
providers, {[REDACTED]{time} . Incorporating these data shows that
the database of twelve providers covers approximately 84% of
reported facilities, and approximately 87% of incarcerated persons.
Table 1 reports shares of minutes, communications (the number of
audio or video calls), and revenues covered by the twelve providers
included in the database alongside the shares of the seven providers
we excluded to the extent those seven providers provided processable
data (the data from {[REDACTED]{time} were either missing or
unreliable). As described above, our database includes twelve
providers: ATN, CPC, City Tele-Coin, HomeWAV, ICSolutions, NCIC, Pay
Tel, Prodigy, Securus, Smart, TKC, and ViaPath. There are another
seven providers reflected in this table's second row whose data we
could process in part, but who were ultimately excluded from the
database for the reasons discussed below: Ameelio, Correct, Crown,
Consolidated, Custom, iWeb, and Talton. Finally, staff could not
process the submissions of Encartele and Reliance. The table
marginally overstates the relative marketplace significance of the
providers included in the database, though the impact is de minimis.
The overstatement arises for several reasons: some of
{[REDACTED]{time} ; and some very small providers did not file. It
is staff's view that if data were available for all these providers,
the impact on our conclusions would amount to no more than a
rounding error.
[GRAPHIC] [TIFF OMITTED] TR20SE24.000
A. Description of Initial Data Processing, Data Cleaning, and
Database Compilation
10. This subsection reviews the steps we took to process, clean,
and combine the collected 2023 Mandatory Data Collection data into a
database.
11. Data Combination. Staff created variable names for each row
of data in the Excel templates. Staff combined the processed twelve
provider submissions into a database, segmented by tabs organized by
worksheet from the submissions. Since the same facilities appear in
multiple worksheets, staff took care to ensure the
[[Page 77372]]
database linked the same facilities across all worksheets.
12. Data Review. Staff reviewed each submission, including the
narratives supplied in the Word template, and checked for errors to
evaluate whether the submitted data complied with the Excel template
parameters. To minimize data submission errors, the Excel template
included formulas to check for consistency between provider's
company-wide and facility-specific entries. In all cases, staff
communicated issues identified in our review, and allowed providers
to resubmit corrected data. This resulted in some form of extended
interaction between staff and providers in all cases except
Consolidated, Custom, and Talton. In these communications, staff
answered provider questions about the data collection requirements
and/or explained the data collection process to aid submission. We
received 14 refilings as a result of our error check process. The
following providers refiled: Ameelio, CPC, Correct, City Tele-Coin,
HomeWAV, ICSolutions, NCIC, Prodigy, Securus, Smart, TKC, ViaPath,
and Pay Tel on two occasions. The conversations which staff had with
these providers to prompt their refiling illustrates that the
Commission ``made inquiries to providers during the data-collection
process regarding ``questionable'' cost data.''
13. Removing Invalid or Incomplete Data. Despite these efforts,
staff concluded that we could not incorporate into the database
worksheets submitted by nine providers: Ameelio, Correct, Crown,
Consolidated, Custom, Encartele, iWeb, Reliance, and Talton. Staff
would have removed {[REDACTED]{time} . Most commonly, filings could
not be incorporated because providers' reports of expense, revenue,
or demand data were wholly or partially omitted. For example, among
other problems, {[REDACTED]{time} did not provide costs at the
facility level. Thus, their data could not be used to analyze how
per-minute expenses vary by facility type, a matter which is central
to the analysis. Similarly, among other problems, {[REDACTED]{time}
did not provide IPCS minutes, making analysis of per-minute
expenses, which is the basis for capping rates, impossible. In other
cases, the provider failed to fully allocate investments or
expenses, failed to identify the relevant subcontractor, or failed
to report video expenses at a facility level, among other problems.
For example, {[REDACTED]{time} did not allocate investments or
expenses to the other products and services category (though it
supplies other services, e.g., electronic incarcerated person
messaging services and management services) overstating
{[REDACTED]{time} IPCS expenses. {[REDACTED]{time} also did not
identify the name of the subcontractor, address, and facility
geographic coordinates for all facilities making it impossible to
match {[REDACTED]{time} expense reports with those of its
subcontractors, making analysis of {[REDACTED]{time} facilities
impossible. {[REDACTED]{time} did not allocate IPCS costs between
audio IPCS and video IPCS (though it provides both services).
{[REDACTED]{time} provided no financial statements, providing no
means of cross-checking their expense reports. Without such cross
checks staff and outside parties cannot even determine whether
{[REDACTED]{time} reports are internally consistent.
{[REDACTED]{time} also left the company-wide investment and
expenses and facility video worksheets blank (though it sells
video), making analysis of its expenses, and of video services
impossible. In contrast to claims in the record, no provider was
excluded from the database based on the provider's costs relative to
industry costs.
14. Excluding an Anomalous Provider. {[REDACTED]{time}
15. Excluding Federally Managed Facilities. Staff also excluded
from the database facilities subject to the Immigration and Customs
Enforcement (ICE) and the Bureau of Prisons (BOP) contracts because
these facilities are not comparable to other correctional
facilities. Significant portions of incarcerated people's
communications services in these institutions are managed by a
federal incarceration authority rather than the reporting provider.
As was the case in the 2021 ICS Order, {[REDACTED]{time} .
{[REDACTED]{time} under those subcontracts from the database. Staff
removed all BOP contracts they were able to identify. In 2021 ICS
Order, staff allocated the shared costs to the BOP contract before
dropping it, but that is not necessary for this data collection as
it required providers to allocate all their costs down to the
facility, {[REDACTED]{time} .
16. Data Corrections. For the 12 filings reflected in the
database, staff made corrections where necessary and feasible. In
cases where unique facility identifiers were not identical across
worksheets due to misspellings, abbreviations, or other mistakes
(e.g., ``Couny'' versus ``County''), staff corrected these. In cases
where the provider did not identify the facility as a jail or
prison, and staff was able to do so, staff inserted the relevant
facility type. Twenty-four entries could not be identified as a jail
or prison, and were removed. Of these 24 facilities,
{[REDACTED]{time} entries given at the contract level that could
not be matched to a facility. Two more entries do not correspond to
a specific facility, and are instead attributed to `No Specific
Contract' and `Other Non IPCS Facility Sites.' The last is an
{[REDACTED]{time} . ViaPath submitted average daily population (ADP)
and site commissions data at the contract level, so staff allocated
ADP from contracts to facilities in proportion to ViaPath's total
audio and video IPCS communications. Communications were chosen as
the allocator variable as it correlates strongly with ADP in
ViaPath's single-facility contracts. Communications was chosen over
minutes as the allocator as the Pearson correlation coefficient was
higher between ADP and communications than ADP and minutes. However,
the impact of this choice is small. The difference in methodologies
influences the industry per-minute IPCS expenses by no more than
$0.0046 and by no more than 2.22% in any size-bracket, audio or
video. This largest difference can be found in video IPCS per-minute
expenses for very small jails, where the minutes-weighted
methodology is $0.0046 lower than the calls-weighted methodology.
Additionally, for some facilities reported total (billed + unbilled)
minutes of use did not match the sum of billed and unbilled minutes
of use. To fix these discrepancies, for both audio and video, total
minutes of use were recalculated by summing billed and unbilled
minutes of use.
17. Treatment of Subcontractors. At certain facilities, IPCS is
provided by a contractor and a subcontractor. In some cases, both
the contractor and subcontractor submitted cost or demand data for a
single facility, because each incurred some part of costs or bills
for service. To account for this, staff matched or removed
facilities across contractor/subcontractor pairs to avoid double
counting the same facility. As facility IDs are not consistent among
providers, staff performed many matches by examining information on
address, counterparty, building, type, latitude, and longitude.
Table 2 below depicts the attempted and successful matches:
[[Page 77373]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.001
18. In cases where the contractor and subcontractor both
submitted data that could be incorporated into the dataset, multiple
entries for a single facility were merged into one. For non-numeric
descriptive data and numeric data that could not easily aggregate
across entries, such as max call duration, average daily population,
or tax rates, staff used the values given by the contractor for the
merged entry if available. Staff summed numeric data that would not
be duplicated across entries, such as revenue, cost, and minute
information. In total, staff merged 82 subcontractor entries with 81
contractor entries. In one case, a facility is reported by three
providers, with {[REDACTED]{time} both acting as subcontractors. In
the three instances where a match was attempted but could not be
made, staff removed the facilities, as identified. Additionally,
{[REDACTED]{time} remain in the dataset, but staff removed the
video information. In other cases, where the subcontractor was not
incorporated into the dataset, either because it never filed or was
excluded, staff removed those facility entries. This accounts for
the removal of 354 facility entries, which, in addition to the other
steps, leaves 4,537 facility entries in the dataset.
19. Geocoding. The providers were asked to provide address and
coordinate information for each facility. However, many facilities
lacked coordinate information. Staff used address information, where
given, to geocode the dataset to generate coordinate information. As
many providers' coordinates were incomplete, inaccurate, had low
precision, or were different from staff-geocoded coordinates by a
large distance, staff-geocoded coordinates were used where possible.
To identify facilities as urban or rural, staff used Census-block
data published by the US Census Bureau. The US Census identifies
urban census tracts with five-digit UACE codes. Using UACE codes
provided in the 2020 Census, staff identified 2,474 urban and 1,975
rural facilities, for a total of 4,449 identified facilities. 98% of
included facilities across all providers could be identified as
urban or rural using provider coordinates or geocoded addresses.
This is used in the Lasso Analysis in Appendix D.
Appendix E: Rate Cap Methodology
1. This appendix describes the method staff used to analyze the
2023 Mandatory Data Collection data and estimate the upper and lower
bounds of our zones of reasonableness for incarcerated people's
communications services (IPCS) per-minute expenses. The structure of
the data collection allows staff to determine the fully distributed
cost of providing IPCS for each provider and the entire industry.
Providers were required to directly assign, attribute, or allocate
all of their investments and expenses among audio IPCS, video IPCS,
safety and security measures, ancillary services, and other products
and services. Our measure of the fully distributed cost of providing
a service, annual total expenses, sums the provider's operating
expenses and capital expenses, including an allowance for recovery
of its cost of capital. As described in Appendix A above, annual
total expenses accounts for all of a provider's expenses, including
maintenance, repair, and engineering and 14 other categories of
operating expenses, depreciation and amortization expenses, federal
and state income taxes, and the provider's cost of capital. Annual
total expenses were reported for audio IPCS, video IPCS, safety and
security measures, and ancillary services at the company level and
separately for audio IPCS and video IPCS at each facility. Company-
wide annual total expenses of providing safety and security were
allocated among seven different safety and security categories
separately for audio IPCS, video IPCS, ancillary services, and other
products and services. Audio IPCS and video IPCS safety and security
expenses were further allocated by category among facilities. We
determine our lower and upper bounds described in this Order by
dividing allowable amounts of the reported expenses for various IPCS
components by billed and unbilled minutes separately for prisons and
different jail sizes. In this appendix, we outline the critical
components of this analysis necessary to set just and reasonable
rate caps for the provision of IPCS.
2. Unit of Analysis. As discussed in the data collection
description section, the 2023 Mandatory Data Collection required
providers to report audio IPCS and video IPCS investments and
expenses at two levels: that of the provider (company-wide) and that
of individual facilities the provider serves. Our analysis of
providers' costs is performed primarily at the level of the
individual facility. This is in contrast to the 2021 ICS Order where
staff analyzed provider data at the level of the contract, which was
necessary because, in the ordinary course of business, many filers
did not maintain requested cost data at the facility level. Relying
on multi-facility contracts encompassing facilities of varying
sizes, and in particular contracts that included facilities with
less than 1,000 ADP, likely led to an overestimate of interim rate
caps. The rate-setting methodology staff employ in this rulemaking
relies on reported facility-level data, and thus avoids this
problem. The structure of the 2023 Mandatory Data Collection,
delineated by a detailed set of instructions requiring providers to
assign, attribute, or allocate reported audio IPCS and video IPCS
investments and expenses among facilities, allows for a more
granular facility-level analysis. This ensures that the analysis is
fully consistent with our rate-setting approach, which establishes
rate caps for facilities rather than for contracts.
3. Separation into Tiers. Staff separate facility observations
into prisons versus jails and into jail size tiers based on average
daily population (ADP), analyzing provider IPCS investments and
expenses separately within each tier. Staff establish the following
tiers for the purposes of rate setting: prisons; large jails (ADP >=
1,000); medium jails (350 <= ADP < 1,000); small jails (100 <= ADP <
350); and very small jails (ADP < 100). This approach is largely
consistent with the approach taken in the 2021 ICS Order and is
similarly consistent with record evidence of the cost differences
among facilities of different sizes. However, whereas the 2021 ICS
Order did not adopt rate caps for jails with ADP less than 1,000,
the 2023 Mandatory Data Collection enables us to address IPCS
facilities of all sizes. As such, staff must establish additional
jail size tiers for the purposes of rate setting. Staff analysis of
the variation in IPCS costs across jails of different sizes showed
that significant cost differences exist among facilities served.
These cost differences reflect progressively greater costs for jails
with smaller ADPs, which warrants a more granular tiering
[[Page 77374]]
structure for jails than that adopted in previous orders, comprising
four tiers based on jail size. Staff examined per-minute costs both
graphically and using simple regressions. While there were no
sharply obvious break points, per-minute costs increased at an
increasingly steep rate as facility ADP fell. This suggested use of
the tiers adopted in the Rates for Inmate Calling Services, WC
Docket No. 12-375, Second Report and Order and Third Further Notice
of Proposed Rulemaking, 30 FCC Rcd 12763 (2015) with the small jails
tier split into two tiers, now called small jails and very small
jails. Grouping facilities into the tiers outlined above is
necessary to ensure that our rate caps reflect underlying
differences in the cost of IPCS provision across different types and
sizes of facilities. Prisons and jails are distinguished under our
rules largely by their respective confinement periods, with prisons
used to confine individuals ``sentenced to terms in excess of one
year'' and jails used to confine those with shorter sentences. This
definitional difference entails a meaningful difference in average
confinement periods and turnover rates, which drives part of the
difference in costs between the two types of facilities. Thus, by
accounting for facility type, our rate caps account for the impact
of turnover on costs. We examine the impact of other factors in the
Lasso analysis below.
4. Unit of Sale. Our rate setting methodology relies on the sum
of billed and unbilled minutes of audio or video IPCS as the unit of
sale. That is, we divide annual total expenses by billed and
unbilled minutes to determine separate per-minute rate caps for
audio and video IPCS for each facility tier. Use of a per-minute
rate structure is consistent with past Commission action, reflects
the predominant industry pricing strategy for IPCS, and is
consistent with existing Commission rules covering interstate and
international audio IPCS, which require providers to charge for
service on a per-minute basis. While this rulemaking allows
alternate pricing plans, such as monthly plans for a set number of
calls or minutes, subject to certain specified conditions, all
providers still must offer per-minute pricing for audio and video
IPCS. The use of both billed and unbilled minutes is an improvement
from the 2021 ICS Order, which divided expenses by paid minutes, and
better reflects the cost of actual minutes. This approach helps
ensure all incarcerated persons are charged no more than the cost of
their calls, and treats all minutes equally, regardless of a
facility's or a provider's policy decisions on whether and how to
provide free minutes. We disagree with commenters who argue that,
similar to the 2021 ICS Order, we should have calculated per-minute
costs on the basis of billed minutes rather than the sum of billed
and unbilled minutes. The ratio of billed minutes to unbilled
minutes varies across facilities, and rate caps based on the average
cost of a billed minute would allow over recovery of costs, and
therefore unreasonably high rates, in facilities that had a lower
ratio than the average facility in 2022, while allowing under-
recovery in other facilities. As a result, such an approach would
also mean the Commission was effectively requiring incarcerated
people who receive relatively few free minutes to subsidize other
users. Further, if the relative proportions of billed to unbilled
minutes were to shift in the future, a rate cap based on the amount
of billed minutes would become outdated. It is true that many ``IPCS
providers--particularly those serving jails--are required to provide
certain calls (e.g., calls for booking and calls to public
defenders) free of charge.'' The Report and Order does not prevent
or in any way discourage this. Just as correctional authorities may
pay providers to offer calling plans that (from the incarcerated
person's perspective) are free, correctional authorities may enter
into arrangements with providers that allow incarcerated people to
make certain types, or a certain number, of free calls. Correctional
authorities remain free to decide whether and how providers should
offer unbilled minutes. We further note that there is no strict
parallel between ``Paid Minutes,'' as used in the 2021 ICS Order,
and ``Billed Minutes'' as used in the 2023 Mandatory Data
Collection. Billed minutes do not equal paid minutes to the extent
minutes are billed for, but not paid. The instructions for the 2023
Mandatory Data Collection define billed minutes as the number of
audio or video IPCS minutes supplied for which payment is demanded,
and define unbilled minutes as the number of audio or video IPCS
minutes supplied for which payment is not demanded. Thus, billed
minutes reported in response to the 2023 Mandatory Data Collection
are intended to include minutes billed to the caller, called party,
incarcerated authority, or any other third party whether or not
these bills were actually paid. By contrast, paid minutes reported
in response to the Second Mandatory Data Collection were intended to
exclude minutes which were billed, but for which the bills were not
actually paid. (Our measure of expenses reflected in the rate caps
includes an allowance for bad debt expense to recognize unpaid bills
that are no longer expected to be collected due to customer
default.)
