Human Rights Defense Center
DEDICATED TO PROTECTING HUMAN RIGHTS

January 13, 2014

Submitted Online Only

The Honorable Tom Wheeler, Chairman
Federal Communications Commission
445 12th Street, S.W.
Washington, DC 20554

Re: Reply Comment in the Matter of Rates for Inmate Calling Services,
WC Docket No. 12-375 (Further Notice of Proposed Rulemaking)
Dear Chairman Wheeler:
On December 20, 2013, the Human Rights Defense Center (HRDC) submitted a comment
concerning the Commission’s Further Notice of Proposed Rulemaking on WC Docket No. 12375. Our comment addressed the following primary issues: the importance of ICS reform, the
necessity for reform of intrastate ICS rates, quality of ICS services, insufficient regulation of
intrastate ICS calls on the state level and ancillary fees charged by ICS providers.
We now submit this reply comment to address issues raised by Pay-Tel Communications (“PayTel” or “the company”) in its comments filed with the FCC on Docket No. 12-375 on December
20, 2013, and in its notice of ex parte presentation filed on December 9, 2013.
In essence, Pay-Tel argues that it is required to subsidize losses from intrastate ICS calls, some
of which are subject to local rate caps, through revenue generated from interstate ICS calls. The
company states: “The practical effect of this approach has been to force ICS providers like Pay
Tel to subsidize below-cost intrastate rates with above-cost interstate rates.”1 Also, “Like other
ICS providers in jails, Pay Tel has managed to survive to this point by subsidizing local calls
with long distance revenues.”2

1
2

Pay-Tel petition for partial stay, Docket No. 12-375 (Nov. 26, 2013).
Pay-Tel ex parte presentation, Docket No. 12-375 (Aug. 1, 2013).

______________________________________________________________________________
P.O. Box 1151
Lake Worth, FL 33460
Phone: 561.360.2523 Fax: 866.735.7136
pwright@prisonlegalnews.org

Page | 2

Pay-Tel has previously asserted that whereas interstate ICS calls make up only 2.7% of the
company’s total revenue calls, this small percentage in fact generates 8% of Pay-Tel’s total
revenue, which is used to subsidize losses due to below-cost rate caps on local calls.3
Assuming this is correct, it illustrates the inflated interstate charges that prisoners and their
families are required to pay in order to offset Pay-Tel’s losses from intrastate ICS calls, and
thus the necessity for the Commission’s September 26, 2013 Order in Docket No. 12-375 with
respect to interstate ICS rates. Indeed, it is neither fair nor reasonable that prisoners who make
long distance calls to stay in touch with their families and children must pay inflated interstate
ICS rates in order to subsidize losses from intrastate calls made to prisoners’ family members
and children who reside in the same state as their incarcerated loved ones.
Pay-Tel asserts it uses inflated interstate rates to subsidize losses from intrastate calls due to
below-cost local rate caps imposed in some of the states in which it has contracts. “Pay Tel
is unable to recover its total company costs because of the existence of below cost rate caps
imposed by state public service commissions and facility contractual requirements.”4
The capped local rates to which Pay-Tel refers predominantly effect county jails in Florida,
Georgia, New Mexico, North Carolina, South Carolina, Tennessee and Virginia.5
We acknowledge there are differences between ICS services in prisons and jails, specifically
in regard to issues related to zero-revenue calls and population turnover (churn) in the latter
facilities. However, we submit that Pay-Tel’s explanation falls short as to why it is unable to
comply with interstate rate caps in spite of its claim that it uses interstate ICS call revenue to
subsidize below-cost intrastate calls due to local rate caps. Specifically, as discussed below,
local rates are not in fact capped by statute or regulation in three of the states cited by Pay-Tel,
the company can seek waivers from local rate caps, and rate caps imposed pursuant to facility
contracts are subject to contractual renegotiations or amendments.
Thus, while Pay-Tel raises valid points with respect to differences between prisons and jails,
the averaging of interstate and intrastate ICS rates, and preemption of state requirements that are
inconsistent with the Commission’s Order, we disagree with its rationale and explanation as the
company has not addressed other options which remain available to it, including those listed in
the preceding paragraph which are described in greater detail below. By extension, the points
in this reply comment equally apply to other ICS providers similarly situated to Pay-Tel.
We do not take a position on Pay-Tel’s contention that separate rate caps should be implemented
for prisons and jails based on differences between facilities that primarily hold pre-trial detention
populations and those that primarily house convicted/sentenced populations, as we believe this
issue requires additional research and analysis.

