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November 3, 2003

RECEIVED
Marlene H. Dortch
Secretary
Federal Communications Commission
445 12th Street. S,W,
Room TW-A325
Washington, D.C. 20554

Writer's Direct Contact
l202) 387-8743
fl<.rogh@mofo.com

NOV - 3 2003
fBlEMl ~11ONS COUA4ISSIOM
OffiCE Of THE SWlfTMI'

C-c. ~c1.J

~Q: "''''/~S

Re: Petition for Rulemaking by Martha Wright, et 01., on referral from Wright
v. Corrections Corporatioll ofAmerica. CA No. 00·293 (GK) (D.D.C,)
Dear Ms. Dortch:
Enclosed are an original and four copies of a Petiticn for Rulemaking or. in the
Alternative, Petition to Address Referral Issues in Pending Rulemaking ("Petition"),
filed on behalf of Martha Wright and other prison inmate and non-inmate petitioners.
This Petition is filed in response to an order entered in the above-captioned class action
referring to the Commission petitioners' claims relating to the exorbitant long distance
telephone service rates imposed on inmates at privately administered prisons and
persons receiving collect calls from such inmates.!
These excessive inmate service rates result from the exclusive service
agreements entered into between prison administrators and telecommunications carriers
and the payment of generous commissions to each prison facility by its monopoly
service provider. As explained in the expert affidavit attached to the Petition. there are
no security or other penological justifications for these exclusive service agreements. It
would be technologically and economically feasible for multiple carriers to offer
telephone services to inmates at any given prison while meeting all legitimate security
and other penological needs.
Ac.cordingly, petitioners request that the Commission prohibit exclusive inmate
calling service agreements at privately administered prisons and require such facilities to
, Wright v. Correctiom Corporaliorto/America. CA No. OQ·293 (GK) (D,D.C. Aug. 22.2001).

MORRISON

& FOERSTER

LLP

Marlene H. Dortch
November 3, 2003
Page Two

permit multiple long distance carriers to interconnect with prison telephone systems in
the manner described in the expert affidavit. Service providers also should be required
to offer debit card or debit account service as an alternative to collect calling services.
Any questions about the Petition or supporting materials should be directed to
the undersigned.
Yours truly,

'::;~/J. f{~
Frank W. Krogh
Enclosure
cc:

Christopher Libertelli
Matthew Brill .
Jessica Rosenworcel
Daniel Gonzalez
Lisa Zaina
William Maher
Tarnara Preiss
Deena Shetler
Daniel P. Struck
Mark Schneider
Frank R. Volpe
Anita Wallgren
Jay M. Vogelson
Christopher R. Bjornson
Charles Sullivan
Kay Perry
Lynn Powell
Carol Finley
Douglas Dawson

dc-362764

._-----------------

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of:
Martha Wright, Dorothy Wade, Annette Wade,
Ethel Peoples, Mattie Lucas, Laurie Nelson,
Winston Bliss, Sheila Taylor, Gaffney &
Schember, M. Elizabeth Kent, Katharine Goray,
Ulandis Forte, Charles Wade, Earl Peoples,
Darrell Nelson, Melvin Taylor, Jackie Lucas,
Peter Bliss, David Hernandez, Lisa Hernandez
and Vendella F. Oura
Petition for Rulemaking or, in the Alternative,
Petition to Address Referral Issues In Pending
Rulemaking

)
)
)
)
)
)
)
)
)
)
)
)
)
)

File No. _ __

PETITION FOR RULEMAKING OR, IN THE ALTERNATIVE,
PETITION TO ADDRESS REFERRAL ISSUES IN PENDING
RULEMAKING

"

Deborah M. Golden
D.C. Prisoners' Legal Services Project, Inc.
2639 Connecticut Ave., N.W.
Suite 225
Washington, D.C. 20008
(202) 775-0323

Stephen G. Seliger
Laurie S. Elkin
Seliger & Elkin, Ltd. #500
ISS North Michigan Avenue
Chicago, IL 60601
(312) 616-4244
Barbara J. Olshansky
Center for Constitutional Rights
666 Broadway, 7'h Floor
New York, NY 10012
(212) 614-6464 x 439

Dated:. October 31, 2003

Cheryl A. Tritt
Frank W. Krogh
Jennifer L. Kostyu
Morrison & Foerster, LLP
2000 Pennsylvania Avenue, N.W.
Suite 5500
Washington, D.C. 20006
(202) 887-1510

T ABLE OF CONTENTS
Page

I.

INTRODUCTION AND SUMMARY ...................................................................... 2

II.

BACKGROUND ....................................................................................................... 4

III.. THE COMMISSION'S POLlCY ALLOWING EXCLUSIVE DEALING
ARRANGEMENTS IS BASED ON AN INCORECT ASSUMPTION,
PREVENTS COMPETITION IN THE INMATE CALLING SERVICE
MARKET AND MUST BE RECONSIDERED ....................................................... 9

IV.

A.

The Commission's Policy Incorrectly Assumes That Security
Concerns Preclude The Possibility of Competition In Inmate
Calling Services ................................................................................................ 9

B.

Competition In Inmate alling Services May Be Allowed Without
Sacrificing Legitimate Security Or Other Penological Goals ......................... 11

C.

Because Exclusive Dealing Arrangements And Restrictions That
Limit Inmate Te~ephone Services To Collect Calling Are Not
Justified, They Should Be Prohibited To Advance The Public
Interest In Reasonable Calling Rates .............................................................. 15

D.