5. Industry Average Costs. The Martha Wright-Reed Act expressly
granted the Commission authority to use industry-wide average costs
to set IPCS rate caps. Our rate-setting approach relies on this new
statutory authority. As such, our analysis of provider investments
and expenses calculates the minute-weighted average expense of IPCS
provision, separately for audio and video IPCS and within each rate
tier. If staff were confident of three things: That the providers'
cost allocations reasonably reflect cost-causation; there was no
underlying cost variation within each of our five facility
categories when looking at audio and video separately; and there was
no overstatement of costs--then rate caps based on the industry
average would be far too high from an efficiency perspective. For
example, our analysis showed no material variation from facility to
facility in local market conditions. However, it is unlikely that
any of these three things are true, so instead staff use the minute-
weighted industry average to account for potential variation in
costs within our categories, and discount certain costs using a zone
of reasonableness analysis, to account for potentially misallocated
or cost variation otherwise not controlled for. Specifically, our
analysis calculates the minute-weighted average expense of providing
IPCS, separately for audio and video IPCS for each facility tier
(prisons, and jails of differing sizes). Staff calculate minute-
weighted average costs as annual total expense divided by total
billed and unbilled minutes, separately for audio and video IPCS and
within each rate tier. Staff reliance on industry average costs is
further supported by the Brattle Group's analysis of the 2023
Mandatory Data Collection data. Brattle finds considerable variation
in costs among IPCS providers and the facilities they serve,
particularly in the provision of video IPCS, and ultimately drop all
facility observations with costs above $0.25 per minute in their
analysis of per-minute expenses. We have concerns with such an
approach, as dropping observations creates a delta between company-
wide expenses and those reported across providers' facilities. In
addition, any threshold relied upon for pruning outliers must either
be untenably high or would potentially drop valid data points.
However, given that Brattle relies on simple, rather than weighted,
averages of facility-level per-minute expenses, pruning of outliers
needs to take place to obtain meaningful results. Staff's use of
weighted industry average expenses per minute avoids this concern,
allowing even significant outlier observations to be included in the
calculation of rate caps while ensuring that such observations do
not have a disproportionate impact on the results. We disagree with
commenters who argue that the use of the industry average to develop
our caps is ``confiscatory.''
6. Staff consider that the industry minute-weighted averages,
controlling for audio or video service, and whether the facility is
a prison or a jail of a particular size, are good, if high,
estimates of efficient costs for the following reasons. First,
providers differ in their cost accounting practices, and use
different and necessarily imperfect cost allocators. These cost
allocation variations create cost differences across facilities that
are not related to the efficient cost of service delivery. However,
by definition, these cost allocation problems cancel out across each
provider--that is, if costs are overallocated to one facility, they
must be under allocated to another. This conclusion does not apply,
of course, to costs that are improperly allocated to IPCS rather
than to nonregulated services. If these inappropriate cost
allocations are relatively random across all facilities, and there
is no evidence to the contrary, then the use of the per-minute
weighted mean would, as a good approximation, net these differences
out. The Commission could only take a different action if there was
a known correctable cost allocation bias. Second, given providers'
incentives, costs are likely overstated, biasing the industry mean
toward overstating efficient costs. That {[REDACTED]{time} reported
company-wide IPCS revenues that were respectively about 15%, 15%,
and 25% below their reported IPCS costs plus site commissions is
evidence of cost overstatement. There are many ways that costs could
be overstated which we cannot audit on the record before us and, to
the
[[Page 77375]]
extent additional information would help us resolve the matter,
within the timeframe the Martha Wright-Reed Act sets for Commission
action. Securus argues that ``the assumption that costs must be
inflated is contrary to the draft's conclusion that the cost
information is reliable.'' We disagree. Third, to the extent that
providers' cost reports are not overstated in the sense that they
reflect actual costs, many providers appear to be inefficient,
implying that the industry mean is further biased toward overstating
efficient costs. For example, there is substantial variation in
provider costs that quality or scale differences do not readily
explain. While the largest providers, {[REDACTED]{time} . These
disparities are not likely explained by quality differences, since,
for example, the large providers tend to offer more features than
smaller ones, suggesting they should have higher per-minute costs.
Fourth, while there may be some variation in efficient costs, after
controlling for audio or video service, and whether the facility is
a prison or a jail of a particular size, the cost variation that can
be attributed to any given factor is relatively small compared with
the preceding two sources of difference. The record suggests the key
drivers of audio cost are facility-type and size, which are already
controlled for in our rate-setting approach. The Lasso analysis
shows the relationship between costs and other variables, apart from
provider identity and state, to be largely statistically
insignificant. Although our Lasso analysis points to provider
identity and state as the dominant predictors of costs, we find that
these variables are not appropriate for incorporation into our rate
caps. In summary, when taking the industry mean, the variation due
to the first of these points likely cancels out; the variation due
to the second and third points likely results in substantial
overstatement of efficient per-minute expenses; and the true cost
variation of the fourth point is small. Thus, the industry minute-
weighted mean likely lies above efficient costs. This is further
supported by analysis of facility per-minute revenues.
7. Overview of Our Zones of Reasonableness. Staff establish
zones of reasonableness, separately for audio and video IPCS and for
each facility tier, and determine final audio and interim video IPCS
rate caps from within these zones. A zone of reasonableness approach
helps avoid giving undue weight to imprecise and likely overstated
provider cost data, as well as to data assumptions and adjustments
that could lead to unduly high or low per-minute rate caps.
8. Staff begin by using data that providers submitted in
response to the 2023 Mandatory Data Collection to establish upper
bounds. Staff make no adjustments to provider reported expenses
beyond the data cleaning, processing, and corrections discussed in
the data collection appendix, and supplement these data with
estimates of the costs incurred by facilities to provide access to
IPCS and by providers to provide TRS. As discussed above, we find
that, in light of the Martha Wright-Reed Act's elimination of the
requirement that ``each and every'' completed communication be
fairly compensated, it is appropriate to set our upper and lower
bounds based on industry-wide average costs at each tier of
facilities, without the need to consider one standard deviation or
any other measure of deviance from the average. Staff then make
reasonable, conservative adjustments to the reported data and use
those data to establish the lower bounds of our zones of
reasonableness. Finally, we select rates from within each zone of
reasonableness to establish final audio and interim video IPCS rate
caps for each facility rate tier.
9. Components of Our Upper Bounds. Our upper bounds incorporate
five distinct components of expenses for audio and video IPCS: (i)
audio/video IPCS expenses; (ii) audio/video IPCS safety and security
expenses; (iii) ancillary service expenses; (iv) correctional
facility expense component; and (v) TRS allowance. Staff discuss and
explain each of these components in the upper bounds appendix.
10. Components of Our Lower Bounds. As indicated, staff
establish our lower bounds by making reasoned disallowances and
adjustments to reported provider cost data. The lower bounds
appendix explains the need for these steps. After the disallowances
and adjustments, the lower bounds incorporates the following
components of industry average costs: (i) audio/video IPCS expenses
after adjustments to certain expense categories; (ii) audio/video
IPCS safety and security expenses after certain disallowances and
adjustments to expense categories; (iii) ancillary service expenses
after adjustments to certain expense categories; and (iv) unadjusted
TRS allowance. The impact of the expense adjustments on ancillary
service expenses is trivial, shaving $0.001 off the lower bounds.
Appendix F: Summary Statistics
1. The database, developed as described in Appendix A, is the
primary data source for our analysis. This appendix provides summary
statistics and associated analysis for that database. The database
used in our analyses contains data for 4,537 facilities supplied by
12 providers, referred to throughout as the industry. The following
discussion summarizes key aspects of audio and video incarcerated
people's communications services (IPCS) provision, including
industry demand, revenue, and expenses as reported in the database.
2. As mentioned in previous sections, the data used for this
analysis comes from two levels of data: company-wide and facility-
specific. It is important to note that the estimates from company-
wide and facility-specific do not always perfectly match one
another. Therefore, estimates using company-wide data may vary
slightly from facility-specific data.
A. Industry Fundamentals
3. Table 1 provides an overview of the size and composition of
audio and video supply and of the nature of audio and video
expenses. In 2022, IPCS audio was the predominate form of
communication, and IPCS audio usage outweighed IPCS video. There
were 11,266 million audio IPCS minutes, and 558 million video IPCS
minutes. Thus, audio minutes comprised approximately 95% of industry
minutes--see Table 1. Similarly, audio communications comprised
approximately 97% (1.82 billion/1.878 billion) of industry
communications. This difference was less marked in terms of
facilities: 2,092 facilities had video calls, or about half as many
2,092, was about half as many as had audio, 4,151. This suggests
that in 2022 video had barely taken off as a service, and it is
highly likely that video share today is much higher than in 2022,
and likely will continue to grow. It is best to first focus on audio
given the lopsided share of audio data and, as evidenced below, the
odd results for video, which are likely attributable to the nascent
nature of video supply in 2022. Either in terms of minutes or
average daily population (ADP) the two largest IPCS providers by far
were {[REDACTED]{time} .
4. [REDACTED]. Video is also different from audio in other ways.
{[REDACTED]{time} .
BILLING CODE 6712-01-P
[[Page 77376]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.002
[[Page 77377]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.003
[[Page 77378]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.004
5. Table 1 also illustrates that per-minute audio expenses vary
significantly across carriers. Focusing first on audio, while
{[REDACTED]{time} .
6. Per-minute video expenses vary much more than audio. The
industry standard deviation across providers is 210.7 for audio and
1,187.5 for video. And again there are surprises. For example,
despite being a relatively low-cost audio provider,
{[REDACTED]{time} . This wide variation could arise from accounting
differences, including choices on how to depreciate assets over
time, quality differences, and providers being at different points
in their video deployment. For example, some providers may be
further down the ``learning by doing'' cost curve, and/or have
incurred costs without yet achieving the sales volumes they are
capable of.
7. Finally, Table 2 shows providers' shares of audio minutes can
be quite different from their share of audio communications,
implying that the average length of an audio communication varies
across providers. This is directly shown in Table 2, and is also
true for video. Table 2 also shows that the average video
communication lasts about 18.3 minutes, more than double the average
audio communication length of 7.3 minutes. Yet, {[REDACTED]{time} .
Video communication lengths are also considerably more varied than
those of audio. Audio communications lengths vary by about nine
minutes, from 4.3 to 12.9, while video communications lengths vary
by about twenty-one minutes, from 3.6 to 25.1 minutes. The industry
standard deviation across providers is 2.3 for audio and 6.8 for
video.
[[Page 77379]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.005
BILLING CODE 6712-01-C
[[Page 77380]]
B. Expenses, Revenues, and Margins
8. Expenses. Table 3 shows provider-reported expenses, as
allocated between five categories: audio, video, safety and security
services, site commissions, and ancillary services. Throughout
Appendices D through J, the term ``site commissions'' refers to the
sum of all forms of monetary payment, in-kind payment, gift,
exchange of services or goods, fee, technology allowance, or product
that a provider or affiliate of a provider may pay, give, donate, or
otherwise provide to an entity that operates a facility, an entity
with which the provider enters into an agreement to provide IPCS, a
governmental agency that oversees a facility, the city, the county,
or state where a facility is located, or an agent of any such
facility. In-kind site commissions amount to less than one percent
of all site commissions. Site commissions are not IPCS costs.
Ancillary services refer to the five types of services defined in
the data collection as ``Permissible Ancillary Services,'' which our
rules allowed providers to charge: (i) automated payment services,
(ii) live agent services, (iii) paper bill/statement services, (iv)
single-call and related services, and (v) third-party financial
transaction services (all other ancillary services are defined as
``Other Ancillary Services''). As expected, {[REDACTED]{time} .
Safety and security expenses are the largest source of industry
expenses, accounting for more than a third of the sum of reports for
the five listed expenses. Yet, there is a sharp difference between
{[REDACTED]{time} , a matter we will turn to when discussing Table
4.
9. After safety and security, site commissions account for the
second largest fraction of industry expenses--over one fourth.
(Percent of Site Commissions of All Related Expenses = (Legally
Mandated Site Commissions + Contractually Prescribed Site
Commissions)/Total Expenses = ($29,017,010 + $403,577,600)/
$1,555,228,234 = 27.8%.) By comparison, audio expenses account for
about one fifth of industry expenses, and ancillary services for
about one tenth. A distant last place, video expenses only account
for less than five percent of this total, again likely reflecting
that video was a new service in 2022.
BILLING CODE 6712-01-P
[[Page 77381]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.011
10. Using facility-specific data from providers, we also analyze
expenses and revenues separately for prisons and jails, and for
different jail sizes. We categorize jails based on average daily
population (ADP). A large jail is defined as a jail with an ADP
[[Page 77382]]
equal to or greater than 1,000. A medium jail is a jail with an ADP
of or greater than 350 and less than 1,000. A small jail has an ADP
of or greater than 100 and less than 350. Lastly, a very small jail
has an ADP of less than 100. As demonstrated in the tables below, a
large majority of facilities are jails as opposed to prisons and, of
all jails, about half classify as very small, with ADPs of less than
100.
11. Table 4 reports first audio expenses, excluding safety and
security expenses, per billed and unbilled audio minute by facility
type for each provider and the industry average, and then the same
thing for video. Focusing first on audio, it shows that audio
expenses per billed and unbilled minute tend to be lower for prisons
compared to jails for the entire industry, with an industry average
of about $0.02 for prisons and between $0.02 and $0.09 across the
different jail sizes. However, for the three providers that serve
prisons, the difference between prisons and jails is minimal.
Similarly, smaller jails tend to have higher per-minute expenses for
audio compared to larger jails. Industry audio expenses per billed
and unbilled minute are about $0.02, $0.04, $0.06, and $0.09 for
large, medium, small, and very small jails, respectively. Again, the
data for video contain anomalies. Video per-minute expenses for
prisons were $0.156, greater than that for jails of all sizes except
very small jails, reversing the same comparison for audio. And the
per-minute expenses of the three providers of prisons are very
different, with an order of magnitude range of {[REDACTED]{time} .
With only ten providers reporting video expenses, industry video
expenses per billed and unbilled minute are about $0.09, $0.09,
$0.12, and $0.21 for large, medium, small, and very small jails,
respectively. Table 4 also shows the outsized impact of
{[REDACTED]{time} .
[[Page 77383]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.012
[[Page 77384]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.013
12. Safety and Security Expenses. Table 5 presents per-minute
audio and per-minute video IPCS safety and security expenses for
facility types. It shows that {[REDACTED]{time} .
[[Page 77385]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.014
[[Page 77386]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.015
BILLING CODE 6712-01-C
13. International Audio Termination Expenses. Staff examine the
providers' reported international termination expenses to determine
the feasibility of establishing a
[[Page 77387]]
separate rate cap to recover those expenses. Under the Commission's
current rules, a provider can charge a per-minute rate for
international audio communications that does not exceed the
applicable interstate rate cap plus the average per-minute amount
the provider paid its international service providers for
communications to a particular international destination. Under
these rules, a provider is also required to determine the average
amount paid for communications to each international destination for
each calendar quarter and to adjust its maximum rates based on this
determination within one month of the end of each calendar quarter.
Providers were required to report extra payments to
telecommunications carriers or other entities for international
communications as an operating expense on row 75 on the C1-C2.
Company-Wide Information worksheet. {[REDACTED]{time}
{[REDACTED]{time} . As these extra payments are for termination of
audio communications to international destinations, and providers
can impose a separate charge on international minutes to recover
these expenses under our rules, staff divide {[REDACTED]{time} .
Logically, if none of the extra payments to telecommunications
carriers or other entities for international communications were
allocated to video IPCS, then the portion of the extra payments
allocated to safety and security measures would be attributed to
audio IPCS provision. Table 6 below details this calculation.
