Tag Archives: rates

Economics Of The Prison Payphone Call

Prisoners-Phone-CallsThe first round of comments are in for the FCC Proposed Rule Making 12-375 (The Wright Petition), and advocates from both sides of the issue have submitted letters and comments on the price of interstate calls from prison.

Some cash-strapped states and facilities collect commissions from prison phone contracts. Texas, for instance, uses some of the money collected for a crime victims’ fund.

Nationwide, states collect more than $150 million a year from prison phone commissions, according to a Prison Legal News survey. These commissions effectively raise call rates, but they also provide funding that states or prisons crave.

“Correctional agencies need those revenues either to lessen the financial burden that prison operations put on state and county budgets, or to implement programs that benefit inmates,” Stephanie A. Joyce, an attorney representing Dallas-based Securus Technologies, advised the FCC in October.

Of particular interest amongst the many briefs, letters and comments was a study of Securus Technologies’ prison payphone costs, commissions and prices across small, medium and large jails as well as state department of corrections (DOC) facilities. The following are some of the highlights from that report:

The costs incurred by Securus for the provision of ICS services to a typical institution in each facility group are summarized in Table 2. The ICS cost figures reflect the average costs incurred by Securus to provide ICS service. The costs include site commissions, bad debt, billing and collection, telecom facilities and services, validation, field technicians, and customer services:

Table-2-ICS-costs-per-minute

The costs faced by Securus in providing ICS services can also be assessed on a per-call basis. As shown in Table 3, Securus incurred total ICS costs of $2.53 per call in serving the average High 10 facility. For Medium 10 facilities, the company incurred costs of $5.48 per call. For Low 10 institutions, on average, Securus faced ICS costs per call of $11.54 per call. Finally, for DOC facilities, the company’s average ICS cost per call came to $1.51:

table-3-ICS-costs-per-call

In Table 5, the average site commissions reported in Table 4 are divided by the total average costs required to provide ICS services for the facilities in each facility group. The ICS cost figures were previously reported in Table 2:

Table-5-Average-site-comm-against-costs

In Table 6, the average site commissions from Table 4 are divided by the average ICS revenue generated by inmate facilities in each of the four facility groups. The resulting percentages demonstrate the magnitude of site commissions as a function of the average calling revenue earned by Securus in each facility group:

Table-6-Average-site-comm-against-revenue

The total number of interstate calls from all Securus facilities nationwide in 2012 was 9,122,432 calls. For the same year, the company processed 106,082,679 interstate minutes. Based on these two figures, the average length of an interstate call from a Securus facility in 2012 was 11.63 minutes.

Table 10 reports the calculated price per call that would apply for an interstate call of average duration that was generated by an average facility in one of the four facility groups. Note that the average call lengths assumed in Table 10 closely track the calculated average call lengths for the four facility groups:

Table-10-interstate-call-prices

Although it is never explicitly summarized in the report, here is the bottom line: (Using Table 10 to calculate the price per minute and subtracting costs per minute from Table 2)

  • High 10 = $1.09 price per minute vs. $0.17 cost per minute = $0.92 profit/minute
  • Medium 10 = $1.08 price per minute vs. $0.50 cost per minute = $0.58 profit/minute

  • Low 10 = $1.09 price per minute vs. $1.71 cost per minute = ($0.62) profit/minute
  • State DOC = $0.46 price per minute vs. $0.10 cost per minute = $0.36 profit/minute

Note: This profit analysis does not take into account intrastate and local calls, which are the majority of prison phone calls.

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Methodology for the Securus data: Divide the non-DOC facilities into three groups. Each group contains ten facilities for which Securus provided ICS services in 2012. The three groups included the ten highest volume non-DOC customers (“High 10”), the ten medium volume non-DOC customers (“Medium 10”) and the 10 lowest non-DOC volume customers (“Low 10”) (collectively, the “10-10-10”methodology). For each customer, the volume used to determine membership in each group was based on total minutes.

In addition to these three groups, a fourth group was created consisting of all DOC facilities that Securus served in 2012, of which there are eight (8).