3

Ibid.
Pay-Tel ex parte presentation, Docket No. 12-375 (Dec. 9, 2013).
5
Pay-Tel ex parte presentation, intrastate rate caps, Docket No. 12-375 (Dec. 9, 2013).
4

Page | 3

Analysis of Local Rate Caps
Pay-Tel cites local rate caps in seven states in which it has contracts, primarily in the Southeast:
Florida, Georgia, New Mexico, North Carolina, South Carolina, Tennessee and Virginia.6
HRDC contacted the public utility commissions in each of those states to verify the information
provided to the Commission by Pay-Tel, and the results are set forth below.
Florida
Beth Salak, Director of Regulatory Analysis for the Florida Public Service Commission (FPSC),
stated in an email:
Currently, the Florida Department of Corrections negotiates the telephone contracts
for the state prisons. The jail contracts would be negotiated at the local level.... You
are correct that we did have operator services rate caps. However, the law was
changed and the FPSC no longer has that authority.
See Exhibit A.
In fact, Florida statutes relating to rate caps were modified in 2009 and the caps for operator
services were eliminated. The Florida Public Service Commission then modified its rules to
reflect that change. State law was again modified in 2011, and the operator services statute was
eliminated.7
Pay-Tel acknowledges that Florida deregulated inmate phone services in 2009, thus eliminating
the caps; however, it still included Florida on its list of “Intrastate Rate Caps for Local Calls,”
noting that Florida jails “have nonetheless required ICS vendors to maintain local call rates at
or below the prior rate cap.”8
Yet such local rate caps are not mandated by statute or the Florida Public Service Commission;
rather, they are a contractual matter, which Pay-Tel terms “facility-imposed constraints.”9 The
company thus has the option of renegotiating or amending its existing Florida contracts so as to
comply with the FCC’s Order with respect to interstate rates and address the impact the Order
will have on below-cost intrastate rates at the Florida jails with which it contracts.
According to data produced by Pay-Tel, of its 12 contracts in Florida, nine have intrastate rates
that result in net positive revenue (surpluses), despite the “rate cap” the company cites for local
calls.10 The company fails to explain why it cannot renegotiate or amend its other three Florida
6

Ibid.
See Exhibit A.
8
Pay-Tel ex parte presentation, intrastate rate caps, Docket No. 12-375 (Dec. 9, 2013).
9
Pay-Tel comments, Docket No. 12-375 (Dec. 9, 2013), at 14.
10
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
7

Page | 4

contracts to achieve similar results, given that there are no statutory or regulatory rate caps for
local ICS calls in Florida.

Tennessee
According to David Foster, Chief of the Utilities Division for the Tennessee Regulatory
Authority (TRA):
The TRA did cap local calls from inmate telephones, but the order is no longer
applicable to companies that have elected market regulation.... So basically, our
rate cap has been voided by market regulation.
See Exhibit B
In a separate email, Mr. Foster verified that Pay-Tel has opted into market regulation and thus is
not subject to local rate caps in Tennessee.11
Thus, Tennessee is another state where the market, not state statutes or public utility rules or
regulations, controls the cost of intrastate calls. Pay-Tel, however, includes Tennessee on its list
of “Intrastate Rate Caps for Local Calls,” claiming a cap of $1.50 per local call and referencing
a TRA order that is no longer in effect for companies – including Pay-Tel – that have elected
market regulation.12 The company also references an RFP from Lincoln County, Tennessee. But
as noted previously, rate caps specified by contract are subject to renegotiation and amendment,
since there are no statutory or regulatory rate caps for local ICS calls in Tennessee.
Virginia
Katie Cummings, Deputy Director for the Virginia State Corporation Commission (SCC), stated
in an email:
The Virginia State Corporation [Commission] has not set rate caps for inmate
calling as it has no authority over telecommunications services provided under or
relating to any contract to the state government or any agency thereof.
See Exhibit C.
However, Pay-Tel included Virginia in its “Intrastate Rate Caps for Local Calls” chart, citing a
cap of $1.50 per local call and referencing an RFP from Henrico County, Virginia.13 Again, rate
caps imposed pursuant to facility contracts, but that are not required by statute or regulation, are
subject to contract renegotiation and amendments.

11

See Exhibit B.
Pay-Tel ex parte presentation, intrastate rate caps, Docket No. 12-375 (Dec. 9, 2013).
13
Ibid.
12

Page | 5

North Carolina
Pay-Tel states that a rate cap of $1.71 applies to local ICS calls in North Carolina, citing North
Carolina Rule R13-9(d).14
However, according to John Garrison, director of the North Carolina Utilities Commission,
Communications Division, “The cap of $1.71 only applies to the following type of call: 0+Local
Automated Collect Station-to-Station.... No other rates are subject to regulation by the Utilities
Commission due to preemption by the Federal Communications Commission or deregulation by
the North Carolina General Assembly.” See Exhibit D.
Thus, the $1.71 rate cap does not apply to all intrastate ICS calls, but only “0+Local Automated
Collect Station-to-Station” calls. Rate caps for other types of intrastate calls are contractual in
nature and therefore subject to contract renegotiation and amendments.
This may explain why, of Pay-Tel’s 53 contracts in North Carolina, 16 – 30% – generate net
positive revenue (surpluses) in spite of the rate cap for local collect station-to-station calls.15
Georgia
Pay-Tel correctly notes that the Georgia Public Service Commission imposes a rate cap on
intrastate ICS calls of $2.70 ($2.20 surcharge plus $.50 local coin rate).16
Despite the rate cap, Pay-Tel generates net positive revenue (surpluses) for more than half (30)
of its 54 Georgia contracts.17 The company fails to explain why it cannot renegotiate or amend
its other Georgia contracts to address below-cost intrastate ICS rates at those facilities.
New Mexico
Pay-Tel correctly notes that the New Mexico Public Regulation Commission (PRC) imposes
rate caps on intrastate ICS calls.18 Those rate caps include $.15/minute for local, intraLATA and
interLATA prepaid and prepaid collect calls ($2.25 for a 15-minute call), and $1.00 plus $.15/
minute for local, intraLATA and interLATA collect calls ($3.25 for a 15-minute call).
Pay-Tel did not provide data regarding its New Mexico contracts with respect to intrastate
revenue shortfalls or surpluses; thus, it is unknown what impact the intrastate rate caps have
on the company’s ICS revenue in that state.19