[GRAPHIC] [TIFF OMITTED] TR20SE24.016
14. {[REDACTED]{time} . In addition, nothing in the record
suggests a need to create a separate charge for video analogous to
the separate charge for termination of international audio
communications.
15. Staff note that annual total expenses, as developed on the
Excel template, excludes extra payments to telecommunications
carriers or other entities for international communications.
{[REDACTED]{time} other providers make payments for termination of
international communications. They likely report these as expenses
on a different row than the row designated for reporting these extra
payments in the Excel template. For example, providers may have
reported the extra payments for international communications not as
extra payments but instead as part of payments to telecommunications
carriers or other entities for interstate, international, or
intrastate communications other than extra payments to
telecommunications carriers or other entities for international
communications. In other words, they may have reported the extra
payments on row 74 on the C1-C2. Company-Wide Information worksheet
and row 85 on the D1. Facility Audio IPCS Costs and D1. Facility
Video IPCS Costs worksheets. To the extent that these other
providers report these extra payments as expenses on any other row,
these expenses are reflected in annual total expenses and thus in
the upper and lower bounds of our audio rate caps. Consequently, the
upper and lower bounds for our audio rate caps are likely overstated
because providers can still impose a separate charge for termination
of international audio communications, consistent with the
Commission's existing rules.
16. Revenues. Turning to the other side of the ledger, Table 7
depicts IPCS billed revenues, inclusive of the portion of those
revenues used to pay monetary site commissions (revenues hereafter),
by category for each provider and the overall industry. Table 7
shows that the overwhelming majority of IPCS revenue is audio
revenue, roughly 77%. {[REDACTED]{time} We conclude that generally
safety and security measures are not priced separately. Our
instructions specified that only revenues derived from safety and
security measures that are priced separately were to be reported
separately.
BILLING CODE 6712-01-P
[[Page 77388]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.017
17. The top of Table 8 shows the audio revenues per billed and
unbilled audio minutes among the different facility types for each
provider and for the industry average. Looking at the industry;
revenues, per billed and unbilled minutes, are lowest for prisons,
increasing by about 50% for large jails, by 50% again for medium
jails, and finally by about 20% for small jails, with no change for
very small jails. However, this pattern is largely driven by
{[REDACTED]{time} . Many of the smaller providers' per-minute
revenues fall for some jail size declines, and often their per-
minute revenues are quite close across the jail types they serve.
The latter half of Table 8 reveals less variation across facility
types for video than for audio revenues per billed and unbilled
minutes, but directionally the effects are similar.
[[Page 77389]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.018
[[Page 77390]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.019
18. Margins. Provider's reported margins, the difference between
their reported revenues and expenses, including site commission
payments, are remarkable--see Table 9. Half of the 12 companies in
the database, including the largest three,
[[Page 77391]]
{[REDACTED]{time} . And five of these companies {[REDACTED]{time} .
The reported losses are so large that they result in an industry
loss of about $219 million, more than 16% of industry revenue.
{[REDACTED]{time}
[GRAPHIC] [TIFF OMITTED] TR20SE24.020
BILLING CODE 6712-01-C
19. A firm's revenues from the sale of services over the long
run must cover the expenses it incurs to provide these services,
including its cost of capital. Otherwise, a firm will cease to
operate as it will be unable to pay its employees, suppliers, or
creditors, or compensate its owners with a normal rate of return for
use of their money. A normal rate of return is a rate of return
equal to what the firm's owners could expect to earn if they
invested in their next best alternative, holding other things, most
notably risk, constant. There is no evidence that a current IPCS
provider is failing to recover enough to justify long-run ongoing
service. While recent press reports suggest Securus may be
considering filing for bankruptcy, {[REDACTED]{time} . As such, a
useful benchmark to gauge the suitability of the providers' reported
expenses for setting rate caps is whether their revenues cover their
expenses. Some providers produce services other than and in addition
to IPCS. IPCS is a key business segment for all providers and this
segment would be expected to operate as a profit center. Thus, a
narrower comparison between IPCS revenues and expenses is a useful
benchmark for the business segment.
20. Thus, the reported losses of at least the six companies,
{[REDACTED]{time} are difficult to reconcile with a reasonable
expectation of these providers' economic profits--their capacity to
recover the least cost of their operations, including a return on
capital commensurate with efficient risk bearing--rather than
accounting losses relevant for tax purposes, or to investors who may
have overpaid for the company or debtors who may have
underappreciated the risks associated with their loans.
{[REDACTED]{time} are large and sophisticated, with many years of
experience in the provision of IPCS. Indeed, the smaller companies
reporting losses also have many years of experience in this
industry. All these companies routinely and voluntarily bid on
contracts in an environment they understand. They know what services
correctional authorities are interested in and what is necessary to
offer them. They have a deep knowledge of the characteristics of
their customers and the regulatory and political environment, and
thus of what protections are needed in their contracts. There is
nothing in the record that suggests 2022 was a year in which any of
these providers faced unusual economic difficulties, or to suggest
that these providers' operations are not going concerns. 2022 was
unusual due to the ongoing impacts of
[[Page 77392]]
COVID, which led correctional facilities to request changes in
contract terms, for example, so as to provide more free calling.
However, these were voluntary, and subject to the original terms of
the existing contracts. There is no evidence that these changes
created financial hardship for any providers.
21. It is therefore implausible that {[REDACTED]{time} . Such
deficits call into question the suitability of these four providers'
reported expenses for setting rate caps. In sum, these figures
suggest that, at a high level, reported costs are overstated. In
either case, use of the providers' reported expenses without
adjustment to set rate caps or without considering other record
evidence or recognizing that this deficit is simply a snapshot in
time that does not reflect long run expectations may produce rate
caps that are too high, thereby enabling even an inefficient
provider to earn more than a normal rate of return.
C. Video Versus Audio IPCS Investment and Expense Data
22. We compare key net investment and expense categories
reported industry-wide for video IPCS, a relatively new service,
with the same categories reported for audio IPCS, a service that has
been provided for many years. Staff observe large differences
between the video IPCS and audio IPCS net investment and expense
data across the various categories. This analysis excludes
consideration of safety and security investments and expenses as
providers were not required to further allocate the various
investment and expense categories for safety and security measures
between audio and video. Rather, providers more simply allocated
annual total expenses, our measure of the fully distributed costs of
providing IPCS, between audio and video. Table 10 below shows each
of these categories of net investment and expense and billed
revenues, depicted in absolute dollar amounts, and billed and
unbilled minutes. Investment and expense data are from the C1-C2.
Company-Wide Information worksheet. Revenue and minutes data are
from the D1. Facility Demand and Revenue worksheet.
BILLING CODE 6712-01-P
[GRAPHIC] [TIFF OMITTED] TR20SE24.021
[[Page 77393]]
BILLING CODE 6712-01-C
23. Table 10 shows that the dollar amount for each of these
categories is much smaller for video relative to audio. For example,
the ratios of video to audio dollars for net investment in tangible
assets, total net investment, depreciation and amortization
expenses, total operating expenses, billed revenues, and billed and
unbilled minutes are respectively about 0.49, 0.18, 0.37, 0.17,
0.11, and 0.05. In short, video has yet to achieve anywhere near the
scale of operations as audio. This is not surprising, given that
audio is an established industry, while video is still emerging.
These facts demonstrate relative size but not relative efficiency
between video and audio operations.
24. One current difficulty in establishing permanent video rate
caps stems from relative cost inefficiencies reflected in the video
net investment and expense data. To enable a comparison between the
provision of audio and video, staff must provide a measure of
efficiency and adjust for scale. Staff first divide the absolute
dollar amount reported for each of the net investment and expense
categories by billed and unbilled minutes separately for video and
audio. A service is provided more efficiently if it requires fewer
dollars of investments or expenses to produce a unit of output
(e.g., a minute of audio or video). We then divide the resulting
per-minute video net investment and expense numbers by the analogous
audio numbers to compare the efficiency of providing video and
audio. The last column of Table 10 shows that the resulting video to
audio ratios for all of the net investment and expense categories
are well above one, and as high as ten. As video and audio are
different services, we would expect the video to audio per-minute
ratios for the various net investment and expense categories to
differ somewhat from one, even after video matures, though not
nearly to this same extent. Overall, these results demonstrate that
provision of video is far less efficient than that of audio. We note
that the ratio of video to audio billed revenue per billed and
unbilled minute is also set out in the last column of Tbl. 10. This
ratio is greater than two, meaning that average revenue per minute
for video is more than twice that average for audio.
25. Most notably, the highest ratios of video to audio per-
minute net investments and expenses are for tangible assets net
investment (about 10) and depreciation and amortization expenses
(about 7). While video may have greater capital requirements than
audio, we would not expect the ratios of video to audio per minute
for tangible assets net investment and depreciation and amortization
expenses to be nearly as high as video usage grows significantly
over time. These high ratios may reflect providers' large capital
outlays for purchasing and installing long-term assets necessary for
the roll out and delivery of video, as would be expected for a new
service that requires significant investment in fixed assets during
its early phases. At the same time, limited customer awareness of
and experience with a new service such as video may limit initial
customer demand over which the capital outlays for these assets may
be spread. Depreciation and amortization allocate the initial
capital outlay for a long-term asset over its useful life as a
periodic expense for accounting or tax purposes. (While depreciation
and amortization are conceptually the same, tangible assets are said
to be depreciated over time whereas definite-life intangible assets
are said to be amortized over time.) We can reasonably expect video
to experience considerable growth in the future. As this growth
occurs, we can expect video to be provided far more efficiently and
therefore at a much lower cost per-minute than the current video
investment and expense data suggest. Consequently, we hesitate to
establish permanent cost-based rate caps for video at this time
given the likelihood that these caps will soon be considerably above
cost.
D. Ancillary Services
26. Table 13 shows expenses, by provider and for the industry,
per billed and unbilled audio and video minutes for each of the
ancillary services for which providers may assess separate
interstate charges under the Commission's rules. Per-minute expenses
for these ancillary services collectively range from less than
{[REDACTED]{time} , with an industry average of $0.011. Eight
providers reported automated payment services expenses, and these
expenses account for most of the ancillary services expenses.
Automated payment services per-minute expenses range from
{[REDACTED]{time} , with an industry average of about $0.01.
Industry expenses per minute for the other ancillary services are no
higher than one tenth of a cent. Seven providers reported live agent
expenses; of these providers, these per-minute expenses are as large
as {[REDACTED]{time} . Only four, three, and two providers reported
expenses for third-party financial services, paper bill/statement
services, and single-call and related services, respectively. As
Table 11 demonstrates, providers failed to reliably or consistently
allocate their costs among the various ancillary services.
BILLING CODE 6712-01-P
[[Page 77394]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.022
[[Page 77395]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.023
BILLING CODE 6712-01-C
E. Site Commissions
27. Table 12 shows site commissions, by provider and industry.
Site commissions are equal to the sum of legally mandated and
contractually prescribed site commissions, and are only attributable
to audio, video, safety and security measures, and ancillary
services, not other products and services. Over 93% ($403.6 million/
$432.6 million) of site commissions are contractually prescribed as
opposed to legally mandated. Only two providers, {[REDACTED]{time} ,
reported legally mandated site commissions. The total site
commissions figure understates the overall industry cost for site
commissions, as it omits the excluded providers, whose collective
submissions comprise less than 1% of reported billed and unbilled
minutes in the 2023 Mandatory Data Collection, and total an
additional $13,433,691 in reported site commissions, or 3% of the
industry total of $446,038,302.
BILLING CODE 6712-01-p
[GRAPHIC] [TIFF OMITTED] TR20SE24.024
[[Page 77396]]
28. Table 13 shows that legally mandated and contractually
prescribed site commissions, expressed per billed and unbilled
minute, range from{[REDACTED]{time} {[REDACTED]{time} with an
industry average of $0.036. {[REDACTED]{time}
[GRAPHIC] [TIFF OMITTED] TR20SE24.025
29. Table 14 presents site commissions per billed and unbilled
minute, by facility type for each provider and the overall industry.
Similar to other expenses and revenues, site commissions per minute
are typically lower among prisons and higher among medium and
smaller-sized jails.
[[Page 77397]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.026
[[Page 77398]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.027
F. Supplemental Data Tables
30. Detailed Tables Showing Industry Shares for Minutes,
Communications, and Facilities. Tables 15 and 16 provide detailed
breakdowns of provider shares, first by minutes and communications,
and then by facilities and ADP.
[[Page 77399]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.028
[[Page 77400]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.029
[[Page 77401]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.030
31. Safety and Security Expenses--Detailed Tables. Tables 17-
through 19 provide detailed breakdowns of safety and security
expenses.
[[Page 77402]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.031
[[Page 77403]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.032
[[Page 77404]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.033
[[Page 77405]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.034
[[Page 77406]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.035
[[Page 77407]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.036
BILLING CODE 6712-01-C
Appendix G: Lasso Analysis
1. In this appendix, staff analyze incarcerated people's
communications services (IPCS) providers' responses to the 2023
Mandatory Data Collection to determine what characteristics of IPCS
provision have a meaningful association with providers' reported
per-minute expenses. The Commission performed a similar analysis in
Appendix F of the 2021 ICS Order, Appendix F of the 2020 ICS Order
on Remand, and in the 2020 ICS Notice of Proposed Rulemaking (NPRM)
(85 FR 67480, October 23, 2020). Those analyses found that provider
identity and the state a facility is in to be the most important
predictors of a contract's per-minute audio costs. Staff update that
analysis here, using the 2023 Mandatory Data Collection data and
looking at both audio and video facility-level costs. Staff consider
characteristics such as the average daily population (ADP) of the
facility, the type of facility served (prison or jail), and the
rurality of the facility. If these variables are associated with
statistically significant variation in provider costs, then our
analysis would support a rate-setting approach that has audio and
video rate caps that vary along these dimensions.
2. As before, staff use the statistical method called Lasso
(least absolute shrinkage and selection operator). This method
identifies predictors of an outcome variable--in our case, the
logarithm of either audio or video costs per minute--by trading off
goodness of fit against the complexity of the model, as measured by
the number of predictors. Lasso is especially useful in situations
where many variables, and interactions among those variables, can
predict an outcome of interest. Given that we are interested in
determining the potential cost effects of many categorical variables
as well as their interactions with one another, the overall number
of potential variables is extremely large: our baseline Lasso
specifications consider 490 variables for audio, and 381 for video.
Estimating the effects all these variables have on costs via more
traditional methods (such as linear regression) is infeasible. The
results of our Lasso analysis indicate that the main predictors of
provider costs per minute at the facilities they serve, for both
audio and video, are provider identity and the state where the
facility is located. We also find that whether the facility is a
prison or jail is a predictor of costs per minute, although the
effect is weaker than provider identity and state. A wide range of
other variables have less or essentially no predictive power for
either audio or video expenses.
3. We use the upper bound processed dataset with the facility
operated by a provider as the unit of observation for our analysis.
For both audio and video communications, we use the logarithm of
per-minute costs as the dependent variable. Log transformation of
the dependent variable has two benefits: (i) it can reduce the
impact of outliers; and (ii) it can reduce skewness of the
underlying per-minute cost data and make the distribution of the
dependent variable more normal, which can improve model fit and help
to ensure that residuals are normally distributed. Among the
variables that we are interested in are monetary and in-kind site
commission payments by providers at facilities they serve.
Providers, however, did not allocate site commissions between audio
and video. Therefore, for some of our models we will rely on the
logarithm of the sum of audio and video per-minute costs as the
dependent variable. To avoid having the Lasso biased by misreported
and outlier data, we conservatively drop facilities with per-minute
audio costs above $1, per-minute video costs above $5, or for which
per-minute audio or video costs are reported as negative. Standard
regression analysis is vulnerable to distortion from outliers. The
simplest regression of the dependent variable on an independent
variable fits a line by minimizing the sum of the squared
differences between each observation and that line. Points on the
line are the model's ``prediction,'' and can be thought of as the
expected values of the dependent variable for the values of the
independent variable. Outlier observations are farther from the
prediction line and squaring those differences has a
disproportionate effect on the sum of squared differences, pulling
the prediction line towards those outliers. The same logic applies
for a multivariate regression except that the prediction line is a
``hyperplane'' across the multidimensional space of all the
independent variables. The Lasso model, like standard linear
regression, minimizes the sum of squared differences and is
therefore also sensitive to outliers. In the case of the 2023
Mandatory Data Collection, there are some extreme outliers, e.g.,
per-minute expense reports in excess of $1,000 for audio and
$100,000 for video. We also drop facilities for which negative
commission payments were reported. The predictor variables that we
considered in our analysis are as follows:
The identity of the incarcerated people's
communications service provider;
The state(s) in which the correctional facilities are
located;
The type of facility (prison or jail);
An indicator for joint contracts (i.e., contracts for
which an IPCS service provider subcontracts with another
incarcerated people's communications service provider);
An indicator for whether the facility receives a site
commission;
Contract average daily population (ADP);
Five indicators for whether a facility meets one of the
five following criteria: it is a jail with average daily population
<=100; it is a jail with average daily population between 100 and
350; it is a jail with average daily population between 350 and
1,000; it is a jail with average daily population >1,000; or it is a
prison;
Log of safety and security expenses;
Rurality of the facilities covered by the contract
(urban if the facility is located in an area designated by the Urban
Area Census (UACE20) as urban);
Various combinations (i.e., multiplicative
interactions) among the above variables.