The Commission Should Implement A Competitive Inmate Calling
Policy By Issuing Basic Ground Rules ............................................................ 18

CONCLUSION ........................................................................................................ 21

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

Before the

FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554

In the Matter of:

)
)

Martha Wright, Dorothy Wade, Annette Wade,
Ethel Peoples, Mattie Lucas, Laurie Nelson,
Winston Bliss, Sheila Taylor, Gaffney &
Schember, M. Elizabeth Kent, Katharine Goray,
Ulandis Forte, Charles Wade, Earl Peoples,
Darrell Nelson, Melvin Taylor, Jackie Lucas,
Peter Bliss, David Hernandez, Lisa Hernandez
and Vendella F. Qura

)
)
)

)
)
)
)
)

File No. _ __

)

Petition for Rulemaking or, in the Alternative,
Petition to Address Referral Issues In Pending
Rulemaking

)
)
)

To the Commission:

PETITION FOR RULEMAKlNG OR, IN THE ALTERNATIVE,
PETITION TO ADDRESS REFERRAL ISSUES IN PENDING
RULEMAKlNG
Martha Wright, Dorothy Wade, Annette Wade, Ethel Peoples, Mattie Lucas, Laurie
Nelson. Winston Bliss, Sheila Taylor, Gaffney & Schember, M. Elizabeth Kent, Katharine
Goray, Ulandis Forte, Charles Wade, Earl Peoples, Darrell Nelson, Melvin Taylor, Jackie Lucas,
Peter Bliss, David Hernandez, Usa Hernandez and Vendella F. Qura (collectively, "Petitioners")
petition this Commission to address anticompetitive practices that result in excessive inmate
telephone service rates at privately-administered prisons. Martha Wright and other Petitioners
originally sought relieffrom these practices in Wright, et al. v. Corrections Corporation of
America. e/ al. (" Wright"), which was referred to the Commission with the instruction that the

parties "file the appropriate pleadings with the FCC".I Accordingly, pursuant to Section 1.401
of the Commission's rules,2 Petitioners request the Commission to initiate a notice and comment
rulemaking proceeding to address certain of the referral issues as set forth below.

1.

INTRODUCTION AND SUMMARY
Prison inmates generally pay some of the highest long distance rates in the country, the

result of the exclusive service agreements that prison administrators typically enter into with
telecommunications carriers for inmate calling services. These arrangements usually involve the
payment of generous commissions to the prison facility by the winning service provider, which
recovers these costs by charging exorbitant rates. Prison officials assert that multiple telephone
service providers would jeopardize prison security and anti-fraud measures and undermine other
penological goals. These exclusive arrangements, however, preclude effective competition for
inmate calling services and result in excessive calling rates. At some prison facilities, inmates
also are limited to collect calling services and are not offered the cheaper alternative of debit card
or debit account calling services.
Petitioners are current or former prison inmates in facilities operated by the Corrections
Corporation of America ("CCA"), a defendant in the Wright case, and family members, loved
ones, legal counsel and others who receive and typically pay for interstate telephone caBs from
inmates. The Petitioners and other similarly situated persons are harmed by the inflated rates
resulting from these exclusive service agreements, excessive commissions and "collect calIonly" requirements governing the provision of inmate telephone services at CCA facilities by the

I Wright v. Corrections Corp. of America, C.A. No. 00-293 (OK) (D.D.C. Aug. 22, 2001), Order,
slip op. at 1.

247 C.F.R. § 1.401.

2

long distance carrier defendants in the Wright case. The tremendous cost of long distance
telephone calls from inmates, often located far from their relatives and legal counsel, harms the
Petitioner inmates and other low income Petitioners paying these rates. Petitioners are forced to
restrict their calling or acceptance of collect calls, effectively depriving Petitioner inmates and
family members of their most reasonable means of communication and further straining the
family and community ties necessary for released inmates' rehabilitation. 3
Existing Commission rules and policy have long condoned these exclusive service
arrangements and restrictions on inmate calling options based upon the assumption that security
and other penological considerations justify these practices. As demonstrated in the attached
expert affidavit of Douglas A. Dawson ("Dawson Affidavit"), however, that assumption is
\vrong. It is both technically and economically feasible for multiple carriers to offer telephone
services to inmates at any given prison while meeting all legitimate security and other
penological needs. Accordingly, Petitioners request that the Commission prohibit exclusive

inmate calling service agreements and collect call-only restrictions at privately-administered
prisons and require such facilities to permit multiple long distance carriers to interconnect with
prison telephone systems in the manner described in the Dawson Affidavit. Under that structure,
the Commission would establish a benchmark access fee that the prison telephone system would
be allowed to charge the long distance provider selected by the inmate. The Commission also
should require inmate service providers to offer debit card or debit account service as an

} Petitioners' interests thus are directly affected by the Commission's policies regarding inmate
calling services. See 47 C.F.R. § IAOI(d).

3

alternative to collect calling services. 4 Because the penological justifications for exclusive
inmate calling service agreements can no longer be substantiated and are pretextual,s there is no
longer any justification for such arrangements.

II.