14

Ibid.
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
16
Memo from Georgia PSC, May 16, 2008.
17
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
18
NMAC 17.11.28.1, et seq.
19
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
15

Page | 6

Regardless, Pay-Tel failed to mention that it can seek relief from the PRC’s rate caps. Pursuant
to NMAC 17.11.28.17, “The commission may permit an IOSP [institutional operator service
provider] to impose rates higher than the rate caps as provided for in the rate caps chart below as
may be amended from time to time or as stated in a separate commission order for good cause
shown. Such permission shall not be unreasonably withheld.”
Additionally, NMAC 17.11.28.23 provides: “The commission recognizes that public health and
safety and the requirements of the correctional institution may require exceptions to requirements
contained in this rule. In those cases, the IOSP may petition the commission for a waiver of a
particular requirement, which shall not be unreasonably withheld.”
In response to an email, John Reynolds with the New Mexico Public Regulation Commission
confirmed that “Providers have the ability to seek waivers from the rate caps to serve higher-cost
facilities.” See Exhibit E.
Pay-Tel does not explain why it is unable to petition the New Mexico PRC for a variance from
the rate caps for local and intrastate calls under 17.11.28.17, or a waiver under 17.11.28.23, to
address losses due to below-cost intrastate rate caps. Incidentally, NMAC 17.11.28.8 states that
IOSPs are “exempt from 17.11.15 NMAC, rule concerning payphone providers, 17.11.16.11
NMAC, consumer protection, access to service and rate information, and SCC 94-02-TC, rule
concerning operator services providers.”
South Carolina
Pay-Tel correctly notes that the South Carolina Public Service Commission imposes a rate cap
of $2.60 on local ISC calls.20
Yet of the company’s 13 contracts in South Carolina, 11 generate net positive revenue from
intrastate ICS calls.21
This indicates that the $2.60 cap on local ICS rates in South Carolina does not preclude the
company from entering into profitable contracts with respect to intrastate calls.
Analysis and Conclusions
Based on the foregoing, of the 7 states that Pay-Tel identified as having local rate caps,22 three
do not have statutory or regulatory caps (Florida, Tennessee, Virginia); one has a rate cap on
only certain types of local calls (North Carolina); and three have statutory or regulatory rate caps
that range from $2.25 to $2.70 for local ICS calls (Georgia, New Mexico, South Carolina). Of
the latter three states, all of the local rate caps are above the safe harbor rates established by the
FCC for interstate calls ($.14/min. for collect calls, $.12/min. for debit and prepaid calls).
20

Pay-Tel ex parte presentation, intrastate rate caps, Docket No. 12-375 (Dec. 9, 2013).
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
22
Pay-Tel ex parte presentation, intrastate rate caps, Docket No. 12-375 (Dec. 9, 2013).
21

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Pay-Tel asserts that an intrastate shortfall analysis conducted by Don Wood found the company
had a net shortfall of $416,603.11 for the second quarter of 2013 for intrastate collect, debit and
prepaid calls – or an estimated $1,666,412 annualized net shortfall.23
Consequently, Pay-Tel claims that “Although well-intentioned, the Order imposes upon the ICS
industry a one-size-fits-all regulatory scheme in which Pay Tel will not be able to recover its
overall costs of providing ICS in jails and will be forced to either operate at a loss or go out
of business.”24 The company further states the FCC’s “regulatory regime will make Pay Tel
financially unsustainable overall.”25
HRDC submits that these outcomes are unlikely considering that Pay-Tel has the ability to 1)
renegotiate or seek to amend its ICS contracts in states where there are no statutory or regulatory
local rate caps; 2) renegotiate or seek to amend its ICS contracts in states that do have statutory
or regulatory local rate caps, to modify intrastate rates within the caps and/or reduce commission
percentages; and 3) seek waivers from local rate caps in states (like New Mexico) that expressly
provide for such waivers.
With respect to the first two options cited above, ICS contracts typically include provisions that
accommodate renegotiations or amendments upon agreement of the parties. For example, Exhibit
F, a contract between Pay-Tel and the Okanogan County Sheriff’s Office in Washington State,
provides, at section 7.2:
Pay Tel may terminate this Agreement at any time upon thirty (30) days written
notice to Customer in the event that regulations governing the operation of the
Services constitute a material change to the economic assumptions used in
connection with Pay Tel’s Services under this Agreement. Pay Tel agrees to work
in good faith with Customer to renegotiate the terms of this Agreement should
regulations governing the operations change the economic assumptions, with the
mutual goal of a continuation of Services on terms agreeable to both parties.
(Emphasis added).26
And at section 4.3:
Customer acknowledges and agrees that it will take no action unreasonably to
impede use of the Services by the Inmates and further agrees, to the extent there
is any material change in any revenue stream for any reason on which Pay Tel
reasonably relied in calculating commission rates to work with Pay Tel to correct
the material change and if necessary, amendment [sic] this Agreement in order to
accommodate the interests of both parties. (Emphasis added).27
23

Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
Pay-Tel petition for waiver, Docket No. 12-375 (Jan. 8, 2014).
25
Pay-Tel comments, Docket No. 12-375 (Dec. 9, 2013).
26
See Exhibit F.
27
Ibid.
24

Page | 8

In addition, the company states that “Of the 160 clients to which Pay Tel provides ICS, 117 of
these locations have at least one category of intrastate calls in which Pay Tel’s average revenue
per minute is below cost.”28 This is an accurate but misleading statement.
Based on Pay-Tel’s own data, of the company’s 160 contracts,29 almost half – 75 – generate net
positive revenue from intrastate ICS calls without the need to subsidize such calls with revenue
from interstate calls.30 That is, while Pay-Tel indicates that many of its contracts show a loss
for postpaid collect or prepaid/debit ICS calls, the combined net revenue for each of 75 of its
160 contracts is positive.
Thus, even with no further action by the FCC, Pay-Tel could retain almost half of its existing
contracts that are currently profitable for the company with respect to intrastate ICS calls, while
it could discontinue contracts that currently result in a net loss from intrastate calls.
For example, the company notes that its contracts in two states which impose local rate caps –
North Carolina and Georgia – “alone account for $1,717,486.00 of Pay Tel’s total intrastate
revenue shortfall.”31
If Pay-Tel’s contracts in Georgia and North Carolina in fact account for $1,717,486.00 of the
company’s current intrastate revenue shortfall, as the company states, then perhaps it should
reconsider doing business in those states. Nothing forces Pay-Tel to provide ICS services in
states where local rate caps make it difficult or impossible to generate profit, and the company
has contracts in other states where it generates net positive revenue from intrastate calls (i.e.,
Kansas, Missouri, Ohio and Washington).32

Increased Call Volume Due to Lower Rates
According to Anthony Annucci, Acting Commissioner of the New York Dept. of Corrections
and Community Supervision (NYDOCCS), the nation’s fifth largest state prison system, New
York eliminated its commissions on ICS calls in 2007, which reduced the cost of a 20-minute
call to 96 cents (for local, intrastate and interstate calls) based on a rate of $.048/minute with
no connection fee. See Exhibit G.
Commissioner Annucci observed that “The impact of the rate change has been significant. The
number of completed calls has risen steadily from 5.4 million in 2006, to what we are projecting
to be over 14 million in 2013.”
28

Ibid.
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
30
It is unclear whether the data presented in the Wood intrastate shortfall analysis for “Intrastate Average/MOU”
rates includes commission payments (i.e., whether the average rates in the analysis encompass both actual call costs
and the cost of commission payments under Pay-Tel’s contracts). If commission payments are included, then PayTel presumably could negotiate lower commission rates for its ICS contracts, which would result in increased net
revenue if the company maintains its current intrastate rates.
31
Pay-Tel petition for waiver, Docket No. 12-375 (Jan. 8, 2014).
32
Pay-Tel ex parte presentation, Wood intrastate shortfall analysis, Docket No. 12-375 (Dec. 9, 2013).
29

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Additionally, regarding a recent order on regulating intrastate rates, the Alabama Public Service
Commission noted that:
ICS providers at the FCC testified that postalized ICS call rates (single per-minute
rate for calls) and/or lower per-minute rates result in increased call volume. In
some cases, the usage stimulation is extensive (above 100%). One ICS provider in
Alabama confided to staff that they converted their ICS local rates in Alabama to a
postalized rate of $0.15 per-minute, equating to a 46% decrease in price based on the
average duration of a local ICS call in Alabama and the existing rate cap for local
calls. Nevertheless, the provider reports that total revenue remained unchanged due
to the effects of call stimulation. Staff anticipates that a postalized rate structure and
elimination of unnecessary or excessive ICS fees will significantly increase the
volume of inmate calls.33
Thus, when the FCC’s Order goes into effect and the cost of interstate ICS calls drops, based on
the experiences in several states – including New York and Alabama – it is likely that interstate
call volume (and thus revenue) will increase in a compensatory effect.
Pay-Tel may not have considered this potential increase in interstate call volume and revenue as
a result of lower interstate ICS rates. To the extent that Pay-Tel subsidizes below-cost intrastate
rates with revenue generated from interstate calls, the company could continue that practice after
the FCC’s Order goes into effect, in whole or in part, depending on the amount of the resulting
increase in interstate ICS call volume and revenue.

In conclusion, we applaud the FCC for enacting much-needed reforms for interstate ICS rates.
HRDC, along with our allies, has led a decade-long fight to reduce ICS rates because we know
how important it is for prisoners to communicate with their families and how excessively high
ICS rates frustrate such communication. Communities across the country – and society as a
whole – will benefit from the Commission’s landmark Order.
Sincerely,

Paul Wright
Executive Director, HRDC
Attachments

33

“Further Order Proposing Revised Inmate Phone Service Rules and Establishing a Comment Cycle,”
Alabama Public Service Commission, Docket 15957, October 1, 2013; available online at:
www.prisonpolicy.org/phones/AL-proposed-100113.pdf.