4. Lasso and Costs per Minute. The Lasso results indicate
significant differences in costs per minute across different
providers and states. The baseline Lasso models, when all variables,
including multiplicative interactions, are included, explain
approximately 62% of the variation in audio costs across facilities,
and 67% of the variation in video costs across facilities. In
addition to provider and state variables, these baseline models also
select variables for facility type (i.e., prison versus jail), and
whether or not a site commission was collected. For both our audio
and video baseline models, facility type is selected by the Lasso
almost exclusively for its interaction effect with state dummy
variables. However, the explanatory power of variables other than
provider and state is small.
5. To establish the incremental explanatory power of state and
provider, staff consider
[[Page 77408]]
audio and video Lasso models where only provider and state variables
are included and compare them with models that included all
variables except for provider and state. Staff find the provider and
state variables explain far more than what all the other variables
are able to explain. When only provider and state variables are
included, the Lasso models explain approximately 52% of the
variation in audio costs across contracts, and 56% of the variation
in video costs. This is a difference of about 10% as compared with
the full model. By contrast, for models that include all variables
except for provider and state, Lasso explains just 23% of variation
in audio costs across contracts, and 20% of the variation in video
costs, a difference of about 40% as compared with the full model.
6. The differences in costs across providers identified by the
Lasso may reflect systematic differences in underlying costs of IPCS
provision but may also point to differences in the way providers
allocated their company-wide investment and expenses to the
facility-level. The cost variation attributed to the state variable
may reflect state-level differences in costs arising from different
regulatory frameworks, including state-specific price caps that may
be correlated with provider decisions to bid on contracts (allowing
only the most efficient providers to operate in certain states), or
to underlying cost differences due to other state-specific factors.
Given concerns that the Lasso model may be placing undue weight on
the provider and state variables due to cost allocation approaches
that are unrelated to the underlying cost of IPCS provision, and
given that we have substantial record evidence indicating that
facility type and size are important dimensions along which costs of
IPCS vary, it would not be appropriate to consider the Lasso model
results as suggesting that rate caps be established by directly
taking into account the IPCS provider or location of a facility.
Rather, the Lasso results confirm that there are certain data
deficiencies at the facility-level, likely due to differences in
cost allocation approaches across providers as well as instances of
cost misallocation, and provide additional support for the industry
average cost approach to rate-setting, as such an approach is less
impacted by individual provider decisions on cost allocation and
cost-allocation anomalies that create outlier facility cost
observations.
7. While the provider and state variables were most significant
in explaining the variation in audio and video costs in our Lasso
models, facility type was also selected by the Lasso as an important
predictor of per-minute costs. Given the results from the Lasso
models, and the strong record support for jails being more costly to
service than prisons and smaller jails being more costly to serve
than larger ones, we explored whether a cost difference between
jails and prisons, and between jails of different sizes, existed
using a double-selection Lasso model. Unlike regular Lasso, which
selects predictors but does not allow for standard statistical
inference (e.g., confidence intervals, t-statistics), double-
selection Lasso allows for statistical inference to be performed on
a subset of variables of interest. In double-selection Lasso, the
researcher selects a subset of predictor variables as the variables
of interest. Two Lasso models are then run. In the first, a Lasso is
run regressing the variables of interest on all other predictor
variables. In the second, a Lasso is run regressing the dependent
variable (in our case, the per-minute cost of service) on all the
predictor variables except for the variables of interest. The
researcher then takes all of the predictor variables that were
selected by the two Lasso models and runs a regression of the
dependent variable on that subset of predictor variables and the
variables of interest. This process allows for statistical inference
on the variables of interest.
8. For audio communications, the results of the double selection
Lasso model indicated that--all other things equal--the costs of
providing audio services are approximately 113% greater in jails
than in prisons, and the costs of providing video services were
approximately nine percent greater in jails than in prisons. The
audio result was statistically significant at the 99% confidence
level, whereas the video result was not significant (z-score of
0.31). The lack of statistical significance in the difference
between video costs in jails and prisons may be further evidence
that the 2022 video data is unreliable; for example, it could be the
result of certain providers in the data making significant upfront
capital expenditures in video provision, without yet realizing high
video usage. When audio and video costs were combined, the per-
minute costs of providing audio and video service were approximately
33% higher in jails than in prisons, with the cost difference
between jails and prisons statistically significant at the 90%
level, but not 95% confidence level (z-score of 1.90).
9. Lastly, we test whether providers that pay legally mandated
or contractually prescribed site commissions at their facilities
have significantly lower per-minute expenses than providers who do
not pay site commissions. If our results showed this, it would be
consistent with there being cost shifting between the provider and
the correctional facility (i.e., the facility is receiving a
commission in exchange for covering some costs of IPCS provision).
With respect to audio communications, however, we find that
facilities for which providers pay site commissions--all else
equal--have higher per-minute costs, with the result being
significant at the 99% confidence level. This is not consistent with
cost-shifting between the provider and the incarceration authority
receiving the site commission. Instead, it may reflect how different
providers allocated their costs and site commissions, or something
else. For video communications, we find no statistically significant
difference in costs between facilities that do and do not collect a
site commission. Recognizing the aforementioned issues with our per-
minute video cost data, we also consider the sum of per-minute video
and audio costs. We find no statistically significant difference
between costs in facilities that do and do not pay site commissions.
Altogether, our double-selection Lasso results do not support the
premise that site commissions represent cost-shifting between the
provider and the correctional facility.
Appendix H: Upper Bound Analysis
1. The following appendix explains how staff determined the
upper bounds of our zones of reasonableness for incarcerated
people's communications services (IPCS) per-minute expenses
(hereafter ``upper bound(s)''), using the providers' reported
expenses and billed and unbilled minutes without adjustment. The
data used consist of the database as described in Appendix A. Staff
reviewed providers' data for compliance with the basic parameters of
the Incarcerated People's Communications Services 2023 Mandatory
Data Collection Instructions, WC Docket Nos. 23-62 and 12-375, at
29, https://www.fcc.gov/files/2023-ipcs-mandatory-data-collection-instructions, including a comparison with their financial
statements, and shared that review with providers. In response,
providers revised and resubmitted their data, also providing a
narrative to address these compliance issues. The expenses of the
unadjusted dataset are likely too high. These upper bounds reflect
the allocation methods that providers chose following our
instructions. Providers allocated their reported company-wide
investment and expenses among audio IPCS, video IPCS, safety and
security measures, automated payment services, live agent services,
paper bill/statement services, single-call and related services,
third-party financial transaction services, other ancillary
services, and other products and services. Providers further
allocated audio IPCS, video IPCS, and safety and security
investments and expenses among individual facilities. The providers
chose the basis for allocation, or allocators, as necessary to
allocate their investments and expenses among the above services and
facilities. Staff calculated ten upper bounds--five for audio IPCS
and five for video IPCS, for prisons, large jails, medium-size
jails, small jails, and very small jails. Staff did this to control,
albeit imperfectly, for the effect of facility type and size on
expense per minute. The average per-minute expense for each category
measures the central tendency of the data for similar facilities.
2. The respective upper bounds for audio and video services for
the five facility types are the sum of five per-minute expense
components: (i) audio IPCS or video IPCS; (ii) audio or video IPCS
safety and security measures (hereafter ``safety and security
measures''); (iii) ancillary services; (iv) Telecommunications Relay
Services (TRS) compliance; and (v) correctional facilities'
expenses. We discuss these in turn.
3. Audio and Video Expenses. Audio and video IPCS, safety and
security, and ancillary services expenses per minute are calculated
in the same way as per-minute expenses in the summary statistics
section above. Audio IPCS and video IPCS expenses per minute,
respectively, are calculated by taking the sum of, respectively, the
reported audio IPCS and video IPCS expenses and audio IPCS and video
IPCS billed and unbilled minutes across all providers, and dividing
the expenses by the minutes. Safety and security expenses per
minute, respectively, sum the
[[Page 77409]]
reported safety and security expenses and audio IPCS and video IPCS
billed and unbilled minutes across all providers and divides the
expenses by the minutes. Ancillary services expenses per minute sums
the reported ancillary services expenses and billed and unbilled
audio and video minutes across all providers that reported ancillary
services expenses and divides the expenses by the minutes. The
ancillary services are automated payment services, live agent
services, paper bill/statement services, single-call and related
services, and third-party financial transaction services. Staff
calculated safety and security expenses per minute for all seven
safety and security measure categories combined. The seven safety
and security measures are: (i) the Communications Assistance for Law
Enforcement Act (CALEA), 47 U.S.C. 1001 et seq., 47 CFR 1.20000 et
seq., Compliance Measures; (ii) law enforcement support services;
(iii) communication security services; (iv) communication recording
services; (v) communication monitoring services; (vi) voice
biometrics services; and (vii) other safety and security measures.
This ensures our upper bounds reflect all safety and security
expenses reported by providers without consideration as to whether
they are used and useful in the provision of audio or video IPCS.
4. Ancillary Services. Prior to this Order, ancillary services
were billed separately, but going forward will be recovered under
our caps. To incorporate ancillary service expenses into the upper
bounds, staff divide the sum of ancillary expenses by the sum of
audio and video minutes for providers reporting said expenses and
add this quotient, $0.011, to each of our ten caps. Staff do this
because ancillary service expenses are not reported separately for
audio and video. This also is a reasonable way to allocate these
costs for three reasons: billing and collection services cover both
audio and video IPCS; both sets of charges would generally appear on
the same bill; and it is not obvious billing and collection services
for audio would be more expensive than for video or vice versa.
Indeed, commenters asserted that the costs of ancillary services
were not distinguishable for audio versus video IPCS.
5. TRS Expenses. The 2023 Mandatory Data Collection invited
providers to estimate the incremental expense of complying with the
TRS requirements adopted in the 2022 ICS Order, to the extent those
expenses are not reflected in their data for 2022. Those rules
require that IPCS providers must provide access for incarcerated
people with communications disabilities to all relay services
eligible for TRS Fund support in any correctional facility where
broadband is available and where the average daily population
incarcerated in that jurisdiction totals 50 or more persons. They
also require that where incarcerated people's communication services
providers are required to provide access to all forms of TRS, they
also must allow American Sign Language direct, or point-to-point,
video communication. The Commission clarified and expanded the scope
of the restrictions on incarcerated people's communications service
providers assessing charges for TRS calls, expanded the scope of the
required Annual Reports to reflect the above changes, and modified
TRS user registration requirements to facilitate the use of TRS by
eligible incarcerated persons. One provider, {[REDACTED]{time}
submitted an incremental expense estimate, providing the only data
from which we extrapolated these costs for the industry. The upper-
bound TRS compliance expense per minute component divides
{[REDACTED]{time} . The resulting figure, rounded to $0.002, is used
as an estimate for the industry, as no other provider submitted an
incremental TRS expense estimate. It is added to each of the ten
upper bound calculations.
6. Correctional Facilities' Expenses. The 2023 Mandatory Data
Collection recognized that, in some cases, the authorities that
operate prisons or jails may incur costs attributable to providing
IPCS. Specifically, the 2023 Mandatory Data Collection directed
providers to report any verifiable, reliable, and accurate
information about the costs incurred by facilities that the
providers served in 2022 to offer safety and security measures or
other functions regarding the provision of IPCS. None of the
providers submitted these cost data. Hence, staff develop the
facilities component of the upper bounds by again relying on the
$0.02 expense additive adopted as part of the interim rate caps in
the 2021 ICS Order (86 FR 40682, July 28, 2021). Staff add this
amount to each upper bound rate cap tier for both audio and video
IPCS. Including this amount likely overstates facilities' IPCS
costs.
7. Table 22 shows the upper bound industry average components
for prisons and the four jail sizes, depicting audio and video IPCS
and IPCS safety and security, excepting the ancillary services, TRS,
and facility components, and the sum of these components plus $0.011
for ancillary services, $0.002 for TRS, and $0.02 for facility
expenses. Columns (1A) and (2A) summarize the industry average
components of the upper bounds of our zones of reasonableness for
audio IPCS and safety and security expenses, separately for each
rate tier. Staff adds a flat per-minute allowance for ancillary
services ($0.011), TRS ($0.002), and facility expenses ($0.02) to
calculate the upper bounds for audio IPCS rate caps in the third
column.
[[Page 77410]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.037
8. Columns (1B) and (2B) show the industry average components of
the upper bounds of our zones of reasonableness for video IPCS and
safety and security expenses. Staff adds a flat per-minute allowance
for ancillary services ($0.011), TRS ($0.002), and facility expenses
($0.02) to calculate the upper bounds for video IPCS rate caps in
the final column of Table 1.
9. The upper bound results for audio IPCS and video IPCS are
driven by the two largest providers, {[REDACTED]{time} which supply
a majority of IPCS minutes. As a result, {[REDACTED]{time} ,
discussed in the summary statistics above, likely distort our video
upper bounds. Tables 2 and 3 present the upper bound results, for
audio and video respectively, for each individual provider to permit
comparisons across and between providers' per-minute expenses and
the industry average per-minute expense. The fixed add-ons for
ancillary services, TRS, and facility expenses are excluded.
10. Table 23 suggests that the upper bounds for audio IPCS rate
caps do not disadvantage smaller providers that appear to operate
efficiently in their provision of audio IPCS compared to the
industry average. Setting an audio IPCS zone of reasonableness upper
bounds at the industry average implies four carriers,
{[REDACTED]{time} , have average per-minute expenses that are either
less than the upper bounds or within five percent of them for all
facility types. This is also true for {[REDACTED]{time} . That
leaves five providers with average per-minute expenses that are more
than five percent above the cap for a majority, but not always for
all of the facility types: {[REDACTED]{time} . While, to some
degree, these results support the view that larger providers have
lower unit costs, {[REDACTED]{time} are small providers who report
costs largely or entirely under, or close to, the upper bounds. In
fact, for small and very small jails, {[REDACTED]{time} . Thus,
though {[REDACTED]{time} appear to benefit from scale economies,
there is no clear indication that the rest of the industry is
systematically disadvantaged in its ability to provide audio IPCS at
rates below our upper bounds. That being said, efficient costs are
the least costs of provision, and there is no onus on the Commission
to set rate caps that support inefficient business models, even if a
provider is inefficient due to its scale.
BILLING CODE 6712-01-P
[[Page 77411]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.038
11. Table 24 shows that using the industry average to determine
the five upper bounds for video IPCS expenses leaves only
{[REDACTED]{time} with per-minute expenses that exceed the industry
average by more than five percent for a majority of facility types.
However, this result is largely driven by one provider.
{[REDACTED]{time} per-minute expenses substantially raise the
average, ranging from nearly twice to more than seven times as high
as the next highest provider. It is also not clear that reported
per-minute video expenses represent long run expenses, because video
calling is a nascent market. Thus, providers may still be making
large expenditures to improve their platforms, while supply may be
constrained and demand is still growing. These effects would
overstate per-minute video expenses relative to a future steady
state, as current expenses are higher than those in a future steady
state, while demand is lower.
[[Page 77412]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.039
{[REDACTED]{time}
BILLING CODE 6712-01-C
Appendix I: Lower Bound Analysis
1. The following appendix explains how staff estimated the lower
bounds of our zones of reasonableness for incarcerated people's
communications services (IPCS) per-minute expenses (hereafter
``lower bounds''). The first section explains a range of adjustments
made to the upper bounds, to produce our lower bounds, while the
second section brings these together, producing ten lower bounds,
being the five for each facility type for both audio and video. The
final section uses three independent sources to validate our lower
bounds.
