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HRDC FCC comment re acquisition of ICSolutions by Securus, FCC Chairman Pai conflict of interest - July 2018

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Human Rights Defense Center
DEDICATED TO PROTECTING HUMAN RIGHTS

July 13, 2018

Federal Communications Commission
Secretary Marlene H. Dortch
Office of the Secretary
445 12th St. S.W.
Washington, D.C. 20554

Re: Comment on WC Docket No. 18-193
Dear Ms. Dortch:
The Human Rights Defense Center (HRDC) respectfully submits this comment to the Federal
Communications Commission in reiteration of our position on Chairman Ajit Pai’s conflict of
interest in matters involving Securus Technologies, Inc. (Securus). i While employed with the
law firm of Jenner & Block, LLP immediately preceding his confirmation as FCC Commissioner
in May 2012, Chairman Pai represented Securus. There is reason to believe that Chairman Pai’s
prior relationship with Securus has influenced his decisions at the FCC, particularly in regard
to his decisions concerning the Inmate Calling Services (ICS) industry.
The ICS industry, which controls the ability of prisoners to communicate with their loved ones,
has grown into an effective duopoly: Securus, along with rival telecom Global Tel*Link (GTL),
currently control over 70 percent of the ICS industry. ii Securus maintains monopoly contracts at
facilities that collectively house over 1.2 million prisoners, iii charging often exorbitant fees
which burden families and provide lucrative kickbacks to government agencies. Former
Chairwoman Mignon Clyburn and many others in the FCC worked diligently to reform this
industry, issuing orders in 2013, iv 2015 v and 2016 vi to cap the rates for calls made from prisons
and jails.
By contrast, Chairman Pai has dissented on all votes taken by the Commission with respect to
reforming the ICS industry. In his short tenure as Chairman, he has undercut reforms in dubious
ways, including barring FCC attorneys from defending the Commission’s order on intrastate rate
caps before the U.S. Court of Appeals for the District of Columbia. vii
P.O. Box 1151
Lake Worth, FL 33460
Phone: 561-360-2523 Fax: 866-735-7136
pwright@prisonlegalnews.org

Page |2

HRDC is not the only group that has questioned the motivations of Chairman Pai. On June 19,
2018, U.S. Senator Ron Wyden (D-Ore.) demanded Chairman Pai’s recusal from a matter
involving Securus. Upon learning that Securus had allowed law enforcement agencies to track
Americans’ phone location data, Sen. Wyden declared that “Chairman Pai's total abandonment
of his responsibility to protect Americans’ security shows that he can't be trusted to oversee an
investigation into the shady companies that he used to represent.” viii
HRDC is in complete agreement.
With respect to WC Docket 18-193, we also object to the acquisition of ICSolutions by Securus,
as that would further increase the duopoly nature of the ICS industry and thus result in even less
competition within that market. See attached Exhibit A for an article on this topic that ran in the
July 2018 issue of HRDC’s monthly publication, Prison Legal News.
Given Chairman Pai’s history with Securus as well as his record of contrarian decision-making
related to the ICS industry, HRDC is respectfully requesting, again, that Chairman Pai recuse
himself from all actions and decisions involving both Securus and the ICS industry. We further
call on Chairman Pai to disclose any financial relationships he has with Securus or any other
ICS providers, or companies that own or control ICS providers. Lastly, we object to Securus’
acquisition of ICSolutions and urge the FCC to deny the requested transfer of control.
Thank you for your time and attention to this matter.
Sincerely,

Paul Wright
Executive Director, HRDC
i

See HRDC Ex Parte Comment (August 9, 2017)
(https://www.humanrightsdefensecenter.org/media/publications/HRDC_Ex_Parte_Filing_re_Pai_Confirmation_080
917_final.pdf)
ii
See Prison Phone Giant GTL Gets Bigger, Again (August 28, 2017)
(www.prisonpolicy.org/blog/2017/08/28/merger)
iii
See About Us (https://securustech.net/about-us)
iv
See Rates for Interstate Inmate Calling Services, Report and Order and Further Notice of Proposed Rulemaking,
28 FCC Rcd 14107 (2013) (https://apps.fcc.gov/edocs_public/attachmatch/FCC-13-113A1.pdf)
v
See Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Second Report and Order and Third
Further Notice of Proposed Rulemaking, 30 FCC Rcd. 12763 (2015)
(https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-136A1.pdf)
vi
See Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Order on Reconsideration, 31 FCC Rcd
9300 (2016) (https://apps.fcc.gov/edocs_public/attachmatch/FCC-16-102A1.pdf)
vii
See “Prison Phone Update: Appellate Court Deals Major Blow to Prisoners and Their Families,” Prison Legal
News (July 2017, p.52) (https://www.prisonlegalnews.org/news/2017/jun/30/prison-phone-update-appellate-courtdeals-major-blow-prisoners-and-their-families) 
viii
See Following Wyden’s Investigation, Verizon Pledges to End Contracts with Companies that Sell Americans’
Location (June 19, 2018) (https://www.wyden.senate.gov/news/press-releases/following-wydens-investigationverizon-pledges-to-end-contracts-with-companies-that-sell-americans-location-)