BACKGROUND
In selecting inmate service providers, prison administrators commonly accept bids from

multiple service providers and grant a monopoly to the winning bidder for a particular prison.6
Inmates, and the individuals they call, have access only to the monopoly service provider.
Moreover, the services are typically limited to operator assisted collect calling and debit card or
debit account calling services, and in some cases, collect calling services only. As part ofthe
bidding process, competing service providers generally are expected to offer the administrators
generous commissions for the right to provide exclusive service to the facilities. 7 The winning
bidder is typical1y the service provider that offers the highest commission rates, often exceeding

Petitioners limit the scope of this Petition to inmate telephone services at private prison
facilities in order to avoid any possible conflict with state laws regulating the administration of
publicly administered correctional facilities. Moreover, Wright involves only a private prison
administrator, the CCA. Petitioners do not concede thereby that state laws or regulations
governing the administration ofpubliC\y administered correctional facilities could not be
preempted by this Commission.

4

See Justin Carver, An Efficiency Analysis of Contracts for the Provision of Telephone Services
to Prisons, 54 Fed. Comm. U. 391, 394 (2002) ("Carver"). A copy of the Carver article is
attached as Exhibit 4 to the expert affidavit of Douglas A. Dawson, [n the matter of Martha
Wright. et al.. Petition for Rulemaking or, in the Alternative, Petition to Address Referral Issues
In Pending Rulemaking ("Dawson Affidavit"), appended hereto as Attachment A.

5

6 implementation

of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996,17 FCC Red 3248, 3252 (200;2) ("Inmate Pilyphone NPRM').

lId.

4

45 percent and sometimes more than 60 percent of gross revenues. 8 The winning bidder then
charges excessive rates for inmate calls in order to cover the huge commissions that it has agreed
to pay to the prison administrator.
The Commission itself has recognized that this approach to the selection of inmate
calling services has the distorting effect of allowing competitive pressures to drive prices up,
rather than down. "[P]erversely, because the bidder who charges the highest rates can afford to
offer the confinement facilities the largest location commissions, the competitive bidding process
may result in higher rates.,,9 Thus, ;ather than awarding contracts to service providers based
upon service quality and low rates, these contracts are awarded based upon the commission rates.
For years, prison inmate advocates have pressed for regulatory mechanisms that would
provide relief from the exorbitant rates and limited service options for inmate long distance
calling services. Citizens United for Rehabilitation of Errants ("CURE") and The Coalition of
Families and Friends of Prisoners of the American Friends Service Committee ("AFS<;") have
stressed the need to reduce the burden of oppressively high inmate calling rates, which is borne
largely by economically disadvantaged relatives and friends of inmates, often located far from
the facilities where the inmates are incarcerated, Not only do these exorbitant rates directly
injure the non-inmates paying them, but, as studies cited by CURE and AFSC explain, they also
work to the detriment of society by reducing rehabilitative ties that reduce recidivism, preserve

8

Jd. at 3253 n.34; Carver, 54 Fed. Comm. L.J. at 394, 395 n.22,

Jd. at 3253; see also Billed Party Preference/or InterLATA 0+ Calls, 13 FCC Rcd 6122, 6156
(1998) ("0+ Second Report"), modified, 16 FCC Rcd 22314 (2001); Carver, 54 Fed. Comm. L.J.
at 394-96, attached as Exhibit 4 to the Dawson Affidavit.

9

5

families, ease prison tensions and promote societal efforts to rehabilitate ex-offenders. lo
Moreover, these exorbitant rates are imposed on a captive market that is unable to afford them,
while all other consumers enjoy the benefits of increased competition and choices in
telecommunications services. I I
Until now, the Commission has accepted the status quo based upon its assumption that
competition in inmate services is incompatible with prison officials' legitimate security and other
penological goals. The Dawson Affidavit, however, explains how competition in long distance
inmate services can be structured to"accommodate those goals and demonstrates that withholding
the benefits of competition from the inmate telephone service market can no longer be justified.
This Petition arises from an order in Wright, a class action brought in the United States
District Court for the District of Columbia by certain of the Petitioners and other individuals
against the CCA, a private prison facility administrator for state and local governments, and five
telecommunications carriers with exclusive contracts to provide inmate calling services at
different CCA facilities. Petitioners allege in their federal court complaint in Wright that the
defendants' exclusive dealing arrangements restrict telephone service choices for inmate calls,
resulting in substantially increased rates for such services, thereby violating various

See, e.g., CURE Comments on Second Further Notice of Proposed Rulemaking at 1-5, Billed
Party Preferencefor 0+ InlerLATA Cal/s, CC Docket No. 92-77 (July 16, 1996) ("CURE
Comments"); Comments of Citizens United for Rehabilitation of Errants and The Coalition of
Families and Friends of Prisoners of the American Friends Service Committee at 1-5,
Implemental ion of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, CC Docket No. 96-128 (June 21,1999) ("CURE/AFSC
Comments").
10

II

CUREI AFSC Comments at 2-4.

6

constitutional and statutory rights, including Section 201 (b) of the Communications Act of 1934,
as amended (the "Act,,).'2
In an August 22, 200 I Memorandum Opinion and Order, the federal district court
dismissed the complaint and directed the parties "to file the appropriate pleadings with the FCC
to ensure that the issues raised in this lawsuit are presented to the FCC," finding that such
referral would "assist the Court in its task of adjudicating these claims.,,13 In an Order released
on November 5, 2001,14 the court granted Petitioners' Motion to Reconsider the dismissal of the
complaint and stayed the federal coUrt action until the Commission considered the claims. IS

12 47 U.S.c. § 20 1(b). Petitioners also allege that these unj ustifiable restrictions abridge inmates'
First, Fifth and Fourteenth Amendment rights under the United States Constitution.
13 Wright v. Corrections Corp. ofAmerica, C.A. No. 00-293 (GK) (D.D.C. Aug. 22, 2001),
brder, slip op. at 1; Memorandum Opinion, slip op. at 13. The court's Memorandum Opinion
and Order are appended hereto as Attachments Band C.