After review of the data provided for the 10-10-10 groups, it was decided to adjust the data as follows: First, a minimum contract revenue of $1,000 was adopted for the Low 10 group. This adjustment removed facilities with extremely low revenue totals that likely reflected measurement periods of less than one year. Second, outlier facilities in the original High 10 group were replaced by alternative facilities. The three outlier facilities reported volume and/or ICS revenue data that for known reasons are not representative of the High 10 Group.

Source


Predatory Prison Phone Rates

A bipartisan group of prison reformers is calling on the Federal Communications Commission to stop phone companies from charging inmates what they call unreasonable and predatory rates to make phone calls.

The letter is signed by conservative leaders such as Gary Bauer and David Keene, as well as civil rights groups such as The Leadership Conference on Civil and Human Rights, the NAACP, the National Council of La Raza, and the National Organization for Women.

As the letter states, “Healthy relationships with their families and other members of the community are the most important factor in prisoners’ successful return to their neighborhood. Maintaining the bonds of a family and support network is a very effective way to reduce recidivism among inmates, which is an important national goal…Yet, predatory phone rates discourage regular telephone contact with stable family members and others in the community.

Prisoners’ friends and families often provide the only opportunity incarcerated individuals will have to re-connect with a job and a support network that can prevent them from returning to prison. We need more people connecting to those in prison, not fewer. Sound public policy dictates that we should not disincentivize the very behavior that will help us keep families together and in turn reduce future crime.”

Why such astronomical fees? Phone companies often pay commissions to the state after they’ve won an exclusive contract to provide phone service at a state’s prisons. (All but eight states allow these exclusive contracts.) The phone companies then pass on the cost of paying the state to inmates and their families, who have to shell out as much as $17 for a 15-minute call, the group says. That can add up to $250 a month to call home for an hour each week—a cost that the often-poor families of inmates can hardly afford.

But the money also drives revenue to the country’s cash-strapped, crowded prison systems. In 2011, these phone company commissions generated $152 million in revenue for state prisons alone. In the federal system, which charges lower rates, the millions raised from commissions helps fund recreational and job-related activities for inmates, according to a Government Accountability Office report. (Source)

One strategy is to reduce the commissions, and therefore the cost of the telephone service, and offset this lost revenue by offering the new meshDETECT secure prison cell phone service. Many prisoners and their families would be willing to pay a premium to have the convenience and privacy a cell phone would provide their conversations. This will increase total revenues, reduce the contraband value of smuggled cell phones and offer more opportunities for prisoners to stay in touch with family and friends.

Here is the full text of the letter:

May 18, 2012

CAP INTERSTATE PRISON PHONE RATES

Chairman Julius Genachowski

Federal Communications Commission

445 12th Street, SW

Washington, DC 20554

RE: Docket No. 96-128, Petitioner Martha Wright et al., Alternative Rulemaking Proposal

Dear Chairman Genachowski:

We write to you as organizations and individuals that represent a wide variety of views on many issues, but that stand united on the need to reduce the exorbitant rates for telephone calls from prisons. Unreasonably high prison phone rates unjustly punish the families of people who are incarcerated, and contribute to rising recidivism rates by deterring regular telephone contact with family members and loved ones. Our diverse groups strongly believe that action on a petition that has been pending before the Federal Communications Commission since 2003 represents a critical opportunity for the Commission to exert its leadership in this area. Accordingly, we urge you to act quickly to address this problem by capping the charges that can be imposed for interstate prison phone calls.

As you are aware from the record that has been compiled at the FCC, the costs of telephone calls from incarcerated people are often extraordinarily high—well beyond what most people in our country pay for telephone service. It is cheaper to call Singapore at 12 cents a minute from a cell phone than it would be to speak to someone in prison in this country. A typical interstate collect call from a prison has a $3.95 connection fee (regardless of the length of the call), while rates per minute can be as high as almost 90 cents per minute. This can result in charges of $10-17 for a 15-minute collect call or $250 per month for a weekly one-hour call. Prisoners do not bear these costs; rather it is the family members and loved ones outside of prison who pay these extremely high rates.