A. Lower Bound Analysis and Adjustments
2. This section develops the lower bounds for audio and video
IPCS per-minute rate caps for each rate cap tier by making the
following adjustments to the upper bounds: bringing the WACCs
reported by {[REDACTED]{time} down to 9.75%; removing the
allowances for expenses incurred by correctional facilities;
removing categories of safety and security expenses that are not
generally used and useful in the provision of IPCS; adjusting the
ancillary service expenses to reflect the WACC changes; and
adjusting for anomalies in {[REDACTED]{time} The section also
explains our concerns with providers' reports of goodwill, but that
we decline to make goodwill adjustments due to a lack of data. While
at least one commenter has argued that the lower bounds are
``unreasonably low,'' we disagree. As set out herein, we reach those
bounds based on a reasonable, logical analysis of the collected
data. In making these adjustments, staff rely on the providers' data
reports, financials, and Word templates.
1. WACC Analysis and Adjustments
3. The weighted average cost of capital, or WACC, is the sum of
a company's cost of equity, cost of preferred stock, and cost of
debt, each expressed as an annual percentage rate and weighted by
its proportion in the capital structure. It represents the average
rate-of-return that debt, preferred stock, and equity investors
require to provide a company with the capital it uses to finance its
assets and operations. Mathematically, WACC = [(Equity/(Debt +
Equity + Preferred Stock)) * Cost of Equity] + [(Debt/(Debt + Equity
+ Preferred Stock)) * Cost of Debt] + [(Preferred Stock/(Debt +
Equity + Preferred Stock)) * Cost of Preferred Stock]. Staff
programmed the Excel template to multiply the WACC by net capital
stock to determine the return component of the provider's annual
total expenses. Net capital stock means gross investment in assets,
net of accumulated depreciation and amortization, accumulated
deferred federal and state income taxes, and customer prepayments or
deposits, plus an allowance for cash working capital. Annual total
expenses is the sum of annual operating expenses and annual capital
expenses. Return is the allowance for
[[Page 77413]]
recovery of the cost of capital and is therefore a component of
capital expenses.
4. The instructions directed providers to use either a default
WACC of 9.75% or an alternative WACC. {[REDACTED]{time} . All other
providers used the default WACC. If the provider claimed a WACC
greater than 9.75%, the instructions for the 2023 Mandatory Data
Collection required the provider to fully document, explain, and
justify how it developed that alternative WACC. Specifically, the
instructions required that the provider ``fully document . . . by
submitting data, formulas, cost of equity analyses[,] . . .
calculations, and worksheets, and explain and justify the
development of'' its claimed cost of capital, as well as its claimed
cost of debt, its claimed cost of equity, and the other components
of its claimed capital structure. The instructions warned providers
that a failure to do so may result in reversion to the default WACC.
We note that, despite an opportunity for comment, neither Securus
nor ViaPath (nor any other party) objected to the use of 9.75% as
the default WACC during the pleading cycle leading to its adoption.
5. The default 9.75% WACC is equal to the Commission's currently
authorized rate of return for local exchange carrier services
subject to rate of return on rate base regulation. The Commission
adopted this rate of return as part of a formal rulemaking
proceeding and it reflects rigorous analyses of the costs of debt
and equity, capital structure, and the WACC, as the authorized rate
of return is designed to compensate these carriers for their cost of
capital. The Commission's determination was informed by comments,
data and other information entered into the record by interested
parties and the analyses reflected in this prescription underwent
peer review.
6. While we accept the claimed WACC of both Securus and ViaPath
to establish the upper bounds, we decline to do so for the purpose
of establishing the lower bounds. As explained below, neither
Securus nor ViaPath sufficiently justifies its claimed WACC. Given
this lack of justification and the limited information otherwise
available to the Commission to develop its own estimate, we also
decline to develop an alternative WACC for either of these two
providers. Estimates of the true WACC can vary over a wide range
under different sets of reasonable assumptions. A firm's cost of
equity, in particular, must be estimated because it reflects both
current and future investors' constantly changing expectations of
that firm's future profits. Cost of equity estimates are necessarily
developed from imperfect models such as the Capital Asset Pricing
Model or Discounted Cash Flow Model. Where a firm does not issue
publicly traded stock, as is the case for Securus and ViaPath, one
must apply these (or other) models to a sufficiently comparable
proxy group of firms that issue publicly traded stock. Identifying a
proxy group of comparable and publicly traded firms can be a
difficult and imprecise exercise and using different proxies can
produce significantly different estimates. Consequently, cost of
equity estimates developed from models and using proxy groups are
often susceptible to large errors and the cost of equity is often
impossible to measure precisely. Given this, if the Commission were
to attempt to estimate Securus's or ViaPath's costs of capital, the
estimates would come with wide error ranges that would encompass the
9.75% default. We therefore find that adopting our default WACC
provides a reasonable lower bound assumption.
7. Cost of Debt. Of the three estimates needed to estimate the
WACC (i.e., cost of debt, cost of equity, and capital structure
estimates), the cost of debt estimate typically is the least
complicated. Yet, both Securus and ViaPath make mistakes in how they
estimate their costs of debt.
8. {[REDACTED]{time} .
9. {[REDACTED]{time} .
10. Capital Structure. Capital structure refers to the shares of
equity, preferred stock, and debt capital that a firm uses to
finance its operations and assets. Each capital structure component
is equal to: value of a capital component/(value of debt + value of
preferred stock + value of equity). Each share is used to weight its
respective capital cost to estimate the weighted average cost of
capital. Financial theory requires use of market value weights to
estimate the WACC. Financial theory also specifies that a firm's
target capital structure should be used to estimate the WACC.
Regulators, including the Commission, typically use book value
weights to estimate the WACC, though under the Commission's
represcription rules, market value weights can be used if use of
book value weights would produce unreasonable results. Under the
Commission's rules for represcribing the authorized rate of return
for local exchange carriers regulated on a rate-of-return basis, the
results of book value capital structure calculations are to be used
unless their use would be unreasonable. In fact, the Commission's
current authorized rate of return for local exchange carriers
regulated on a rate-of-return basis, 9.75%, reflects the use of
market value weights.
11. {[REDACTED]{time} .
12. {[REDACTED]{time} .
13. {[REDACTED]{time} .
Table 1: {[REDACTED]{time}
14. {[REDACTED]{time} .
15. {[REDACTED]{time} .
16. {[REDACTED]{time} .
17. {[REDACTED]{time} .
18. {[REDACTED]{time} .
19. {[REDACTED]{time} .
20. {[REDACTED]{time} .
21. {[REDACTED]{time} .
22. {[REDACTED]{time} .
23. {[REDACTED]{time} .
24. {[REDACTED]{time} . Total beta is equal to the standard
deviation of a security's expected returns divided by the market's
expected return. Alternatively, total beta equals the CAPM beta
estimate divided by the square root of the coefficient of
determination for the regression equation used to estimate beta.
{[REDACTED]{time}
25. The use of total beta to develop cost of equity estimates
for a private business is not broadly accepted. For example, Pratt
and Grabowski argue: ``This interpretation of beta as the risk
measure in estimating total returns is based on the premise that
most owners of private businesses are completely undiversified and,
therefore, the cost of equity capital of the private business should
include that extra amount due to the owner being undiversified. This
leads to the unreasonable position that there are at least two costs
of capital for a business--the cost of capital for investors who are
the pool of likely buyers who are likely to be diversified (for whom
in theory only market or beta risk matters) and the cost of equity
capital to the current owner who is completely undiversified (for
whom both market risk and unsystematic risk matter).''
26. Moreover, Securus is not an undiversified investor. Securus
is a subsidiary of Aventiv Technologies, which in turn is owned by
the private equity firm Platinum Equity. On its website, Platinum
Equity explains that it has been in business for more than 28 years,
made more than 450 acquisitions, and manages over $48 billion in
assets. It further explains that it ``generate[s] returns by
investing in companies across a wide range of industries that need
financial and operational support.'' Securus cannot credibly argue
that its owner, Platinum Equity (or Platinum Equity's investors
collectively), is an undiversified owner, and it therefore fails to
justify its company specific risk premium adjustment.
27. {[REDACTED]{time} .
28. {[REDACTED]{time} .
29. {[REDACTED]{time} .
30. {[REDACTED]{time} .
31. {[REDACTED]{time} .
32. {[REDACTED]{time} .
33. {[REDACTED]{time} . While CAPM is widely used among
practitioners and is featured prominently in most finance textbooks,
CAPM is not perfect, as no model can be. For this reason, in
addition to reasons we set out above, we are reluctant to rely on
the results of a single model, adjusted or not. When the Commission
last prescribed the rate of return for local exchange carriers, for
example, it relied on CAPM and the Discounted Cash Flow Model,
recognizing that neither model is perfect. That would have been our
preferred approach here as well. However, we do not have access to
data that would allow us to develop a Discounted Cash Flow Model for
either provider.
34. In summary, a substantial range of Securus's and ViaPath's
assumptions in developing their WACCs are not fully documented and/
or appear inappropriate. Consequently, we cannot rely on their
estimates. Given there is insufficient evidence in the record to
allow the Commission to develop robust estimates of our own, we
revert to our default WACC of 9.75%.
35. WACC Adjustment Mechanics. Staff replace Securus's and
ViaPath's claimed WACC figures with the default WACC of 9.75% on
their Excel templates to adjust their reported annual total
expenses. Staff also replace the tax-deductible interest expense
{[REDACTED]{time} Section 163(j) limits the interest expense
deduction to the sum of (i) the taxpayer's business interest income;
(ii) 30% of the taxpayer's adjusted taxable income; and (iii) the
taxpayer's floor plan financing interest expense for the taxable
year. Business interest income is not a cost
[[Page 77414]]
of providing IPCS and is not reported on the Excel template or
relevant to the development of rate caps. Under section 163(j),
floor plan financing interest expense is interest on debt used to
finance the acquisition of motor vehicles held for sale or lease
where the debt is secured by the acquired inventory. Floor plan
financing interest expense is not reported separately on the Excel
template and neither {[REDACTED]{time} nor any other IPCS provider
is likely to incur this type of expense. Staff add this formula even
though {[REDACTED]{time} approach likely understates tax-deductible
interest expense, leading to a larger income tax allowance and
larger annual total expenses than otherwise. Under section 163(j),
adjusted taxable income aligns with earnings before (subtracting)
interest expense and taxes. Return on the Excel template is
generally a smaller number than adjusted taxable income under
section 163(j) because return is equivalent to earnings after
interest expense and taxes with the interest expense added back to
this calculation of earnings. The portion of return subject to taxes
must be ``grossed up'' by dividing it by one minus the tax rate, and
then added to the portion of the return that is not subject to taxes
to calculate the pre-tax return (including interest expense).
{[REDACTED]{time} . Lastly, staff reduce the safety and security
expenses these providers report at the facility level by the same
percentage as these expenses are reduced by at the company-wide
level as a result of the WACC and tax-deductible interest expense
adjustments. Securus argues against this adjustment by noting that
by reducing Securus's and ViaPath's costs of capital, ``the draft
cut {[REDACTED]{time} for [sic] the industries' total safety and
security expenses.'' We find this effect is a natural consequence of
the adjustment, given the fact that capital expenses constitute a
significant portion of safety and security measure costs, and do not
find this a compelling reason to avoid making said adjustment.
36. We reject the argument that the Commission's default 9.75%
WACC ``bears no resemblance to rate of return for companies like
Securus that are primarily technology and IT service providers.'' We
recognize that IPCS is a communication service, yet not necessarily
the same as local exchange carrier service. This distinction is why
the 2023 Mandatory Data Collection instructions directed providers
to use either the default WACC of 9.75% or an alternative WACC, with
providers bearing the burden to fully document, explain, and justify
how they developed any alternative WACC. While the Commission's
9.75% rate-of-return prescription dates back to 2016, that
prescription was conservative. The Commission found that an overall
range for reasonable WACC estimates for rate-of-return-regulated
local exchange carriers is 7.12% to 9.01%, based on WACC estimates
derived from CAPM and a discounted cash flow model. It expanded the
upper end of the rate of return zone of reasonableness beyond these
WACC estimates based on policy considerations and adopted the rate
of return from the upper end of this zone. Specifically, the
Commission expanded the zone of reasonableness to provide an
additional cushion for rate-of-return incumbent LECs that may have
relatively high costs of capital. It also added a cushion to account
for regulatory lag between recognition of the need to prescribe a
different rate of return, as capital markets change significantly
over time, and actually prescribing a new rate of return. It
therefore added about three-quarters of a percentage point to the
top of the WACC range developed from the cost of equity models,
expanding the overall zone of reasonableness for rate of return
estimates to 7.12% to 9.75%, and then prescribed a 9.75% rate of
return. Neither Securus nor any other party objected to the use of
9.75% as the default WACC during the pleading cycle leading to its
adoption.
37. As discussed elsewhere, Securus relies on a number of
aggressive and insufficiently justified assumptions to develop its
WACC estimate. For example, CAPM assumes that investors are able to
diversify away exposure to non-systematic risk such as company-
specific risk. Securus, however, adds a company-specific risk
premium {[REDACTED]{time} to its CAPM cost of equity estimate, even
though its owner, Platinum Equity (or Platinum Equity's investors
collectively), is able to diversify away exposure to non-systematic
risk such as company-specific risk. For these and the other reasons
discussed, we therefore find it reasonable to use the default WACC
for Securus to develop lower bounds for our rate caps.
2. Aggressive Assumptions on Facilities Additive
38. Expenses Incurred by Correctional Facilities. To the extent
correctional facilities bear some IPCS expenses and recover these
through site commissions, our rate caps should allow for the
reimbursement of the legitimately recoverable expenses facilities
incur. In our upper bound analysis, relying on record claims, we add
$0.02 for such expenses. We do not make this addition in our lower
bound analysis because our dataset provides no evidence that site
commissions lower providers' expenses.
39. If site commissions were in some instances associated with
facilities bearing some of the expenses of IPCS provision, then we
would expect to see that providers' expenses in facilities where
site commissions are paid would, on average, be lower than in
facilities where they are not. In fact, the presence of site
commissions tends to raise, rather than lower, providers' audio and
video IPCS and safety and security expenses--see Table 2. For four
of the five facility types, the average expenses per minute rise by
between $0.021 and $0.012 per minute, only declining by $0.006 for
small jails. We therefore disagree with those commenters that urge
the Commission to include a $0.02 additive to account for facility
costs in the lower bounds. Commenters have not provided sufficient
data on either the costs or type of facility costs to contradict the
analysis we perform here. Nor have they provided any data or other
information that might independently justify a $0.02 additive, or
indeed any other additive, to the lower bounds.
[[Page 77415]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.040
40. To the extent that a correctional facility incurs IPCS
expenses (e.g., a broadband connection or safety and security
measure), its corresponding provider would face fewer expenses than
otherwise. Further, one would expect this to be reflected in higher
site commission payments, holding other things constant. However,
the payment of site commissions is not associated with a reduction
of providers' audio and video IPCS and safety and security expenses.
Providers' mean per billed and unbilled minute IPCS expenses at
facilities with no site commissions is $0.070, which is less than
the $0.085 IPCS per-minute expenses where site commissions are paid.
This difference is not statistically significant: there is an
approximately 50% chance of the observed difference randomly
occurring if the means were in fact identical. Based on a linear
regression of expenses per minute on an indicator variable for when
site commissions are zero versus when site commissions are greater
than zero, the p-value for the coefficient of the indicator variable
is 0.488. (The regression model is of the form: Expense Per Minute =
A + B * Site Commission Dummy (0,1)). In contrast, the conventional
default for statistical significance requires a p-value of less than
0.05, that is, less than a one in twenty chance that the observed
difference occurred by chance. Finally, the results of our Lasso
analysis are also consistent with the conclusion that provider
expenses are not offset by the payment of site commissions to the
correctional facilities they serve. In fact, the Lasso model finds
that facilities at which site commissions are paid have higher per-
minute expenses than facilities at which site commissions are not
paid.
3. Lower Bound TRS Additive
41. We add to the lower bounds of our zones of reasonableness
the same per-minute estimate of TRS expenses, $0.002, that we added
to the upper bound zones. This estimate, as explained above in the
upper bound analysis, is derived from {[REDACTED]{time} study of
the incremental expense of TRS compliance. {[REDACTED]{time} study
reasonably adheres to our instructions for developing the
incremental expense of TRS compliance. At the same time, no other
provider submitted an estimate of these expenses. As there is
nothing in the record to support a lower estimate, we use the same
estimate for both the upper and the lower bounds of our zones of
reasonableness.
4. Goodwill Analysis
42. Four providers report goodwill as an investment, and this
section discusses these investments and their implication for the
development of rate caps. In particular, we find that we lack the
necessary information to determine the appropriate amount of
goodwill assigned to regulated services and whether the resulting
amount should be reflected in the development of our rate caps. We
conclude that the best way forward is to accept goodwill as reported
in the development of our upper and lower bounds, but to take
account of this uncertainty in choosing how we set our rate caps
within those bounds.