14 The court's November 5, 2001 Order is appended hereto as Attachment D.
15 Following the court's referral, and pursuant to the Commission's referrlll procedures,
p'etitioners' counsel engaged in protracted discussions with the Enforcement Bureau ("EB") staff
and other parties to the district court case regarding: (a) the most appropriate procedural vehicle
or vehicles to use to bring the referral claims before the Commission; and (b) the EB's pre-filing
mediation procedures in referral complaint cases. See FCC Public Notice, Primary Jurisdiction
Referrals Involving Common Carriers, 15 FCC Rcd 22449 (2000). The Public Notice states that
"primary jurisdiction referrals in cases involving common carriers are appropriately filed as
formal complaints with the Enforcement Bureau pursuant to section 208 of the [Act]. There may
be circumstances, however, in which this approach may not be appropriate." Accordingly, the
'Public Notice directs parties to contact the Enforcement Bureau prior to filing any pleadings.
The parties were in the middle ofthese procedural discussions and the complaint prefiling process when the comment cycle for the Inmate Payphone NPRM closed on June 24,2002.
After further discussions and meetings, Petitioners reached an understanding with the EB and
Wireline Competition Bureau ("WCB") staff dividing the referral claims between a formal
complaint to be filed with the EB, limited to claims regarding unreasonable inmate calling rates
and related claims, and a petition to be filed with the WCB, chaJlenging the Commission's
acceptance of exclusive service agreements and other restrictions in the provisiun of inmate long

7

Accordingly, based on the technical and economic analysis presented in the Dawson
Affidavit and the legal discussion below, Petitioners request that the Commission reconsider, in
the context of privately administered prison facilities, its assumption that exclusive dealing
arrangements for the provision of interstate inmate telephone service are the only means of
satisfying legitimate security and other penological goals, Because that assumption is incorrect,
the Commission should reverse its policy and require such facilities to permit competition in the
provision oflong distance inmate calling services in the manner described in the Dawson
Affidavit and allow inmates a choice between collect calling and debit card or debit account
services.
Specifically, the Commission should conclude that:
•

the Commission's previous assumption that prison security, anti-fraud and other
penological goals can be met only when one carrier provides an telephone services to
inmates in a prison is incorrect because it is technologically and economically feasible to
permit prison inmates to choose among multiple carriers, consistent with all legitimate
security and other penological concerns;

•

similarly, all legitimate security and other penological concerns can be met while offering
inmates debit card or debit account calling services as an alternative to collect calling
services;

•

the excessive rates charged for inmate calling services result primarily from the lack of
competition in the provision of inmate telephone services and the commissions that
carriers pay to prison administrators as a part of their exclusive contracts to provide
inmate calling services;

•

such commissions are driving inmate calling rates up;

•

accordingly, the Commission should require all privately administered prison facilities to
permit competition in the provision of interstate long distance inmate calling services in
the manner described in the Dawson Affidavit, allow inmates a choice between collect
calling and debit card or debit account services and prohibit such commissions except to

'distance services. Accordingly, Petitioners also intend to file a formal complaint with the EB
challenging the reasonableness of the inmate service rates charged by defendants.

8

the extent they are to reimburse the costs actually incurred by prison administrators in
connection with the provision of telecommunications services to inmates.
Because Petitioners seek a new regulatory regime for inmate services, including the
"ground rules" discussed below, a notice of proposed rulemaking ("NPRM") will be required in
order to address these issues. The pending Inmate Payphone NP RM also involves related issues,
but the Commission assumes in that proceeding that exclusive arrangements are the only method
by which prison administrators' security and other penological goals can be satisfied. 16 Full
consideration of Petitioners' challenge to that policy assumption and the rules Petitioners seek to
establish thus requires a further NPRM, either by enlarging the scope of the pending Inmate
Payphone proceeding or initiating a new phase of CC Docket No. 96-128. 17

III.

THE COMMISSION'S POLICY ALLOWING EXCLUSIVE DEALING
ARRANGEMENTS IS BASED ON AN INCORRECT ASSUMPTION, PREVENTS
COMPETITION IN THE INMATE CALLING SERVICE MARKET AND MUST
BE RECONSIDERED
A.

The Commission's Policy Incorrectly Assumes That Security Concerns
Preclude The Possibility of Competition In Inmate Calling Services

The Commission's policy accepting exclusive service arrangements derives not from any
statutory prohibition against competition in inmate services, but, rather, is based entirely on a
factual assumption that, as explained below, is incorrect. The Commission historically has
recognized that security concerns differentiate inmate calling services from other types of
telecommunications services, such as payphone services that are available to the public at large

16

Inmate Payphone NPRM, 17 FCC Red at 3276.

17 See Sprint Corp. v. FCC, 315 F.3d 369, 374-77 (D.C. Cir. 2003) (when an agency changes,
rather than clarifies, a rule, NPRM published in the Federal Register is required; public notice
and comment are not sufficient).

9

and aggregator services. IS The Commission has assumed, based on those considerations, that
"an outbound calling monopoly ... serving [a] particular prison" is necessary "to recognize the
special security requirements applicable to inmate calls.,,19 Most recently, the Commission
assumed in the Inmate Payphone NPRMthat "legitimate security considerations preclude
reliance on competitive choices, and the resulting market forces, to constrain rates for inmate
calling.,,2o Thus, the Commission's policy of approving exclusive inmate service arrangements
is based entirely upon the untested factual assumption that inmate service monopolies are
necessary to meet prison administrators' legitimate security and other penological goals.
The Commission has recognized that the market stmcture resulting from this policy
works in reverse from the traditional telecommunications market, where competitive pressures
drive prices down?1 Nevertheless, the Commission has not questioned whether there might be
other means to satisfy the security and other penological goals of prison administrators.