EXHIBIT A

EXHIBIT B

Time sensitive: Follow-up re TN inmate phone rates
Earl Taylor <Earl.Taylor@tn.gov>
To: "Alex F." <stein919@gmail.com>

Mon, Dec 16, 2013 at 12:14 PM

Mr. Friedman,please see note from David Foster, Chief of Utilities division here at the TRA. If 
you have further questions, feel free to contact Mr. Foster. thanks, Earl Taylor
 
From: David Foster
Sent: Monday, December 16, 2013 10:22 AM
To: Earl Taylor
Subject: RE: Time sensitive: Follow-up re TN inmate phone rates

Earl,
 The TRA did cap local calls from inmate telephones, but the order is no longer applicable to 
companies that have elected market regulation.  Further, my understanding is that Global Tel 
Link has most, if not all, of the prison payphones in Tennessee and they have elected market 
regulation.  So basically our rate cap has been voided by market regulation.
 David 

Time sensitive: Follow-up re TN inmate phone rates
David Foster <David.Foster@tn.gov>
Mon, Dec 16, 2013 at 2:25 PM
To: "Alex F." <stein919@gmail.com>, Earl Taylor <Earl.Taylor@tn.gov>

Mr. Friedmann,
 PayTel has also opted into Market Regulation.  Let me know if you need additional 
information.
 David

EXHIBIT C

EXHIBIT D

EXHIBIT E

EXHIBIT F
MASTER SERVICES AGREEMENT
This Master Services Agreement (hereinafter 11 Agreement") is made and entered into this
24th
day of
June
_2011 by and between Okanogan County Sheriffs
Office
("Customer") of the one part and Pay Tel Communications, Inc., a North Carolina
Corporation ("Pay Tel") ofthe other part,
WHEREAS, Customer and Pay Tel desire to enter into a long term relationship pursuant to
which Pay Tel will act as the exclusive agent and provider to Customer of certain equipment and
services including inmate telecommunications equipment set forth in Exhibit A (hereinafter
sometimes 11 Services 11 ); and
WHEREAS, Customer understands the financial commitment on the part of Pay Tel in providing
and installing equipment associated with such Services and Customer agrees to cooperate and
assist Pay Tel as set forth below.
NOW THEREFORE, in consideration of the mutual promises and obligations hereunder, the
parties to this Agreement do hereby agree as follows:

1.0 AUTHORITY TO CONTRACT
1.1
Customer warrants that the person(s) signing this Agreement have obtained the requisite
authority to authorize them to bind the entity having jurisdiction over the Premises and this
authority is sufficient to bind Customer to agreements of the size and nature of this Agreement.
1.2
Customer further warrants that the person(s) signing this Agreement has/have the right to
license the use ofthe Premises in accordance with the provision of this Agreement.
2.0 Location
2.1
This Agreement is for Services at or connected to the premises at the location or locations
described in Exhibit 8 attached hereto (the "Premises") except as set forth below.

3.0 .I.m!!
3.1
The term of the Agreement shall commence upon the commencement of Services and
shall continue for a period of five (5) years from that date. This Agreement shall be
automatically renewed for successive one year (1) year terms unless written notice of intent to
terminate is given by either party no more than 120 days and not less than 60 days prior to the
expiration of the then current term. Such notice shall be given in strict conformance with
Paragraph 9.1 below.
3.2
During the original or any renewed term of this Agreement, Customer shall not allow any
other party the right to supply the same or similar Services at the Premises. In addition,
Customer acknowledges and agrees during the original or any renewed term of this Agreement
that if Customer commences operations at any location other than the Premises described herein,
Pay Tel shall have the exclusive right to provide Services at such new location(s) in accordance
with the terms and conditions of this Agreement.

3.3
In connection with the provision of Services, Pay Tel shall have the exclusive right
during the original or renewed term of this Agreement, to act as agent for the Customer solely
with respect to the implementation of Services at the Premises to provide, for example,
telecommunications services. In this regard, Customer agrees that it will not authorize any party
other than Pay Tel to act as its agent for the purposes of negotiating, obtaining, renewing, or
terminating contracts or agreements relating to the installation, operation and provision of
Services at the Premises.
4.0 COMMISSIONS
4.1
Pay Tel will make commission payments as set forth in Exhibit C. This Exhibit will be
modified as but only to the extent there is a material change in the operation ofthe facility or the
use of Services by the inmates. Customer understands and agrees that any material change in
operation or use of Services is not anticipated and that Pay Tel has reasonably relied on projected
operation and usage information in establishing its commission rate.
4.2
For purposes of commission calculations, Customer will not be responsible for any losses
due to fraudulent calls. However, Customer agrees to assist Pay Tel in efforts to prevent losses
and fraud and further agrees to aid in the prosecution of any perpetrators of fraudulent calls
whether such perpetrators are inside or outside the Premises.
4.3
Customer understands and agrees that the commission rates and terms contained in this
Agreement are based on revenues that were projected based on inmate populations and the
continued accessibility of communication equipment by the inmates to allow them to initiate
collect, pre-paid collect and debit calls. Customer acknowledges and agrees that it will take no
action unreasonably to impede use of the Services by the Inmates and further agrees, to the
extent there is any material change in any revenue stream for any reason on which Pay Tel
reasonably relied in calculating commission rates to work with Pay Tel to correct the material
change and if necessary, amendment this Agreement in order to accommodate the interests of
both parties.

