NYTimes, By TIMOTHY WILLIAMSMARCH 30, 2015
Since the Pennsylvania police arrested Anthony Kofalt last March for walking out of a Walmart with 21 boxes of Crest White Strips he had not paid for, his wife, Heather, has spent $3,000 — about $60 a week — on phone calls to the prisons and jails where he has been held.
The cost of a 15-minute call is $12.95, although Mr. Kofalt is in a prison only a few hours’ drive from his wife’s home in Franklin, Pa. The cost for a similar non-prison call would be about 60 cents. And every time Ms. Kofalt deposits $25 into the prison phone account, the private company that runs the system charges her $6.95.
Until the 1990s, inmates could place and receive calls to lawyers and family members at rates similar to those outside prison walls. But the prison phone system is now a $1.2 billion-a-year industry dominated by a few private companies that manage phones in prisons and jails in all 50 states, setting rates and fees far in excess of those established by regular commercial providers. The business is so considerable— that it has caught the eye of private equity firms. Now, after years of complaints from prison-rights groups and families of the incarcerated, the Federal Communications Commission is investigating the financial intricacies of the industry, which has been largely unregulated.
At the core of the inquiry are the hundreds of millions of dollars in concession fees, known as commissions, paid by the phone companies to state and local prison systems in exchange for exclusive contracts. The fees help drive phone charges as high as $1.22 per minute, and the leading companies say they need to charge at least 20 cents per minute, compared with typical commercial rates of about 4 cents a minute.
The agency is expected to rule this year on whether to ban the concession fees and limit the costs of prison phone calls.
An analysis released in 2013 by the F.C.C. said the fees “have caused inmates and their friends and families to subsidize everything from inmate welfare to salaries and benefits, states’ general revenue funds and personnel training.” (emphasis supplied)
It added, “The companies compete not based on price or service quality, but on the size of the commission.”
The possibility of eliminating the fees has met fierce opposition from prisons and jails, sheriff’s departments and local officials.
Global Tel-Link, which controls 50 percent of the market for correctional institutions, was sold for $1 billion. Securus, which has about 20 percent of the market, was most recently sold in 2013 for $640 million.
“They are profiting off of people in vulnerable situations,” said Kasie Campbell, who said she lives paycheck to paycheck and spends $150 a month on phone calls to her husband, Allen, in a Texas prison for robbery. “The cost determines when I can talk to my husband and when my son can read a book to him.”
Ms. Campbell, 33, said Securus’s fees for its prison phone service included a charge of $2.49 for processing her bill and $5 if she wants to pay it over the phone. Securus, according to company documents, imposes dozens of fees for calls and basic services, including establishing, maintaining and closing an account. The fees make up an estimated 40 percent of the average prison phone bill.
In its first foray into regulating the industry, the F.C.C in February 2014 capped the cost of interstate calls to and from prisons at 25 cents. Phone companies responded by increasing fees on calls made to and from prisons in the same state, which account for about 90 percent of prison and jail calls.
Global Tel-Link and Securus say any rate cap below about 20 cents a minute would cut too deeply into their operating margins. But prisoner advocates say a cap of about 7 cents a minute would allow phone companies to make a profit while providing inmates more opportunities to speak to their families.
The significance of the fees paid to win a contract was illustrated recently in a solicitation by the Arizona Department of Corrections for a new five-year phone contract. The department’s bidding system awarded 1,250 points to the company that proposed paying the highest concession fee. All other factors, including technical requirements, were worth only a combined 300 points.
Joymara Coleman, a 25-year-old California college student, met her father for the first time last summer at the Louisiana penitentiary. She said the cost of phone calls meant that she had talked to him only twice since her visit.
[S]he said [she] had two brothers also serving time in prison. “I’m the first in my family to go to college,” Ms. Coleman said. “I don’t have the money. I’m just trying to keep the family together.”
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Commentary: Disgusting. If there is indeed divine retribution for the sin of avarice then these investors are going to get their due. This is a variation of what was happening in Ferguson. They are not ticketing poor people to supplement the government coffers as in Ferguson. They are raising telephone rates to make up for the kickbacks they gave the government for letting them have the exclusive right to gouge the poor.
– David Zapp