18 See Inmate Payphone NPRM, 17 FCC Rcd at 3252-53; Billed Parly Preference for 1nlerLATA
0+ Calls, Second Order on Reconsideration, 16 FCC Rcd 22314, 22322, n. 41 (2001) ("0+
Second Reconsideration Order"); 0+ Second Report, 13 FCC Rcd at 6156; Policies and Rules
Concerning Operator Service Providers, 6 FCC Rcd 2744, 2752 (1991) ("Operator Service
Order"), afJ'd, 7 FCC Rcd 3882 (1992).
19

0+ Second Report, 13 FCC Rcd at 6156; see also 0+ Second Reconsideration Order, 16 FCC
Rcd at 22323, n.45 ("Recognizing the security needs of prisons, the Commission does not
require them to grant inmates access to mUltiple aSPs."); Amendment of Policies and Rules
Concerning Operator Service Providers and Call Aggregators, 11 FCC Rcd 4532, 4547-48
(1996) ("Amended Operator Service Order").
20

Inmate Payphone NPRM, 17 FCC Rcd at 3276 (emphasis added).

Id. at 3253; see also 0+ Second Report, 13 FCC Rcd at 6144, 6156. As explained in the
Dawson Affidavit, commissions typically add more than 40 percent to the total costs, before
commissions, of inmate telephone services. Dawson Affidavit at ~ 67. Thus, the theory of
contestable markets does not apply to the market for inmate calling services, and the rates of
inmate service providers are inflated as a result of the exclusive service contracts and excessive
21

10

B.

Competition In Inmate Calling Services May Be Allowed Without Sacrificing
Legitimate Security Or Other Penological Goals

The factual assumption underlying the Commission's policy is incorrect because
exclusive dealing arrangements and collect call-only restrictions are not necessary in order to
enforce prison security or to carry out related penological goals. As explained in the Dawson
Affidavit, call monitoring, blocking calls to certain telephone numbers, preventing fraud and
other security functions can operate consistently with a choice of multiple carriers. Private
prison administrators can implement necessary security functions whether or not operator
assisted collect calling is used, whether a debit card or debit account is used, or whether or not
the telephone company has an exclusive service agreement. 22 Exclusive service arrangements
thus serve only to allow carriers to maximize profits from persons trapped in a captive market
without options available to other consumers and to allow private prison administrators to reap
excessive commissions from the carriers.
As explained in the Dawson Affidavit, it is technically and economically feasible to
permit multiple carriers to provide inmate calling services at any given prison while meeting all
legitimate security and other penological needs. Inmate service competition could be
implemented by allowing multiple long distance carriers to interconnect directly with the
telephone system in a prison facility. This service configuration, under which the competitive
carriers would pay a usage charge to the party installing and operating the prison telephone
system, would be technically and economically feasible. Thus, there would be two components

commissions they pay to the prison administrators. See Carver, 54 Fed. Comm. L.J. at 394-96,
attached as Exhibit 4 to the Dawson Affidavit.
22

See Dawson Affidavit at ~~ 19-49.

11

~'"~----~-.-------------------

to the competitive system described in the Dawson Affidavit -- an underlying prison telephone
system with a switch to control the routing of outgoing calIs to different carriers and two or more
long distance carriers interconnected with the prison switch.23
As demonstrated in the Dawson Affidavit, the underlying prison telephone system could
be operated profitably for a fee as low as 4.4 to 5.9 cents per minute, to be paid to the underlying
,system operator by the interconnecting long distance company carrying a given calJ. 24 It is also
clear from the Dawson Affidavit that the long distance "segment" would add less than another
$0.15 per minute, assuming that both debit calling and colIect calIing were provided.
Competition will quickly bring the rates charged by competitive long distance carriers down to
their actual efficient costsY
Moreover, the cost of the long distance segment would be still lower if only debit card or
debit account service were provided. In its 0+ Second Report, the Commission stated that:
prisons may allow inmates ... as the Florida Commission has done, ... to
use pre-paid debit cards. Such options would exert downward pressure on
high interstate rates for 0+ calls from inmate phones, diminish the ability
of a prison and its [presubscribed long distance carrier] to set
supracompetitive rates, and thus lessen or obviate the need for further
federal regulations concerning 0+ rates in this submarket. 26
In its comments in that proceeding, the Florida Public Service Commission ("FPSC") asserted
that debit cards would prevent "rate shock" because they could be purchased in advance at a

See id. at ~~ 39-49. It should be noted that the interconnecting competitive carriers could also
provide local and other intrastate services for inmates. This Petition, however, addresses only
the interstate long distance services directly under the jurisdiction of this Commission.

23

24

Id. at ~~ 50-71.

25Id. at ~~ 43-44,50-69.
26

0+ Second Report, 13 FCC Rcd at 6156 (citation omitted).

12

predetermined rate. The FPSC noted that the use of debit cards would still allow prison
administrators to "exercise security measures by screening the access number the inmate would
use to place the call before allowing the card to be used.,,2? The FPSC also recognized that
customer-premises equipment was readily available to control fraud.