S.O EQUIPMENT AND SERVICES PROVIDED BY PAY TEL
5.1
Pay Tel will provide, install and operate equipment at the Premises necessary to provide
the Services set forth in Exhibit A attached hereto.
5.2
The placement of any equipment to be provided at the Premises will be determined by
Pay Tel in consultation with the Customer and may be adjusted as necessary.
5.3
In the event that Pay Tel provides 1imited free call services, such services are to be
afforded only for the limited purpose of calls to approved entities and in approved locations such
as in the intake or holding area. Under no circumstances should free calls be allowed for any
other purpose such as the allowance of inmate personal calls after the inmate booking process.
Paragraph 4.3 is incorporated into this paragraph by reference.
5.4
Pay Tel agrees to provide Services in full compliance with all applicable rules and
regulations of the Federal Communications Commission and any applicable State agency.
5.5

All Services will be provided by Pay Tel at its expense.

5.6
Customer hereby authorizes Pay Tel to contact the local telephone company and any
other necessary provider to facilitate the provision of Pay Tel Services. Customer will provide
space and necessary utilities, including a dedicated 24-hour 120 volt electrical service line, to
support the provision of Services. Pay Tel shall pay all charges imposed by any telephone
company with respect to the Services.

5.6
Customer hereby grants to Pay Tel the exclusive right and authority to the extent
necessary to contract with a long distance carrier to handle inmate long distance calls at the
Premises. Pay Tel agrees to charge operator assisted rates for inmate phone calls that are equal
to or less than the tariffed rates regulated by the Federal Communications Commission and any
similar State agency.
5.7
Any equipment provided by Pay Tel hereunder associated with the operation of the
Services is agreed by Customer to be the personal property of Pay Tel and not fixtures, and it is
the express intention of both Customer and Pay Tel that such equipment is and shall continue to
be personal property of Pay Tel. All equipment installed by Pay Tel at the Premises shall remain
the property of Pay Tel. Upon termination of this Agreement for any reason including, without
limitation, termination of this Agreement pursuant to Paragraph 7.1 hereof, Pay Tel shall have
the absolute right to enter upon the Premises at any reasonable time to remove its equipment.
Pay Tel shall repair any and all damage to the Premises by reason of removal of Pay Tel's
equipment.
Pay Tel agrees to maintain its equipment in good operating condition. In order to do so,
5.8
Pay Tel shall have the right during normal business hours to enter the Premises to perform
necessary maintenance and repairs as well as for purposes of inventory control. To assist Pay
Tel, Customer agrees promptly to notify Pay Tel of any malfunctions or loss of equipment.
5.9
Nothing herein shall require or obligate Pay Tel to perform maintenance or repairs to
equipment that Pay Tel does not install or separately agree to repair or maintain.
5.1 0 Pay Tel agrees that its equipment will conform with all applicable local, state and federal
requirements concerning the provision of Services to those with disabilities as defined by the
Americans With Disabilities Act (hereinafter the "ADA"). Customer shall cooperate with Pay
Tel to ensure compliance with all access requirements contained in applicable local, state and
federal regulations relating to those with disabilities as defined in the ADA.
6.0 LIMITED LICENSE
This Agreement, among other things, applies to the provision of inmate telecommunications
services incJuding telephone calls and emails. Services generally include the monitoring,
recording and archiving of calls and emails for use by law enforcement officials in accordance
with all applicable Jaws. ln order to aJlow such services, Customer hereby grants to Pay Tel a
limited license to act under authority of Customer. Whether or not any call, email or other
electronic infonnation ("Electronic Data") is in Pay Tel's custody or control for any period of
time, such custody and/or control shall be deemed under the authority of Customer's law
enforcement personnel and any direction from Customer with respect to such Electronic Data to
Pay Tel shall be done under a limited license to provide such data to law enforcement officials or
to use for legitimate business purposes. Pursuant to this Agreement, Customer grants to Pay Tel
a perpetual limited license to a) comply with requests submitted to Pay Tel by any representative
of Customer; b) disclose electronic data or physical forms of such data to Customer's
representatives; c) utilize such data in order to perform functions necessary to provide Services;
d) monitor such data to prevent fraud; e) monitor such data for equipment quality control and
maintenance purposes; t) use the data in connection with legitimate business purposes; and g)
Pay Tel will notify Customer's designated administrative contact of any requests to Pay Tel from
Law enforcement or other authorities as soon as is practically possible.

7.0 TERMINATION
7.1
Customer may terminate this Agreement only in the event that Pay Tel materially fails to
perform its obligations under this Agreement. Customer shall be required to give written notice
to Pay Tel of said failure in strict conformance with Paragraph 8.1 and Pay Tel shall have a
minimum of thirty (30) business days to cure such alleged default. Notwithstanding this thirty
(30) day cure provision, this period shall be extended for an additional ninety (90) days if such
cure has begun and is being diligently pursued but cannot reasonably be effected within the
initial thirty (30) day period.
Pay Tel may terminate this Agreement at any time upon thirty (30) days written notice to
7.2
Customer in the event that regulations governing the operation of the Services constitute a
material change to the economic assumptions used in connection with Pay Tel's Services under
this Agreement. Pay Tel agrees to work in good faith with Customer to renegotiate the terms of
this Agreement should regulations governing the operations change the economic assumptions,
with the mutual goal of a continuation of Services on terms agreeable to both parties.