The high rates are caused by the system used to procure telephone service at correctional institutions. Prisons request bids from competing telephone companies, requiring each bid to include the payment of a fee or commission to the prison in addition to the provision of telephone service. The costs of the calls are passed on to prisoners’ families in the form of higher telephone rates, while the prison reaps the benefit of the extra fees and commissions. Thus, prisons have every incentive to choose bids that maximize fees and maximize telephone rates—a clear “moral hazard.” While competition would be everyone’s first choice for constraining telephone prices, in this case consumers—prisoners and their families—have no voice in the selection of the carrier. The prison system that does select the carrier actually benefits from the higher rates, leaving the actual consumers as a literally captive market, unable to shop around for lower prices.

Healthy relationships with their families and other members of the community are the most important factor in prisoners’ successful return to their neighborhood. Maintaining the bonds of a family and support network is a very effective way to reduce recidivism among inmates, which is an important national goal. The rate of recidivism is at crisis levels in the U.S.; within three years of being released, 67 percent of ex-prisoners re-offend and 52 percent are re-incarcerated. Americans are paying dearly for this trend. According to the Pew Center on the States, state and federal spending on corrections has grown 400 percent over the past 20 years, from about $12 billion to about $60 billion. Yet, predatory phone rates discourage regular telephone contact with stable family members and others in the community.

Prisoners’ friends and families often provide the only opportunity incarcerated individuals will have to re-connect with a job and a support network that can prevent them from returning to prison. We need more people connecting to those in prison, not fewer. Sound public policy dictates that we should not disincentivize the very behavior that will help us keep families together and in turn reduce future crime.

It does not have to be this way. The U.S. Bureau of Prisons and several states that have rejected these commission payments charge reasonable rates and maintain superior levels of security. A recent study by the Government Accountability Office found that the Bureau of Prisons typically charged less than most state prison systems, yet continued to produce some profit for use by the prison, and also met its security objectives. To illustrate, the Bureau of Prisons charged 6 cents per minute for local calls and 23 cents per minute for long-distance calls, and generated $34 million in profits in 2010.[1]

In sum, the exorbitant rates paid by prisoners’ families increase recidivism, and place an undue and unfair burden upon the innocent. These spiraling costs are not attributable to security needs and cannot be corrected by a marketplace solution. As the only agency with jurisdiction over long distance rates, the Federal Communications Commission is the correct venue to resolve this problem. A firm stance by the Commission, along with recommendations that will help guide the state regulatory bodies with authority over local telephone rates, will provide a strong impetus to improve the situation at every level. Prisoners will be able to be in more frequent contact with their loved ones, and the public will be safer as a result.

For all the above reasons, we urge you to cap interstate prison phone call rates and take up the long-overdue task of protecting a vulnerable population from abusive practices. Thank you for your consideration.

Sincerely,

The Leadership Conference on Civil and Human Rights

ACLU

Rabbi Menachem Katz, The Aleph Institute*

David Keene, American Conservative Union*

Gary Bauer, American Values*

Asian American Justice Center

Chris Cannon, Cannon Industries, Inc.*

Center for Constitutional Rights

Center for Media Justice

Charles Hamilton Houston Institute for Race and Justice

The Constitution Project

Consumers Union

Tom McClusky, FRC Action*

Free Press

Human Rights Defense Center

International CURE

NAACP

Galen Carey, National Association of Evangelicals*

National Council of La Raza

National Hispanic Media Coalition

National Urban League

New America Foundation, Open Technology Initiative

NOW

PolicyLink

Prison Fellowship

Public Knowledge

Rev. Lou Sheldon and Andrea Lafferty, Traditional Values Coalition*

United Church of Christ, OC, Inc.

United Methodist Church, General Board of Church and Society

Washington Lawyers’ Committee for Civil Rights & Urban Affairs

*Institutional affiliation listed for identification purposes only.