28

[IJt is appropriate to review the justification for restricting all
inmate outbound calls to a single provider. If, after investigation,
it is determined that instrument implemented fraud control devices
satisfactorily restrict inmate access and prevent abuse of the
telephone network, there may be justification ... to provide some
competition for inm~te services where none exists today.29
According to the FPSC, allowing competition in the inmate calling services market may offer
benefits such as "savings to inmate families, legal counsel and public defenders from reduced
telephone charges.,,3o
The Dawson Affidavit confirms these findings. If only long distance debit card or debit
account calling is provided, the resulting elimination of billing costs and uncollectible charges
from the cost of the long distance segment of the configuration described in the Dawson
Affidavit would reduce the overall cost of inmate long distance service by more than $0.06 per
minute.)1

Comments of the Florida Public Service Commission at 10-11, Billed Parly Preference for
InterLATA 0+ Calls, CC Docket No. 92-77 (July 16, 1996).

27

28

I d.

29

I d. at 11-12.

30!d

at 12 (citation omitted).

)1 See Dawson Affidavit at ~ 74.

13

That exclusive service arrangements and restrictions on the use of debit card or debit
account services cannot be justified by legitimate security needs or other penological goals is
underscored by a policy statement adopted in early 2001 by the American Correctional
Association ("ACA"), the organization of prison and jail administrators throughout the United
States. That statement, a "Public Correctional Policy on Inmate/Juvenile Offender Access to
Telephones," provides in relevant part:
[I]nmates/juvenile offenders should have access to a range of reasonably
priced telecommunicati~ns services. Correctional agencies should ensure
that:

Contracts are based on rates and surcharges that are commensurate with
those charged to the general public for like services. Any deviation from
ordinary consumer rates should reflect actual costs associated with the
provision of services in a correctional setting; and
Contracts for inmate/juvenile offender telecommunications services
provide the broadest range of calIing options determined to be consistent
with the requirements of sound correctional management.ll
Because multiple types of telecommunications services could be provided to inmates at rates
much lower than the exorbitant rates that are currently available to inmates, the exclusive dealing
arrangements, excessive commissions and colIect calI-only restrictions that generate those
excessive rates thus conflict with the above-stated policies ofthe ACA. Petitioners are forced to
accept the calIing rates and practices imposed by the monopoly inmate calIing service provider if
they wish to talk to their loved ones or attorneys. As CURE and AFSC have pointed out,
because inmates and their families often cannot afford these rates, inmates are forced to limit the

Policy adopted by the American Correctional Association Delegate Assembly on Jan. 24, 2001
at the Winter Conference in NashvilIe Tennessee, a copy of which is appended hereto as
Attachment E.

l2

14

amount of time spent communicating with their family members, which discourages the
maintaining offamily and community ties, further handicapping Petitioner inmates in their
efforts to successfully reenter society upon release. 33

C.

Because Exclusive Dealing Arrangements And Restrictions That Limit
Inmate Telephone Services To Collect Calling Are Not Justified, They
Should Be Prohibited To Advance The Public Interest In Reasonable Calling
Rates

One of the principal goals of the Act is "to promote competition and reduce regulation in
order to secure lower prices and higher quality services for American telecommunications
consumers.,,34 Section 201(b) of the Act specifically provides that "[alll charges, practices,
classifications, and regulations for and in connection with such communication service, shall be
just and reasonable.,,35 Because exclusive dealing arrangements between providers of inmate
calling services and private prison administrators and collect call-only limitations are not
justified by any legitimate security or other penological goals, such restraints are unreasonably
anti competitive. They unjustifiably deny Petitioners the freedom to use other carriers and the
opportunity for other carriers to compete for the provision of inmate services. The Commission
accordingly should bar exclusive dealing arrangements for the provision of interstate inmate
calling services and collect call-only restrictions to ensure that interstate inmate calling rates are
reasonable under Section 201(b) of the Act. 36

33 CURE Comments at 1-5; CURE/AFSC Comments at 1-5.
Telecommunications Act of 1996, Pub. 1. No. 104-04, purpose statement, 110 Stat. 56, 56
(1996).

34

35

47 U.S.C. § 201(b).

See TRAC CommunicaJions, Inc. v. Detroit Cellular Telephone Co., 4 FCC Rcd 3769 (J 989)
(exclusivity provision in cellular service resale agreement impeded complainant from reselling

36

IS

--_._---.-------------------

Acting under its Section 201 (b) authority, the Commission has prohibited exclusive
dealing arrangements and imposed other types of requirements on carriers in a wide variety of
situations to ensure that consumers are afforded reasonable rates. For example, in its

Competitive Networks proceeding, the Commission adopted various measures to promote
competitive access to telecommunications services in multiple tenant environments ("MTEs")
and to ensure reasonable rates and practices in such locations?7 One of those measures included
prohibiting carriers from entering into exclusive contracts with owners or managers of
commercial MTEs for the provision of telecommunications services to the MTEs. In terms
paralleling the circumstances presented in the inmate service context, the Commission concluded
that such MTE agreements
effectively restrict premises owners or their agents from permitting access
to other telecommunications service providers. The use of exclusive
contracts in commercial settings poses a risk of limiting the choices of
tenants in MTEs in purchasing telecommunications services, and of
increasing the prices paid by tenants for telecommunications services.)8
The Commission noted that an exclusive dealing agreement between a carrier and the owner or
manager of an MTE "may essentially constitute a device to preserve existing market power ...
and may impede the development of competition in the market for local telecommunications

services of other cellular carriers and had anti competitive effect, violating Section 201 (b», ajJ'd,
5 FCC Red 4647 (1990).