43. The section begins by defining goodwill. Next, it provides
information on each of the four providers' reported goodwill,
including a description of the relative importance of goodwill as
reflected in their overall investment and expenses. It then
discusses regulatory approaches to goodwill and describes our
concerns with these providers' reported goodwill. Finally, it
explains our approach to goodwill in this proceeding.
44. Goodwill is a balance sheet item that is recorded when one
company acquires another company, being the difference between the
purchase price and the sum of the fair value of the assets acquired,
net of the sum of the fair value of the liabilities assumed.
Goodwill recognizes that the present value of the expected future
return of the going concern is greater than what would be necessary
to compensate the original owners for the value of their assets net
of their debts. Like other long-lived assets measured at carrying
value on a company's financial statements, goodwill is impaired if
the carrying value is not recoverable. The goodwill impairment test
is a test of whether the aggregate carrying value of the assets of a
business including the value of the goodwill is recoverable.
Goodwill impairment testing assesses whether a business acquisition
is successful and holds management accountable for the acquisition.
For example, if after an acquisition the hoped for synergies fail to
materialize, then this should be recognized through impairment
testing. If the impairment testing so indicates, the carrying value
of the goodwill is written down or reduced on the balance sheet, and
the amount of the reduction is recorded as a loss on the income
statement.
45. Four IPCS providers, {[REDACTED]{time} , report goodwill on
the Excel template. Providers were required to report goodwill gross
investment, accumulated amortization, net investment, and
amortization expense on rows 36, 37, 38, and 55 on the C1-C2.
Company-Wide Information worksheet and on rows 47, 48, 49, and 66 on
the D1. Facility Audio IPCS Costs and D1. Facility Video IPCS Costs
worksheets, respectively. The goodwill data reported on the Company-
Wide Information worksheet are used for the analysis in this
section. Table 3 below shows the dollar amount of each provider's
reported goodwill net investment (or more simply goodwill) and the
percentage of the accounting entity total each provider reported for
regulated services and nonregulated services. For purposes of our
discussion of goodwill, regulated services are audio IPCS, video
IPCS, safety and security measures, automated payment services, live
agent services, paper bill/statement services, single-call and
related services, and third-party financial transaction services.
Nonregulated services are other ancillary services and other
products and services. These four providers attribute 100% of their
safety and security investments and expenses to audio IPCS and video
IPCS and thus none to ancillary services or other products and
services on the C3. Safety & Security Measures worksheet.
[[Page 77416]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.041
46. These four providers collectively report goodwill of
approximately $1.2 billion for regulated services, about 94% of the
accounting entity total, as compared to approximately $79 million
for nonregulated services, about six percent of that total.
47. A provider's reported annual total expenses increase as the
amount of reported goodwill increases. Goodwill reported on the
Excel template is a component of net capital stock. The Excel
template multiplies each provider's net capital stock by its claimed
WACC or the default WACC of 9.75% to calculate return. The Excel
template also calculates the federal and state income taxes on this
return, net of tax-deductible interest expense, using the provider's
reported federal and state tax income tax rates. The return and
income taxes are components of annual total expenses, and these
expenses are reflected in our rate cap calculations. A private firm
under GAAP may elect to amortize goodwill on a straight-line basis
over a period of 10 years or less. {[REDACTED]{time} .
48. Net investment is the building block for net capital stock.
Net capital stock equals net investment in assets minus accumulated
deferred federal income taxes, minus accumulated deferred state
income taxes, minus customer prepayments or deposits, plus cash
working capital. Net capital stock is not developed on the Excel
template for nonregulated services. To get a sense of the relative
magnitude of each of these providers' reported goodwill, Table 4
below shows their reported goodwill net investment, total net
investment including goodwill, and goodwill's share of total net
investment separately for regulated and nonregulated services. Total
net investment includes net investment in tangible assets,
capitalized research and development, purchased software, internally
developed software, trademarks, other identifiable intangible
assets, and goodwill. It excludes capitalized site commissions.
49. The four providers collectively report total net investment
of {[REDACTED]{time} for regulated services, and of this total
goodwill accounts for about {[REDACTED]{time} . Thus, for these four
providers, goodwill accounts for over half the return and related
income tax allowances that are reflected in our rate caps for the
industry. In contrast, the four providers collectively report total
net investment of approximately {[REDACTED]{time} for nonregulated
services, and of this total, goodwill accounts for only about
{[REDACTED]{time} . There is no ``net capital stock'' for these
nonregulated services upon which a return is ``allowed'' to be
earned or reflected in rate caps.
[[Page 77417]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.042
50. Table 29 shows the impact of removing goodwill on each
provider's annual total expenses. Annual total expenses are the sum
of reported capital expenses, including a return on net capital
stock, and operating expenses and is the key component to the upper
and lower bounds of our zones of reasonableness. Removing goodwill
from each provider's reported annual total expenses reduces the four
providers' expenses collectively by approximately $141 million, or
about 15%. Staff assume a 9.75% return on net capital stock to
determine this impact. For {[REDACTED]{time} , the reduction to
annual total expenses reflects removal of the remaining unamortized
value of capitalized goodwill from net capital stock and removal of
amortization expense.
[GRAPHIC] [TIFF OMITTED] TR20SE24.043
51. Regulators often exclude goodwill from the base on which a
return is allowed, absent a showing by the regulated firm that its
rate payers stand to benefit from the sale that gives rise to the
goodwill. Otherwise, a firm that is sold for more than the original
cost, fair value, or other regulator-specified valuation of its
assets would be able to earn a return that exceeds what that same
firm was entitled to earn immediately prior to the sale for no
reason other than the exchange of ownership for money. Methods of
asset valuation imposed on regulated firms vary among regulators.
The 2023 Mandatory Data Collection simply requires that IPCS
providers report values for the components of net capital stock
consistent with GAAP. The burden typically is on the acquiring firm
to
[[Page 77418]]
demonstrate to the satisfaction of the regulator that the
acquisition will, for example, create efficiencies that lower the
firm's operating expenses or lead to superior service quality or
more innovative services, and thus benefit rate payers. Otherwise,
the regulator may exclude the goodwill arising from the acquisition
from the base upon which the regulator allows a return to be earned.
52. For the reasons stated above, regulators are skeptical of
allowing goodwill to be included in net capital stock. While these
four firms assign large dollar amounts of goodwill to regulated
services relative to nonregulated services, they do not explain the
basis for these assignments. We looked for justification of these
providers' goodwill claims in their financial statements and in
their Word templates. What we found only further increased our
skepticism. For example, {[REDACTED]{time} .
53. We are also skeptical of {[REDACTED]{time} reported
goodwill. {[REDACTED]{time} . Finally, we have no information that
would allow us to determine whether the four providers' reported
goodwill reflects value to the incarcerated persons that the prior
owner was unable to deliver. Absent a demonstration of that value,
goodwill typically would not be allowed to earn a return or
recovered as an expense.
54. In summary, the four providers that report goodwill have not
justified the amount of their claimed goodwill, nor the assignments
they make to regulated and nonregulated services. A proper
assignment of goodwill to regulated services and nonregulated
services would reflect a comparison between the fair values of these
services to the fair value of their assets, net of liabilities.
Among other complexities, determining the fair value of these
services would require an estimate of the present worth of their
future cash flows. Staff lack the type of detailed and comprehensive
financial information and the insight into the operations of these
services that would be needed to develop our own present worth
estimates and thus have no accurate and feasible way to re-assign or
make targeted disallowances to the goodwill these providers' report
on their Excel templates. Further, we lack sufficient information to
estimate the goodwill recorded on the balance sheet at time of the
acquisition, to conduct impairment tests, or to determine the source
of the goodwill, and hence to determine whether it should be allowed
to earn a return or recovered as an expense. We therefore make no
reassignment of or disallowance to the providers' claimed goodwill.
Instead, we consider the possibility of misassignment or
overstatement of goodwill when choosing rate caps from within our
zones of reasonableness.
5. Safety and Security Expenses
55. Safety and security expenses as reported in the data
collection are divided into seven categories: the Communications
Assistance for Law Enforcement Act (CALEA) compliance measures and
communication security services, law enforcement support,
communication recording services, communication monitoring services,
voice biometric services, and other safety and security measures. Of
the providers included in our dataset, 11 providers reported expense
data and additional information regarding their delivery of safety
and security measures. Of those 11 providers, all reported offering
some mix of safety and security measures and allocated their
expenses by category. Table 6 shows these expenses by category and
facility type, after the WACC and tax-deductible interest expense
adjustments.
BILLING CODE 6712-01-P
[[Page 77419]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.044
[[Page 77420]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.045
BILLING CODE 6712-01-C
56. Because these expenses were exclusively reported at the
level of these seven categories and each category contains more than
one safety and security measure, it is not possible to isolate the
expenses incurred to provide each individual safety and security
measure within each category, much less the portion of the expenses
within each category that are used and useful in the provision of
IPCS. The instructions for the 2023 Mandatory Data Collection
required providers to allocate safety and security expenses among
the seven categories at the facility level, and gave providers the
option to further allocate these expenses among individual services
within each category, notwithstanding NCIC's claim to the contrary.
Providers, including NCIC, declined to allocate costs among
individual services, precluding the Commission from identifying
those expenses on a more granular basis. While our upper bounds
include all expenses reported for each of the seven categories, the
lower bounds include only the expenses reported for the two of these
categories that consist of safety and security measures that we find
are generally used and useful in the provision of IPCS: CALEA
compliance measures and communication security services. Providers'
narrative responses also indicate that the suite of safety and
security measures they provide are often offered as a default
package at the time of contract, however some providers also offer
optional add-on services. The fact that these services are optional
belies the claim that they are necessary for the provision of IPCS.
For example, {[REDACTED]{time} . Together, CALEA compliance measures
and communication security services capture 34.1% of reported audio
and 36.9% of reported video safety and security measure expenses
after the WACC and tax-deductible interest expense adjustments.
57. Table 7 compares per-minute audio and video IPCS safety and
security expenses after the WACC and tax-deductible interest expense
adjustments, with and without the category adjustment. Across the
industry, the adjustment for the lower bounds decreases audio safety
and security expenses by $0.028 per billed audio minute and video
safety and security expenses by $0.054 per billed video minute. The
percent decrease from the unadjusted to adjusted total is similar
across all facility types within audio and video.
[[Page 77421]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.046
6. Ancillary Services Cost Analysis
58. Ancillary services are billing and collection services for
both audio and video IPCS, and consequently are not reported
separately. The reported expenses for these services are included in
the upper bounds of our zones of reasonableness for audio and video
IPCS by dividing them by the sum of audio and video minutes and
adding this quotient to the separate audio and video caps. This
upper bound adjustment adds a flat per-minute allowance, $0.011, for
ancillary services, for all five size-type facilities. This is
computed as industry ancillary services expenses, $125.2 million,
divided by the sum of the audio and video IPCS minutes of the
providers that reported ancillary services expenses, 11,585.9
million (a smaller number than the industry total number of
minutes).
59. The lower bounds reflect reductions in ancillary services
expenses for {[REDACTED]{time} due to restatements (lowering) of
their WACCs, with an accompanying adjustment to {[REDACTED]{time}
reported tax-deductible interest expense. The result is an industry
ancillary service expense of $0.010 per minute. Industry ancillary
services expense for the five services, $125.2 million, is reduced
by WACC and interest expense adjustments for {[REDACTED]{time} . The
minutes for providers who report these expenses are 11,585.9
million. Like the $0.011 ancillary expense added to the upper
bounds, this lower figure is added to the lower bounds as a flat
per-minute allowance for all five size-type facilities.
7. Video Expense Adjustment(s)
60. {[REDACTED]{time} Video IPCS Adjustment. {[REDACTED]{time}
reports extremely high costs for the provision of video IPCS. Their
video IPCS per-minute expenses are a substantial outlier vis-a-vis
their closest competitors and the industry as a whole, and their
resulting reported per-minute video IPCS expenses significantly skew
the industry average. They are three times higher than the industry
average and about {[REDACTED]{time} . Staff did not adjust
{[REDACTED]{time} per-minute expenses in establishing the upper
bounds of our zones of reasonableness but find it appropriate to
adjust these expenses in establishing the lower bounds. While staff
cannot fully determine why {[REDACTED]{time} reported expenses are
so different to everyone else's, they are not indicative of
efficient operations. For example, it is likely {[REDACTED]{time}
future demand will rise to at least proportionately match that of
{[REDACTED]{time} , and that may result in spreading
{[REDACTED]{time} capital expenditures over significantly more
video minutes.
61. Staff make a conservative adjustment to {[REDACTED]{time}
video IPCS expenses to align them more closely with the rest of the
industry by recalculating their expenses based on the industry
average costs per minute. More specifically, we calculate the
weighted average video IPCS cost per minute of all providers,
excluding {[REDACTED]{time} . This estimate is multiplied by
{[REDACTED]{time} total billed and unbilled video IPCS minutes to
estimate {[REDACTED]{time} video expenses as if they were
equivalent to the rest of the industry. {[REDACTED]{time} adjusted
expenses are then divided by their original expenses and subtracted
from one to calculate the percent reduction to {[REDACTED]{time}
video expenses. With an industry cost per minute for video IPCS of
0.076 when {[REDACTED]{time} is excluded, the reduction to
{[REDACTED]{time} expenses is 78.5%. We apply this reduction to
video IPCS expenses separately to each of {[REDACTED]{time}
facility tiers and divide by total minutes for each tier to arrive
at per-minute estimates. This approach is conservative as a more
appropriate adjustment of {[REDACTED]{time} video expenses would
weigh more heavily towards {[REDACTED]{time} video expenses, given
their comparable sizes and market positions. Such a reduction would
bring {[REDACTED]{time} video per-minute costs even lower, as
{[REDACTED]{time} is a relatively low-cost provider of video IPCS.
62. Table 8 shows the unadjusted and adjusted video IPCS
expenses for {[REDACTED]{time} as well as the industry average,
which includes {[REDACTED]{time} , for each facility type. The
adjusted video IPCS expense per minute for {[REDACTED]{time} across
all facilities does not equal that of the industry average because
the reduction applied to the video expenses for {[REDACTED]{time}
is calculated using all observations while the industry average
expense per minute estimates presented in Tbl. 8 must exclude
facilities that do not report ADP so that facilities can be grouped
by tier. All other adjustments made to the
[[Page 77422]]
lower bounds are applied to both scenarios presented in the table.
When compared to the industry average, which includes
{[REDACTED]{time} , {[REDACTED]{time} cost per minute across each
facility type is roughly three or more times higher, with the
exception of small jails, which are still twice that of the industry
average. Once the adjustment is made to {[REDACTED]{time} video
IPCS expenses, {[REDACTED]{time} video cost per minute for each
facility type is much more comparable to the industry average for
each corresponding facility type. However, when including safety and
security we find that {[REDACTED]{time} total IPCS video expenses
are still substantially above the industry average, both overall and
for each corresponding facility type. Despite what is likely a
similar overinvestment in video safety and security relative to
competitors, we do not adjust {[REDACTED]{time} safety and security
expenses for video IPCS provision.
BILLING CODE 6712-01-P
[GRAPHIC] [TIFF OMITTED] TR20SE24.047
63. {[REDACTED]{time} Tablet Deployment. We examine
{[REDACTED]{time} deployment of tablets relative to its competitors
to determine whether {[REDACTED]{time} has over-invested in
tablets, and whether tablet deployment costs have an outsized impact
on {[REDACTED]{time} video IPCS expenses. Table 9 shows tablet
deployment per ADP across providers and facility tiers.
{[REDACTED]{time} deployed the most tablets per ADP for each jail
tier, and has the same per-ADP deployment as {[REDACTED]{time} in
prisons.
[[Page 77423]]
For medium jails, {[REDACTED]{time} tablets exceed the incarcerated
person population by 21%. In total, as seen further down in Table 10
below, {[REDACTED]{time} has deployed nearly twice as many tablets
as {[REDACTED]{time} .
[GRAPHIC] [TIFF OMITTED] TR20SE24.048
[[Page 77424]]
64. {[REDACTED]{time} reports a $400 million gross investment
in tablets. {[REDACTED]{time} tablet deployment should be reflected
in higher investment in tangible assets in the 2023 Mandatory Data
Collection data. Table 10 shows industry net tangible asset
attribution between regulated and nonregulated business segments.