8.0 SUCCESSORS IN INTEREST
8.1
Customer agrees that Pay Tel shall have the right to assign this Agreement and that Pay
Tel shall have the right to grant a security interest in this Agreement and in any of Pay Ters
equipment on the Premises including any and all telephones and their enclosures and/or
pedestals, or other equipment associated with Pay Tel's Services. This Agreement shall be
binding upon the successors and assignees of both Customer and Pay Tel, including, without '
limitation, any financial institution providing financial accommodations to Customer or Pay Tel.
9.0 MISCELLANEOUS PROVISIONS
9.1
All notices required to be given under this Agreement and the attached exhibits shall be
sent to Pay Tel and to Customer addressed as shown on the signature page of this Agreement.
Notices shall be sent by certified mail, return receipt requested. The date of receipt shall be
deemed to be the date of giving such notice.
9.2
This written document, including Exhibit A, Exhibit B and Exhibit C shall constitute the
entire understanding of the parties and all prior agreements and understandings are merged
herein. This Agreement shall not be modified, changed or altered in any respect except in
writing signed by Customer and Pay Tel.
9.3
This Agreement shall be construed in accordance with the laws of the State of
Washington.
In the event that any paragraph or part of the agreement is held to be void or
9.4
unenforceable under any law or regulation, all other paragraphs and subparagraphs hereof shall
be deemed severable and remain in fu11 force and effect.
9.5
The plural number as used herein shall equally include the singular and the masculine,
feminine, and neuter genders are interchangeable as required by context.
9.6
Any and all claims or disputes arising out of or relating to this Agreement or the breach
thereof shall be decided by binding arbitration in accordance with the commercial rules
governing arbitration of the American Arbitration Association. Venue for such arbitration shall
be Greensboro, North Carolina unless otherwise agreed by the parties. At the conclusion of this
arbitration, the award may be confirmed by order of any court having jurisdiction over the
parties.

10.0

LIMITATION OF LIABILITY

ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, PAY TEL SHALL
NOT BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES, ARISING OUT OF ANY CAUSE OR CIRCUMSTANCE INCLUDING
WITHOUT LIMITATION, LOSS OR CORRUPTION OF ELECTRONIC INFORMATION
DUE TO BREACH OF CONTRACT, NEGLIGENCE OR ANY OTHER FAULT OR
CIRCUMSTANCE. FURTHERMORE, PAY TEL'S LIABILITY FOR DIRECT DAMAGES
SHALL NOT EXCEED THE AMOUNT OF COMMISSIONS OTHERWISE DUE
CUSTOMER DURING THE PERIOD IN QUESTION OR THE PRECEDING ONE YEAR
PERIOD, WHICHEVER IS SHORTER.

This Agreement entered into as of the day and year first written above.

Okanogan Sheriff's Office, Washington

By:~.d..
(/

By:

FR.BtJI< t.?oL-rERS
Authorized Agent for Customer

PAY TEL COMMUNICATIONS, INC.:

(Seal)
(Printed)

By:

Vincent Townsend

(Printed)

Date:._ _ _ _ _ _ _ _ _ _ __
Attest:._ _ _ _ _ _ _ _ _ __
Account Representative:

George Sheers

Address: 123 5th Avenue
Okanogan. WA 98840

Address: Post Office Box 8179
Greensboro, North Carolina 27419

Phone:
Fax:

Phone: 336-852-7419
Fax:
336-346-1127

509-422-7200

-----------------

EXHIBIT A

EQUIPMENT AND SERVICES

Equipment and services will be provided in accordance with Pay Tel's proposal to Customer.

EXHIBIT B

PROPERTY DESCRIPTION
The Premises which are the subject of the Agreement dated June 24, 2011.
The Okanogan County Corrections Center
149 N. 4th Avenue
Okanogan, WA 98840

EXHIBIT C
RATES AND COMMISSIONS
Customer may choose from the following rate/commission options. Customer may change the
option selected once during the term of the contract. Any such change must be requested in
writing.

RATES PROPOSED
Call T~ rn·

l'l'r ('all
( 'har~t·
'

•

c.

Pl·r 'linntt•
Hah·
:.

~'

'

$2.15

: ··eaoo··,
.·
q,v. , ..

IntraLATA

$3.00

$0.40

Interstate

$3.00

$0.75

.

i

··so.H
If the County elects to enable the Investigator Pro™ feature, an additional licensing fee of $.25
per call (this fee is not included in the above rates and is subject to regulatory approval) is
required which will be added to the rates listed above. The license fee will not be included in
gross revenue for commissions. (Note: This fee is based on a call duration limit of 15 minutes or
less.

Commission Options
Sekl'ttd ( >pt ion
.JI ,(; In' l'sli:..o.ator
(( 'lwd, Onl')
Pro 1 "
I

laduded

(·om mission
Otfer

'lininmm
\nnual
( ;uaranll'l'

N/A

65%

560,000

Included.

56.5°Al

$52,900

Pay Tel will pay Customer the commission associated with the selected option on a monthly
basis. At the end of each contract year, the total commissions paid will be compared against the
Minimum Annual Guarantee (MAG). If the commissions paid for the prior twelve month period
are higher than the MAG, then no additional funds are due to customer. If the commissions paid
are lower than the MAG, Pay Tel will pay Customer the difference. The MAG is based on an
Average Daily Population (ADP) of 165. The MAG will be reviewed annually and adjusted as
needed to reflect the prior year ADP.