Promotion o/Competitive Networks in Local Telecommunications Markets, 15 FCC Red
22983 (2000) ("Competitive Networks").

37

38

,

Jd. at 22996-97 (citations omitted).

16

service.,,39 The Commission asserted its authority to prohibit these exclusive dealing
arrangements under Section 201(b) of the Act, which bars unreasonable rates and practices.

40

Furthermore, the Commission has required carriers to take affirmative steps to ensure
competition in the telecommunications market even though such steps require the expenditure of
significant capital resources to meet the Commission's mandate. For example, the Commission
required the provision of payphone call tracking by long distance carriers in order to ensure fair
payphone compensation, notwithstanding their objections that the installation oftracking
mechanisms would require significant expenditures of capital.

41

Accordingly, the Commission should ban exclusive dealing agreements, and the
commissions paid to secure such arrangements, for the provision of interstate telephone services
for inmates in privately administered prisons and should require such prisons to allow
competition in the manner set forth herein and service providers to offer debit card or debit
account services as an alternative to collect calling in order to ensure that interstate inmate
calling services are reasonably priced under Section 201(b) of the Act.

42

It is especially

39 I d. at 22997-98. The Commission also stated that the adoption of this prohibition "will reduce
the likelihood that incumbent LECs can obstruct their competitors' access to MTEs, as well as
address particular potentially anticompetitive actions by premises owners and other third
parties." /d. at 23038-39.
4,Old. at 23000.

Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of I 996, II FCC Rcd 20541,20588,20590-91 (1996) (subsequent
history omitted).

41

See also Policy and Rules Concerning Ratesfor Dominant Carriers, 5 FCC Rcd 6786 (1990),
modified on recon., 6 FCC Rcd 2637 (1991), aff'd sllb nom., Nat 'I Rural Telecom Ass 'n v. FCC,
988 F.2d 174 (D.C. Cir. 1993) ("LEC Price Cap Order") (establishing price cap regulation of
dominant local exchange carriers under Section 201 (b) to produce rates within a zone of
reasonableness).

42

17

incumbent on the Commission to modify its policy because, in light of the Dawson Affidavit,
there is no longer any rational relationship between exclusive service agreements and prison
officials' legitimate penological goals. The Dawson Affidavit demonstrates that there is no
rational basis for the Commission's past policy of allowing such arrangements, and such
"changes in factual and legal circumstances may impose upon the agency an obligation to
reconsider a settled policy,,43 and render any continuation of that policy arbitrary and capricious
under cases such as Bechtet4 and Geller .45 That a variety of competitive calling services and
rates could be available to inmates without sacrificing prison administrators' security or other
penological goals invalidates the current policy.

D.

The Commission Should Implement A Competitive Inmate Calling Policy By
Issuing Basic Ground Rules

The proposed competitive irunate calling regime would have two components: (I) an
underlying inmate telephone system; and (2) interconnecting competitive long distance carriers.
Because one entity would provide the underlying telephone system under this proposal, a partial
monopoly in inmate calling service would continue to exist. In order to ensure that the telephone
system provider charges the interconnecting long distance carriers reasonable rates, the
Commission should treat prison telephone system providers as common carriers and place some
requirements on their charges in order to ensure reasonable prison telephone system rates.

Bechtel v. FCC, 957 F.2d 873, 881 (D.C. Cir. 1992), cert. denied Galaxy Communications v.
FCC, 506 U.S. 816 (1992), remanded by Bechee! v. FCC, 10 F.3d 875 (D.C. CiT. 1993)
("Bechlel").

43

44

ld

'15

Geller v. FCC, 610 F.2d 973 (D.C. Cir. 1979) ("Geller").

18

Petitioners suggest that the Commission impose a "safe harbor" benchmark rate
analogous to the benchmark established for competitive local exchange carriers ("CLECs';) in
the Access Charge Reform Order. 46 Just as the access service market "does not appear to be
structured in a manner that allows competition to discipline rates," enabling CLECs "to impose
excessive access charges," a prison telephone system provider could charge competing carriers
excessive rates to interconnect with the system in order to carry inmate long distance calls. 47 It
would therefore be appropriate to establish a benchmark rate above which the system provider
may not charge an interconnecting iong distance carrier unless the carrier agrees to a higher
negotiated rate. 48 In the absence of an agreed-upon higher charge, the system provider would be
required to allow a long distance carrier to interconnect with the prison system and pay the
benchmark rate, which would be presumed reasonable and would be tariffed.
In the Access Charge Reform Order, the Commission initially pegged the benchmark
access rate at 2.5 cents per minute, gradually declining to the composite switched access rate
charged by the incumbent local exchange carrier ("ILEC") with which the CLEC competes.

49

In

the case of prison telephone systems, there is no comparable valid service rate that could be used
as a benchmark. Based on the cost showing in the Dawson Affidavit, however, the Commission
should set the benchmark rate at seven cents per minute, which is about one cent per minute

Access Charge Reform; Reform ofAccess Charges Imposed by Competitive Local Exchange
Carriers, 16 FCC Rcd 9923 (2001) ("Access Charge Reform Order").

46

47

See id. at 9935-36.

48

Jd. at 9925, 9938-40.

49

ld. at 9941.