While {[REDACTED]{time} has a significant investment in net
tangible assets, possibly due to its investment in tablets, it
attributes the lowest percentage of net tangible assets to regulated
services among all providers {[REDACTED]{time} . As such, despite
{[REDACTED]{time} tablet deployment being out of line with
{[REDACTED]{time} and the rest of the industry, the large majority
of {[REDACTED]{time} tangible asset net investment is not reflected
in its net capital stock for regulated IPCS services. As such, we
refrain from making any adjustments with respect to
{[REDACTED]{time} video investments or expenses on the basis of
tablet deployment.
[[Page 77425]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.049
[[Page 77426]]
B. Audio and Video IPCS Lower Bounds
65. Incorporating the adjustments discussed above, staff have
calculated ten lower bounds--five for audio IPCS and five for video
IPCS, in each case for prisons, large jails, medium-size jails,
small jails, and very small jails. As with the upper bounds, our
rate-setting approach controls for the effect of facility type and
size on expense per minute.
66. The respective lower bounds for audio and video services for
the five facility types are the sum of four per-minute expense
components: (i) audio IPCS or video IPCS; (ii) audio or video IPCS
safety and security measures; (iii) ancillary services; and (iv) the
TRS additive.
67. Table 11 summarizes the industry average components of the
lower bounds of our zones of reasonableness for audio and video IPCS
expenses, separately for audio and video, and for each rate tier.
Column (1) shows the industry average for per-minute audio IPCS
expenses by facility type, column (2) shows the industry average for
per-minute safety and security expenses by facility type, and column
(3) shows the final lower bound estimates for audio IPCS, including
the ancillary service and TRS additives. Columns (4), (5), and (6)
report the corresponding estimates for video IPCS expenses per
minute.
[GRAPHIC] [TIFF OMITTED] TR20SE24.050
BILLING CODE 6712-01-C
C. Validation of Lower Bounds
68. This section uses three different sources to validate our
lower bounds. The first examines evidence submitted by the Brattle
Group as to reasonable per-minute audio and video expenses and find
that to be consistent with, if somewhat lower, than our lower bounds
for audio. The second shows that large fractions of facilities in
all likelihood would be viable at rates that are less than our lower
bounds, validating that our lower bounds are not set too low. Staff
demonstrate this for many facilities--presumably those with the most
efficient operations after controlling for facility type. The third
compares counties in the region of Dallas and Denton in Texas and
finds that per-minute audio rates of {[REDACTED]{time} . Because we
set each of our rate caps somewhat above the respective lower
bounds, but in each case closer to the lower bounds than the upper
bounds, these sources also offer support for the rate caps that we
adopt.
1. Brattle Analysis
69. In reviewing the record, we find the Brattle Group's model
carrier analysis provides external validation for our lower bounds.
The Brattle Group's analysis estimates per-minute costs for audio
and video calls in small, medium, and large facilities, drawing on
market data and data from the 2023 Mandatory Data Collection. The
initial model was filed on July 12, 2023, and a revised model was
filed on February 9, 2024. Comments were filed on the Brattle model
carrier analysis.
70. The Commission finds the model carrier approach useful to
evaluate the analysis of reported industry investments and expenses
undertaken by staff to establish the lower bounds of our zones of
reasonableness. Brattle's model carrier analysis aggregates
estimates of the costs of the various components that comprise IPCS,
including a markup on expenses to cover overhead. Its aim is to
estimate IPCS costs based on publicly available prices that are
constrained by market forces capturing industry standards for
efficiency, cost, and performance. As explained below, we find that,
by and large, Brattle has produced a credible and transparent model
of industry costs.
71. The advantages of Brattle's model carrier approach include
its transparency and
[[Page 77427]]
that market forces ``audit'' the relied-upon price data, in contrast
to the inability of the Commission and other stakeholders to audit
providers' expense reports. The disadvantages are that there are
aspects of IPCS for which there are limited market data, notably
many safety and security measures (which the Brattle Group does not
model), that it is not clear how to add up piece parts from
different wholesale markets to ensure the sum of the parts is a good
estimate of the whole, and that it may be difficult for a model
carrier approach to capture cost variation along relevant cost-
causative dimensions, notably the distinction between prisons and
jails, and across jail sizes. The Brattle Group address this
difficulty by using wholesale prices, which already include markups
for overheads, and then apply further markups for overheads to the
sum of these component estimates. Arguably, economies of scope and
scale in IPCS supply may be missed by such an approach, resulting in
cost overestimation. The Brattle Group seek to capture these
differences by choosing component cost models that, in their
analysis, likely overstate costs.
72. Brattle filed an initial model carrier approach, and then in
the light of comments, a revised approach. We focus on the latter.
Brattle created its model carrier by identifying five modules of
costs, populating the modules with data taken from, where available,
publicly available prices, the sources for which they document in
their report; the Commission's data collection from IPCS providers;
and other market estimates. The five cost modules are described in
Table 12.
[GRAPHIC] [TIFF OMITTED] TR20SE24.051
73. Brattle's revised model carrier analysis makes several
adjustments to the Telecom and Facilities cost modules in response
to critiques in the record. These adjustments include the following
four responsive adjustments. First, Brattle made an upward revision
in VoIP call cost by eliminating zero-cost providers from the set
used to calculate an average price. This revision responded to Mr.
Wood's critique that the model picked the lowest prices. FTI argues
even this high rate is too low, but offers no alternative. Second,
Brattle made an upward adjustment to the price of a video call with
a rate from Microsoft Azure at $0.0004 per minute. This revision
responded to Mr. Wood's critique that the model picked the lowest
prices. FTI argues even this higher rate is too low but offers no
alternative. Third, Brattle made an upward adjustment to the number
of necessary T-1 lines based on high-definition video call quality
for 60 minutes. Fourth, Brattle shortened the useful life of
equipment and relied on a wider array of equipment pricing to
respond to Mr. Wood's critique that providers make tradeoffs between
maintenance and replacement of assets.
74. The model carrier analysis assumes all video calls are made
over kiosks, which Brattle explains are more expensive than tablets.
Brattle does not use tablets because tablets can be used for
nonregulated services like books and movies, which creates a cost
allocation issue. FTI's comments argue that in fact tablets are
widely used, sometimes in conjunction with kiosks. This may be so,
but may reflect a transition from kiosks to tablets, with such
duplication being inherently inefficient. Without record evidence,
staff do not consider it appropriate to add both kiosk and tablet
costs together for the purposes of the model carrier model. Further,
even a partial transition from kiosks to tablets would imply that
Brattle's revised model may overestimate the number of kiosks but
underestimate the cost of tablets, with the net impact on
recoverable expenses arguably being an over, rather than an
underestimate.
75. In its revised model carrier analysis, Brattle also lowers
the video to audio minutes ratio from 1:2 to 1:4, which raises video
per-minute costs. The more video minutes in the model, the lower the
per-minute cost would be, because a large fraction of costs are
fixed. Video IPCS is still developing, and the Commission's data
collection does not provide a robust basis for
[[Page 77428]]
establishing a ratio based on long-run relative demand for audio vs.
video IPCS. In developing our lower bounds, the Commission
implicitly assumes an audio to video ratio as given by the industry
average, excluding Securus. {[REDACTED]{time} If, as is likely, the
ratio of video to audio calls were to increase substantially, then
our per video minute lower bounds would be much too high. Outside of
the IPCS context, video calls are increasingly popular, and it is
likely we will see a similar trajectory for the provision of video
IPCS going forward. For example, Juniper Research predicts a
continued decline in revenues from voice service for mobile network
operators, despite investments in 5G and growing subscriber numbers,
because the quality of over-the-top services like video conferencing
applications are improving. To the degree that happens, the Brattle
model and our own projections would overstate long-run video
expenses. It is uncertainty about long run video expenses that leads
us to set interim, rather than permanent, rate caps for video IPCS.
76. Site commissions are not included the model carrier,
something Wood criticizes. However, the exclusion of site
commissions as an expense is consistent with the used and useful
analysis in our Order. Consequently, excluding those costs from the
data analysis accords with the legal determinations we make.
77. Table 13 shows costs for audio and video calls when applying
the model carrier for small, medium, and large facilities in
Brattle's revised model. {[REDACTED]{time}
[GRAPHIC] [TIFF OMITTED] TR20SE24.052
78. The Model Carrier Analysis Is Largely Consistent with Our
Lower Bounds for Audio IPCS. Brattle Group's revised model carrier
analysis makes several reasoned adjustments in response to record
criticism of its original submission, resulting in the per-minute
estimates in Table 13 above. For audio, these estimates generally
align with the lower bound audio IPCS component of expenses that
staff derived through an examination of industry average costs based
on provider 2023 Mandatory Data Collection data ($0.021 per minute
for prisons and $0.022 for large jails). While the model's estimated
video IPCS expenses, excluding safety and security, are about
{[REDACTED]{time} than those established in our lower bounds, this
disparity can be, at least in part, attributed to the market for
video being less established than audio, as reflected by
{[REDACTED]{time} .
79. Staff acknowledge that the model carrier is not a substitute
for a fully distributed cost analysis of provider investments and
expenses because it is unable to capture all sources of cost
variation in the provision of IPCS, most notably cost differences
between facilities of different types and sizes, and because a model
that aggregates piece-parts of service provision to create an
efficient provider by definition does not reflect the real world
investment, operating, and other decisions of IPCS providers.
However, staff are encouraged that the benchmark audio IPCS rates
estimated by the revised model align closely with the lower bounds
we have established, which helps to validate both our lower bound
estimates and the rate caps that we ultimately adopt.
2. Reported Facilities Earning Per-Minute Revenues Below Our Lower
Bounds
80. Comparing Per-Minute Audio Revenues with Our Lower Bounds.
This section examines the facilities in which the per-minute audio
revenue, less site commissions, that is, the per-minute revenues
providers keep at a given facility, is less than our lower bounds
for that facility type. We do not perform a similar analysis for
video because the video data is unreliable and likely reflects a
nascent market with significant up-front expenses and low demand.
This means that both per-minute video revenues and per-minute video
expenses (relied upon to establish the lower bounds) are distorted,
and a comparison of the two would not yield meaningful results in
terms of validating our interim video lower bounds.
{[REDACTED]{time} These facilities demonstrate that our lower
bounds may be too high (and so provide further validation for
setting our rate caps closer to the lower bounds). Such facilities
are prima facie profitable at prices that approximate their per-
minute audio revenue rates, otherwise providers would be seeking to
exit these contracts, thus showing their per-minute audio costs, net
of site commissions, to be below our lower bounds. This result
applies most strongly for prisons and large jails, where nearly two
thirds and nearly one half of facilities, respectively, have per-
minute audio revenues net of site commissions that lie below their
respective lower bounds. For medium, small and very small jails this
share is between more than a fifth and more than a third of
facilities. We also find that the share of providers with per-minute
audio revenues less site commissions that are less than our lower
bounds is not significantly impacted by whether the provider is in a
rural or urban area.
81. In undertaking the analysis, staff's first step is to
calculate, for each facility, the sum of IPCS audio, safety and
security and ancillary service revenues net of site commissions and
divide this amount by the sum of the facility's billed and unbilled
minutes. Safety and security revenues are allocated to facilities
using safety and security expenses, as the two are likely
correlated. {[REDACTED]{time} . Site commissions at the facility
level are allocated between audio video using revenue weights, since
site commissions are in many cases proportional to revenues. To make
an apples-to-apples comparison between the resulting revenue per
minute for a facility and its corresponding lower bound, staff
subtract from the lower bound the $0.002 allowance for TRS costs and
add back in the safety and security expenses removed from the lower
bounds. The safety and security expenses added back in are: law
enforcement support, communication recording services, communication
monitoring services, voice biometric services, and other safety and
security measures. CALEA compliance measures and communication
security services are included in the lower bounds. The TRS
allowance is subtracted because in 2022 TRS was largely not
provided, and so TRS costs did not need to be recovered. Staff add
back in the safety and security expenses that were removed to create
the lower bounds, because revenue reported in 2022 was for services
that included these safety and security expenses. The last row of
Table 14 shows the net impact of these two adjustments on the lower
bound. Thus, staff compare the revenue per-minute calculation for
each facility with the lower bound appropriate to that facility,
thereby identifying facilities for which the per-minute revenue is
less than the lower bound.
BILLING CODE 6712-01-P
[[Page 77429]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.053
[[Page 77430]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.054
82. Table 15 shows the facilities depicted in Table 14
categorized by whether they are located in an urban area, as
classified by the Census (locations that we could not geocode were
unassigned). It suggests that geography does not have a material
impact on whether facilities have per-minute revenues less than
their lower bounds as calculated. The last row shows that non-urban
facilities are 75% less common than urban facilities. This ratio is
also true for facilities that could be identified as urban or rural
with the per-
[[Page 77431]]
minute revenues as described being less than the adjusted lower
bounds, suggesting geography has no impact on the likelihood that a
facility's per-minute rates being lower than the lower bounds as
calculated here.
[[Page 77432]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.055
[[Page 77433]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.056
BILLING CODE 6712-01-C
83. In summary, our lower bounds do not appear too low. Nearly
42% of facilities operate at imputed per-minute rates, after netting
of site commissions, that lie below our caps, yet there are no signs
that these contracts are not viable. Thus, it is likely per-minute
costs for at least the vast bulk of these contracts are less than
our lower bounds.
3. Low-Priced Contracts Analysis
84. A Comparison Across 13 Contiguous Texas Counties. This
section shows two things. First, that our lower bounds may be
excessive for the region of Dallas-Fort Worth and surrounding
counties, which provide a broad range of conditions, from urban to
rural. And staff have no reason to think there is something special
about this region. Second, that despite there being no obvious
reasons why costs would vary significantly across comparable
counties within this region, the per-minute revenues kept by
providers, that is, per-minute revenues net of site commissions,
vary widely. This suggests in most instances where one sees high
per-minute revenues, net of site commissions, these do not reflect
costs.
85. {[REDACTED]{time} We then reviewed the publicly available
contracts we were able to find to better determine if these low
prices were driven by unusual factors (aside from having limited
site commissions). {[REDACTED]{time} Consequently, staff examined
the cluster of 13 counties contiguous to Dallas, Tarrant (Fort
Worth), and Denton in Texas--Figure 1, {[REDACTED]{time} . The twin
cities of Dallas and Fort Worth (Tarrant) are natural comparators.
Collin and Denton are also natural comparators. They are neighbors
of similar geographic size, each lies above a major urban
agglomeration, and has a population of about one million people.
Collin had a population of 1,064,465, and Denton of 906,422. Ellis,
Hunt, Grayson, Johnson, Parker are all of geographically similar
sizes with populations ranging from about 100,000 to about 200,000.
Their respective 2020 Census population estimates were: Ellis:
192,455; Grayson: 135,543; Hunt: 99,956; Johnson: 179,927; Kaufman:
145,310; and Parker: 148,222. Rockwall's population is 107,819, very
similar to Hunt's, but Rockwall is geographically much smaller than
all the counties considered here. That leaves Cooke and Wise, which
are of similar geographic size to all the other counties, except
Rockwall. Cooke and Wise have the two smallest populations,
respectively of 41,668 and 8,632.
Figure 1: The Counties of, and Surrounding, Dallas-Fort Worth and
Denton, Texas, Sorted According to Their Reported IPCS Audio Rates
{[ REDACTED ]{time}
Source: Rates are as found in the providers' 2022 Annual Reports
(covering 2021).
86. Of the 13 counties just outlined, staff were able to
identify all but {[REDACTED]{time} in the 2023 Mandatory Data
Collection--see Table 16. {[REDACTED]{time}
BILLING CODE 6712-01-P
[[Page 77434]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.057
87. {[REDACTED]{time}
88. Given the disparity in reported per-minute revenues, net of
site commissions, staff sought further information on each of these
counties. Staff could identify no factors that would justify cost
differences substantially above the implied costs for the counties
with low prices.
89. Staff first checked providers' 2023 Annual Reports for 2022
for consistency with their 2023 Mandatory Data Collection reports.
Each county's IPCS audio rates are listed in Table 17, along with
whether the county receives any site commissions. This data was
largely consistent with the reports in the 2023 Mandatory Data
Collection.
[[Page 77435]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.058
BILLING CODE 6712-01-C
90. Summary of Contract Analysis. Commission staff then analyzed
the five contracts they were able to find for these 13 counties,
those of Dallas, Denton, Grayson, Tarrant and Wise. Comparing the
twin cities of Dallas and Fort Worth (Tarrant) shows that Securus's
per minute revenues, net of site commissions, were about $0.015 per
audio minute in Dallas, much less than in Tarrant, which were $0.133
per audio minute, for no reasons staff could identify. Thus, staff
concludes the costs of supplying populated suburban counties like
Dallas and Tarrant are around or less than $0.016 per minute. This
is well below our lower bound.