EXHIBIT G
STATE OF NEW YORK

DEPARTMENT OF CORRECTIONS
AND COMMUNITY SUPERVISION
THE HARRIMAN STATE CAMPUS- BUILDING 2
ANDREW M. CUOMO
GOVERNOR

1220WASHINGTON AVENUE
ALBANY, N.Y. 12226-2050

ANTHONY J. ANNUCCI
ACTING COMMISSIONER

July 8, 2013

Mr. Gregory V. Haledjian
Attorney-Advisor
Pricing Policy Division -Wireless Competition Bureau
Federal Communications Commission
445 121h Street SW
Washington, DC 20554
Dear Mr. Haledjian:
The New York State Department of Corrections and Community Supervision (DOCCS)
welcomes the opportunity to contribute to the Federal Communications Commission's
. Workshop on Reforming Rates for Inmate Calling Services. The Department has
considerable experience within this area and offers the following information for the
Commission's consideration .
In 2007 DOCCS eliminated its commissions on inmate calls. Prior to that, DOCCS
received a 57 .5 percent commission on every completed call. The cost of the call
included a connection fee ($1.28 per call) and a per-minute charge ($.16 per minute),
resulting in an average 20 minute call costing the family $4.48.i These fees became the
source of acrimony between the Department and inmate advocacy groups and the
focus of a class action lawsuit against the Department and the State of New York.
Amidst heavy scrutiny by the offender advocacy groups regarding the cost of inmate
calling, in 2007 the Department worked closely with the Governor and Legislature to
pass an inmate calling bill (NY Correction Law 623) that requires the per/minute cost of
a call to be the preeminent focus of our inmate phone contract. The statute indicates
that 'The department shall not accept or receive revenue in excess of its reasonable
operating cost for establishing and administering such telephone system services. " The
statute further requires that the "department {can} establish rules and regulations or
departmental procedures to ensure that any inmate phone call system established by
this section provides reasonable security measures to preserve the safety and security
of each correctional facility, all staff and all persons outside a facility who may receive
inmate phone calls. "

Mr. Gregory V. Haledjian
·
Page 2
July 8, 2013

These provisions of the statute prohibit the Department from collecting commissions
from the system , but they do allow the Department to roll its administrative and security
expenses (call listening and investigations for example) into the cost of the call.
Although the Department is not at present attaching these operational costs to the perminute price of the call, it may add them in the future .
Today the cost of a 20-minute call for an inmate in DOCCS is $.96. The call rate
includes a flat $.048 per minute charge, for both local and long distance calls , with no
connection fee.ii
The impact of the rate change has been significant. The number of completed calls has
risen steadily from 5.4 million in 2006 , to what we are projecting to be over 14 million in
2013 . It should be noted that this increase appears to have stabilized. Interestingly, the
average call duration remains at 20 minutes (see endnote i below).
Operationally, the Department has experienced both benefits and challenges from this
approach . The elimination of the commission created an immediate $20 million annual
revenue short-fall in the Department's operating budget that had to be addressed . The
commission revenue had been used to pay for inmate services related to health care
and family visitation. This was addressed by executive budget increases and the
elimination of some inmate services.
Clearly, lower phone rates have made call ing a more attractive option for inmates as the
numbers previously provided indicate. However, it has also made control of the phones
a strategic option for gangs and unauthorized groups working inside DOCCS facilities
who have sought to extort other inmates by attempting to control' access to the phones.
This requires vigilant monitoring by DOCCS intelligence staff and at times, intervention
by DOCCS security staff.
Lower call rates have had benefits for the inmate population. The Department believes
that its low calling rates have helped contribute to family reunification, and at less than a
nickel per minute , the Call Home Program is among the most cost-effective family
reunification options that we offer. Lower rates have also contributed to an improved
relationship between the Department and the offender advocacy groups.
The Department believes that a lower calling rate has also contributed to a lower rate of
illicit cell phone use by inmates in N~w York. In 2012 , the Department confiscated less
than 100 cell phones , compared to over ten thousand annual seizures in comparablysized correcti.onal systems.111

Mr. Gregory V. Haledjian
Page 3
July 8, 2013

In conclusion , the Department's experience indicates that inmate calling rates can be
reduced substantially if states eliminate their commissions on the calls , and structure
competitive bidding processes that ensure that the cost of the call is among the primary
attributes of their inmate calling contracts . Moreover, there are significant benefits that
can be attributed to lower calling rates that seem to outweigh the operational challenges
that also attach to the process .
Thank you for providing the Department with the opportunity to contribute to your
Workshop and we look forward to seeing the results of your process .

i 20 minutes is the average length of a call completed on the DOCCS system . This was
true in 2006 and is still true in 2013.

International calling is done under a separate system, per minute rates are higher and
are based upon long distance calling rates under a separate state contract. International
calling is less than 1 percent of DOCCS inmate call volume.

ii

iii Phone rates are a contributing factor, but so too are good security measures for both
visitation and perimeter security, adequate training and compensation for line staff, and
a zero tolerance policy that does not allow anyone to possess a cell phone inside a New
York State prison.