19

above the high end estimate in the Dawson Affidavit for total prison telephone system costs, not
including the long distance segment. so
In the alternative, if a prison telephone system provider did not want to be subject to the
benchmark limit, it would be allowed to charge a rate higher than the benchmark if it could show
that its costs justified such a rate. The Commission might also consider alternative measures to
help ensure reasonable prison telephone system rates.
The establishment of a benchmark rate, cost justification requirement or other pricing
requirement for the underlying telephone system should eliminate any need for price regulation
of the long distance segment of the inmate service or of overall inmate service rates. If a long .
distance provider charges more than its actual costs, including profit, other long distance
providers will request interconnection until competition reduces long distance rates to actual
costs. In order to ensure that there are no impediments lO competition, the underlying system
provider at each prison facility should be required to permit a reasonable number of competitive
carriers to interconnect and offer the long distance segment of the inmate service. The
underlying provider should be permitted to offer the long distance segment as well, but if it does
so, it should be required to offer exactly the same interconnection terms and technical conditions
to other competitive carriers as it provides to its own long distance operation at a given facility.
The underlying system provider should also be required to charge itself the same underlying
system rate that it charges to the other long distance competitors, whether that is a benchmark

;0

Dawson Affidavit at ~~ 50-71.

20

rate or some other rate. These simple rules will facilitate the transition 10 competition that is
needed in inmate long distance calling services. sl

IV.

CONCLUSION
For the reasons set forth above, Petitioners request that the Commission grant this

petition and reexamine its long-standing policy that security reasons preclude the competitive
provision of interstate telecommunications services to inmates in privately administered
correctional facilities and that such services may be limited to conect calling. The Commission
should find that private prison administrators must permit competition in the provision of inmate
calling services in the manner set forth in the Dawson Affidavit and allow inmates to use debit
cards or debit account services as an alternative to collect calling. The Commission should
acknowledge that it is technologically and economically feasible to permit prison inmates to
choose among multiple carriers and that a prison's security and other penological goals can be
met when multiple carriers offer long distance services to a prison facility. Given the 11lck of any
justification for exclusive dealing arrangements for inmate telephone services, Section 201(b) of
the Act requires that inmate telephone service rates be restructured to permit competition.
The Commission also should find that commission payments, which drive inmate calling
rates up, are justifiable only to the extent that they reimburse the costs incurred by prison
administrators in connection with the provision of telephone services to inmates. The current use
of commissions as a general slush fund cannot be squared with the public interest in reasonable

Because of the unavoidable inefficiencies of serving extremely small facilities, see Dawson
Affidavit at ~ 68 n.46, it may not be feasible to apply these rules to low-capacity prisons. Most
such facilities. however, are locally-administered jails. Privately administered facilities, which
typically house at least several hundred prisoners, are large enough for multiple carriers to serve
efficiently.

; I

21

rates under Section 201 (b ).;2 Accordingly. in order not to frustrate a properly functioning
competitive inmate service regime, the Commission should also prohibit the imposition and
payment of commissions by inmate telephone service providers except to the extent that the
commissions cover legitimate costs directly incurred by the prison administrators in
Implementing and carrying out legitimate security and other penological goals in connection with
the provision of inmate telephone services.
In order to facilitate the transition to competition, the Commission should provide for a
one-year period in which current exclusive dealing arrangements and commission agreements
would have to be modified to permit competition in the manner set forth in the Dawson Affidavit
and to limit commission payments as requested above.;) The Commission also should prohibit
carriers and private prison administrators from extending existing exclusive dealing
arrangements or entering into new exclusive dealing arrangements. Finally, the Commission
should establish a benchmark service rate or cost justification requirement for the underlying

See Inmate Payphone NPRM, 17 FCC Rcd at 3277 (noting that Commission proceeds
typically used for inmate services or assigned to the state's general revenue fund); see also
Carver, 54 Fed. Comm. L.1. at 400-01, attached as Exhibit 4 to the Dawson Affidavit.

52

The Commission recognized in the Competitive Networks proceeding that it has "authority to
modify provisions of private contracts when necessary to serve the public interest." 15 FCC Rcd
at 23001; see also Western Union Telegraph Co. v. FCC, 815 F.2d 1495, 1501 (D.C. Cir. 1987)
("the Commission has the power to ... modify ... private contracts when necessary to serve the
public interest."); Competition in the Interstate Interexchange Marketplace, 6 FCC Rcd 5880,
5906 (1991).

5)

22

inmate telephone system at private prison facilities and rules governing long distance carrier
interconnections with the underlying inmate telephone system as discussed above and in the
Dawson Affidavit.

Respectfully submitted,
Martha Wright, et al.

., c
/ ,,/ / / 'r/.
By: / )/J5-(>t-(L{< /1' ."-J:ct:;"-0" ":f. '
Deborah M. Golden
.( "-'f I
D.C. Prisoners' Legal Services Project, Inc.
2639 Connecticut Ave., N.W,
Suite 225
Washington, D,C. 20008
(202) 775-0323

By:

-~,_,. I; /
Cheryl A. Tritt
Frank W. Krogh
Jennifer L Kostyu
Morrison & Foerster, LLP
2000 Pennsylvania Avenue, N.W.
Suite 5500
Washington, D.C. 20006
(202) 887-1500 (Voice)
(202) 887-0763 (Fax)

Stephen G. Seliger
Laurie S. Elkin
Seliger & Elkin, Ltd.
155 North Michigan Avenue
Suite 500
Chicago, IL 6060 I
(312) 616-4244
Barbara J. Olshansky
Center for Constitutional Rights
666 Broadway, 7th Floor
New York, NY 10012
(212) 614-6464 x 439

Dated: October 31,2003

Attachments
dc-343057

23