91. {[REDACTED]{time}
92. Staff examination of the Grayson contract showed it only
provides fairly basic features. {[REDACTED]{time} In turn, this
suggests that our rate caps should be set closer to our lower
bounds.
93. Dallas and Tarrant Contracts. The Dallas contract shows
nothing that would suggest it is for facilities with unusually low
costs. {[REDACTED]{time} the Dallas contract was with Securus,
involved no site commissions, and included free community tablets
and included hosted video visitation services. Per-minute domestic
audio and video visitation rates were respectively $0.0119 and
$0.13, with the only other charges being $0.24 to send an email, and
$5 per month for a personal tablet and charges for games, video and
audio content.
94. Given their proximity, and extent of interaction, Dallas and
Tarrant likely face similar cost conditions. {[REDACTED]{time} They
showed audio rates were set on to $0.16 per minute on November 16,
2021, with two sources of site commissions: Tarrant received $0.02
per minute, and $59,420 per month, which previously came from per-
minute site commissions. Staff could not calculate Tarrant's
effective per-minute site commission from the contract. In
comparison, Securus received $0.0119 per IPCS minute in the Dallas
contract. There is nothing in the contracts to suggest that IPCS
provision in Tarrant is more expensive than IPCS provision in
Dallas.
95. Denton contract. Staff next compared the ``sister'' counties
Denton and Collin. {[REDACTED]{time} Staff only had the Denton
contract to examine. It specifies call prices of $0.02 per minute
with a 95% site commission payment. {[REDACTED]{time}
96. Grayson and Wise Contracts. The only other contracts staff
were able to find were for the relatively small and rural Grayson
and Wise Counties. Both contracts are with Correct. In Grayson,
Correct sets the following per-minute rates: interstate prepaid and
debit, $0.21, interstate collect, $0.25, international, $1.00,
intrastate, $0.30, and video visitation $0.50. The contract's
domestic rates are consistent with the 2022 annual report Correct
made to the Commission for calendar year 2001. There is a $3.00
credit card transaction fee, a $1 for debit calling moving fee, a
$5.95 live operator fee, a $0.50 message or email fee, and $0.99 per
hour for tablet use, though prisoners are allowed 15 minutes of free
tablet use every four hours. Correct installs and maintains
equipment, including kiosks and tablets, and undertakes certain
services, such as contraband and remote mail scanning. Under the
contract, Correct pays an 82% site commission on all but interstate
calls and 10% on video visitation, suggesting Correct collects $0.21
per minute on interstate calls, and $0.06 (= (1-0.82) * $0.30) on
intrastate calls. {[REDACTED]{time}
97. Wise County contracted with Correct effective October 1,
2018, to provide audio IPCS setting the following rates: interstate
prepaid, $0.21, interstate collect, $0.25, international, $0.50,
intrastate, $0.50, kiosk transactions, $3.00, and live operator
transactions, $5.95. {[REDACTED]{time} Under
[[Page 77436]]
the contract, Correct was to provide what appear to be relatively
basic services: the equipment and platform required for IPCS and
voicemail services. Wise County was also to receive 75% of calling
revenue ``with the exception of interstate calls with regard to the
FCC rule,'' and 100% of voicemail revenues. Staff understand the
exception to be the same as for Grayson, that no commission is paid
on interstate calls. The contract was amended three times, numbered
one through three, and still appears to be in place. One of those
amendments is relevant here. In that, Correct agrees to increase the
services it requires, in particular to provide 100 tablets, two
correctional grade kiosks, chargers and similar and certain services
such as electronic messaging, law library, and medical scheduling.
There was also a memorandum of understanding which states that due
to an ``excessive increase in cost of business'' Correct will now
``impose a five percent reduction in the number of minutes on which
the commission is calculated.''
98. {[REDACTED]{time}
Appendix J: Rate Cap Validation
1. Selection of Rate Caps from Within Zones of Reasonableness.
We establish our final audio IPCS and our interim video IPCS rate
caps from within our zones of reasonableness. Table 1 presents the
rate caps for audio and video IPCS.
[GRAPHIC] [TIFF OMITTED] TR20SE24.059
2. Validity Check on the Audio Rate Caps. This appendix counts
the facilities where the per-minute audio revenue, less site
commissions, is less than our rate cap for that facility type. On
the revenue side, for each facility, we calculate the sum of IPCS
audio, safety and security, and ancillary service revenues, net of
site commissions, and divide this amount by the sum of the
facility's billed and unbilled minutes. Safety and security revenues
are allocated to facilities using safety and security expenses, as
the two are likely correlated. {[REDACTED]{time} Site commissions
at the facility are allocated between audio and video using revenue
weights, since site commissions are in many cases proportional to
revenues. To ensure apples-to-apples comparisons, staff subtracts
the TRS addon of $0.002 from our rate cap and adds back those safety
and security expenses which were removed from the lower bounds. We
do not perform a similar analysis for video because the video data
is comparatively unreliable and likely reflects a nascent market
with significant up-front expenses and low demand. We agree that
``[v]ideo calling is a relatively new service compared to audio
calling'' and that providers ``will gradually enhance their
efficiency in providing this service over time.'' In sum, a
comparison of per-minute video revenues and per-minute video
expenses using data from the 2023 Mandatory Data Collection, which
are for calendar year 2022, would not meaningfully validate our
interim video rate caps. About half of facilities meet this
condition, as shown in Table 2. It is likely that our audio caps
will have little impact on these facilities, for those facilities
which collect revenues per minute which lie below our caps will not
need to adjust their pricing, things otherwise constant. This result
applies most strongly for prisons and large jails, where about three
quarters and more than half of facilities, respectively, collected
per-minute audio revenues below their respective rate caps. Shares
of medium, small, and very small jails facilities with per-minute
revenues below the rate caps are about 42%, 29%, and 39%
respectively.
BILLING CODE 6712-01-P
[[Page 77437]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.060
[[Page 77438]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.061
BILLING CODE 6712-01-C
3. A large fraction of facilities of all types demonstrate
profitability at rates consistent with our rate caps. While certain
providers claim otherwise and argue that our rate caps will prevent
many providers from recovering costs, we reject these claims as
explained herein. Many facilities appear to have per-minute revenues
net of site commissions that exceed plausible estimates of costs.
For example, 1,294, or over 30% of facilities, report per-minute
audio revenue, less site commissions, that exceed our highest upper
bound, $0.152, which is for very small jails. Of these, 627, or 15%
of, facilities have reported per-minute audio revenues, net of site
commissions, that exceed $0.21, our highest interim cap, but there
are no credible claims that per-minute costs come close to this
level. In fact, the highest per-minute average cost for audio,
including safety and security costs, any provider reported in the
current collection, was {[REDACTED]{time} . Our upper bound analysis
suggests it is unlikely that these per-minute revenues are cost-
reflective. Per-minute expenses, net of site commissions, also vary
widely within the same facility tier. Given there were facilities
where providers' per-minute revenues less site commissions exceeded
our rate caps, this suggests that their revenues per-minute either
exceed costs per-minute, or some providers' costs are inefficiently
high.
[[Page 77439]]
4. In an efficient market for the same service, all providers'
per-minute revenues (net of site commissions) would be similar, as
would providers' per-minute expenses net of site commissions. After
controlling for facility type, we do not see this similarity. There
is no suggestion in the record that we are missing key sources of
cost variation that could explain the substantial differences we
observe. In fact, our Lasso analysis shows providers' identities are
more correlated with costs than any other variable, reinforcing the
conclusion that reported per-minute revenues do not reflect
efficient costs. The Lasso analysis shows that provider identity and
state are primarily correlated with per-minute expenses. Facility
type and whether or not a site commission is collected also matter,
but far less than provider identity and state. Consequently, our
caps will put market pressure on providers with inefficient per-
minute costs. Because so many facilities, after controlling for
facility type, have per-minute revenues below our rate caps, we find
it likely that efficient per-minute costs are below our caps as
well. Thus, our caps incentivize firms with particularly inefficient
costs to reduce their costs through increased efficiencies.
5. Comparing revenues under our rate caps to reported expenses
shows that a range of providers, both big and small, are expected to
recover their costs, again supporting our finding that our rate caps
will allow efficient providers to meet demand for IPCS. Inefficient
firms may well face market pressure as a result, but we are not
persuaded by such claims. Table 3 shows the revenues a provider
would receive if their reported respective audio minutes and video
minutes for each facility were multiplied by the respective audio
and video rate caps. It also shows the sum of audio IPCS, video
IPCS, and CALEA and Communication Security expenses. The difference
between these understates the expected margin since call volumes
would rise with lower prices, but, due to economies of scale, costs
would rise less quickly. We likewise reiterate that we believe
reported costs are inflated, particularly given that total industry
reported costs exceed total industry reported revenues by such a
wide margin. Of the 4,441 facilities, 3,202 have revenues at the
rate caps that match or exceed their costs, accounting for 72% of
facilities. Eight of the twelve providers in our database have
implied revenues under the caps that exceed their reported costs.
The eight providers are {[REDACTED]{time} This is also true for
revenues calculated as the product of reported minutes and the lower
of our rate caps and existing prices. We do not find that the other
four providers would not recover their costs, only that they would
not recover revenues as calculated here. We therefore disagree that
many providers would not be ``fairly compensated.'' These providers,
{[REDACTED]{time} , cover about 85% of all facilities.
{[REDACTED]{time}
BILLING CODE 6712-01-P
[GRAPHIC] [TIFF OMITTED] TR20SE24.062
[[Page 77440]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.063
Contrary to some claims, which argue that our rate caps impact
smaller providers and thus smaller facilities, provider size is no
predictor of the choice to serve very small jails. We disagree with
such claims. As we explain, the eight providers which already have
revenues less site commissions beneath our caps serve an
overwhelming number of small and very small facilities, as well as
medium and large facilities. As illustrated in Table 4, all eight of
the providers discussed above serve very small jails.
{[REDACTED]{time} Thus, it is implausible that our caps will
prevent supply in small jails. Even if we take all providers'
reported costs at face value, which we do not, we would not be
setting just and reasonable rates if we allowed any provider to
recover its reported costs-of-service where these exceed those of an
efficient provider. As articulated therein, we find the reasons that
reported costs are overstated to be compelling, and disagree that
such a finding is ``erroneous[ ].'' Equally, we must ensure
providers are fairly compensated. To that end, we have chosen to set
rate caps that likely exceed efficient costs, even if they are lower
than some providers' reported costs.
[[Page 77441]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.064
BILLING CODE 6712-01-C
7. We reject claims that our actions could harm competition.
Competition should not be mistaken for the number of competitors.
Competition delivers lower prices, adjusted for quality, and
competition may sometimes drive out inefficient competitors.
Competition also leads inefficient competitors to become more
efficient. Setting rate caps to enable inefficient competitors to
survive would not be pro-competitive, and would not result in just
and reasonable prices. It would also allow providers to be
overcompensated, rather than to receive fair compensation. Nor would
an inefficient provider's exit from the market indicate a reduction
of competition as some commenters allege. This commenter would do
well to mind the age-old antitrust maxim: the law protects
competition, not competitors. We agree with those commenters that
observe that ``the Commission is not obligated to set rates to cover
an inefficient business model.''
8. We also disagree with claims that inflation and concomitant
regulatory obligations are ``plausible explanations'' for why
industry reported costs are exceeding IPCS revenues. Commercial
contracts commonly include clauses addressing inflation and changes
of law, and here, contract renegotiation seems common; in any year,
a material fraction of contracts are won, renewed and renegotiated.
Without any evidence in the record, we decline to assume that half
of providers, including Securus, would broadly renew unviable
contracts, place bids at non-viable prices, or would not seek to
renegotiate contracts in the face of unanticipated inflation.
Neither Securus nor any other party has shown that IPCS expenses
have grown sufficiently fast since 2022, after accounting for
industry productivity, to render 2022 expenses too low for the
purpose of setting our rate caps. In fact, over the past decade,
telecommunications industry inflation has been significantly lower
than broader measures of inflation. The Telecommunications PPI over
the last ten years averaged 0.7% annually, as opposed to 2.6%
average annual increases in the GDP deflator over the same period.
Likewise, we are unconvinced that regulation compliance costs made
IPCS unviable in 2022. In 2022, roughly half of all audio call
minutes were for intrastate calls, which were not subject to
Commission pricing regulation at that time. Further, our 2022 rate
caps were set substantially above our current upper bounds, which
take providers' 2022 reported costs at face value, so they too
cannot have held rates below costs. Nor are we convinced that
regulation at the state level adequately explains the disparity
between industry-wide costs and revenues. For example, Securus
points to Pay Tel's exit from California, but IPCS continued to be
supplied at the correctional facility in question, just by a
different, and presumably more efficient provider. In sum, we do not
find it credible that inflation could have caused the apparent
losses providers reported in 2022, nor is it the Commission's
responsibility to cure contracts that fail to anticipate common
exigencies.
9. We are likewise unpersuaded that the difference between
industry contract revenues and IPCS expenses is explained by
providers use of profits from other non-IPCS services to cross-
subsidize the price of IPCS. The record presents no substantive
evidence of cross-subsidization, or of its extent, let alone
establish that the practice was
[[Page 77442]]
widespread and led to material reductions of IPCS revenues below
costs. Cross-subsidization, while potentially making an otherwise
unprofitable business segment profitable for the overall contract,
can also obscure inefficiencies within the regulated business and
misalign incentives. For example, providers may be disincentivized
to reduce costs and efficiently provide IPCS if they only use it to
generate other business within the same contract. In Securus' own
words, ``regulated rates must enable companies to earn a positive
return specifically from the service being regulated.'' Given the
distortionary effects of cross-subsidization, we find the most
direct way to assess viability of IPCS provision at a facility is to
compare IPCS revenues with IPCS costs.
10. In validating our caps, we do not place significant weight
on analysis of facility-level per-minute audio expenses as that
would be misleading for at least the following reasons: different
providers allocate costs differently, no provider's cost allocations
are likely to be particularly accurate at the level of the facility,
and the likelihood of reporting errors at the facility. There are
also corner cases, for example, where costs are incurred at the
start of a contract, but few or no minutes are supplied. Tables 5
and 6 illustrate the difficulties with facility-level data. These
tables show provider-reported per-minute expenses vary widely within
a single provider's data, often over implausible ranges. However,
because providers allocate all their costs down to their facilities,
a focus at the level of the provider avoids cost allocation
problems. Similarly, viewing an aggregation of facilities, including
at the level of the provider, or across providers, tends to smooth
out reporting errors and corner cases. This is not the case when
considering a provider's higher cost facilities, since, by
definition, one is choosing the facilities to which more costs were
allocated and ignoring those to which fewer costs were allocated.
Thus, Pay Tel's argument that one third of its facilities will be
loss-making under our rate caps requires belief that its cost
allocations accurately reflect underlying costs. That seems
improbable for at least some of its facilities given its per-minute
cost estimates for very small jails range from {[REDACTED]{time} .
If it is true that Pay Tel overall could not operate profitably
under our rate caps, we find that to be because Pay Tel's costs
exceed efficient costs. We reject, for the same reasons, a similar
claim made by Securus. Securus argues that a substantial number of
facilities will be ``underwater at the lower bound cost level given
the proposed rate caps,'' and that certain ``providers' lower bound
per minute costs exceed the rate cap[s].'' We find this analysis
implausible, unsupported, and, given the fact that Securus did not
submit the calculations in the record, we are unable to analyze or
otherwise replicate their results. As an initial matter, Securus
fails to separately identify audio and video profitability, leaving
the differences between these services obscure. Further, we find
Securus's analysis misleading. By ``excluding {[REDACTED]{time} ''
from the analysis, Securus removes the substantial majority of
facilities and cost data from its analysis, and uses a sample size
of less than 20% of the industry to support its conclusions. Such a
limited picture is particularly inappropriate for developing rate
caps based on industry average costs, an approach which is expressly
permitted by the statute. For example, given that our upper bounds
reflect all costs as submitted, we find it unlikely that certain
providers have ``lower bound costs [that] exceed rate caps by
{[REDACTED]{time} '' as Securus claims, because costs which lie
{[REDACTED]{time} above the rate caps would also lie above the
upper bounds for all jail size tiers.
BILLING CODE 6712-01-P
[GRAPHIC] [TIFF OMITTED] TR20SE24.065
[[Page 77443]]
[GRAPHIC] [TIFF OMITTED] TR20SE24.066
[FR Doc. 2024-19037 Filed 9-18-24; 8:45 am]
BILLING CODE 6712-01-C