EXHIBIT A

https://www.prisonlegalnews.org/news/2018/jul/1/prison-phone-industry-has-quietly-becomeeven-more-duopoly/
Prison Legal News, July 2018, p.20

The Prison Phone Industry Has Quietly Become Even More of a Duopoly
by Steve Horn
In little-noticed regulatory filings in New York, Maryland, West Virginia, Ohio and Arizona in
May 2018, telecom company Securus Technologies solidified its grip over the prison and jail
phone service industry by announcing its acquisition of one of its competitors, ICSolutions, also
known as ICS. First reported by Law360.com, the purchase further consolidates the duopoly of
the prison telecom market, which is largely split between Securus and Global Tel*Link (GTL).
GTL and Securus currently own over 70 percent of the prison and jail phone industry,
according to data crunched by the Prison Policy Initiative (PPI), a criminal justice research and
advocacy organization. The regulatory filings – joint petitions by Securus and ICSolutions
regarding the acquisition – also included the private equity firm TKC Holdings, the company
that owned ICSolutions. TKC Holdings also owns Trinity Services Group and Keefe Group,
which provide food and commissary services to prisons and jails.
“Securus will acquire all the issued and outstanding membership interests of ICS,” the
filings stated. “As a result, ICS will become a wholly owned, direct subsidiary of Securus.
Petitioners intend to consummate the Transaction as promptly as possible after the necessary
federal and state regulatory approvals have been received.”
Just a week before the announcement of the acquisition, The New York Times revealed
that former Missouri sheriff Cory Hutchenson had been indicted for using Securus’ telephone
system at his jail to obtain location data on cell phone customers without a court order. Put
another way, Securus’ platform can be abused by law enforcement officials to spy on people
who receive calls from their incarcerated loved ones.
Officially, as the regulatory filings in New York and West Virginia point out, there are
other competitors in the prison and jail telecom market besides Securus and GTL, including
Legacy Long Distance, Network Communications International Corp., Pay Tel and Legacy
Inmate Communications. But by and large, Securus and GTL dominate the industry and
ICSolutions was already in a distant fourth place behind GTL, Securus and CenturyLink,
according to PPI.
The regulatory filings noted that Securus would now have an even greater opportunity to
market its telecommunications services to prisoners, including tablet devices. [See: PLN, April
2018, p.44; Sept. 2015, p.16; July 2015, p.42]. “Inmate calling can also be permitted from such
tablets, further facilitating the ability of inmates to connect with their friends and family,” the
filings stated.
An investor note written by the analyst and credit ratings firm Moody’s observed that
Securus was acquiring ICSolutions by taking on the company’s $350 million in debt. It also
noted that the purchase will rid Securus of one of its competitors.

“The transaction is strategically positive for Securus as it removes a marginal competitor
and improves the company’s market share position,” the note said. “ICS has grown significantly
over the past three years by winning new contracts, occasionally from Securus as well as other
competitors. While a costly purchase, the acquisition eliminates an aggressive competitor in the
smaller facility space comprised of local and county jails. Moody’s believes this is a prudent
defensive tactic which fortifies Securus’ recent market share gains and helps preserve the
company’s solid growth trajectory.”
Securus also owns JPay, a company it acquired in 2015 that provides fee-based email
services, video calling, money transfers and tablets to prisoners. Securus, in turn, is owned by the
private equity firm Platinum Equity. The company, managed by Detroit Pistons owner Tom
Gores, acquired Securus for $1.5 billion in November 2017. [See: PLN, Oct. 2017, p.48]. GTL,
meanwhile, purchased Telmate, another corrections phone service provider, in August 2017 –
further consolidating the industry into a duopoly.
In a research note about GTL’s acquisition of Telmate, the Prison Policy Initiative
explained why the ever-consolidating prison and jail phone industry matters for prisoners and
their families.
“Now that there are just two major national companies left to compete for contracts, it
will be harder for facilities that want to lower prices to do so,” PPI stated. “Because the primary
differentiation between vendors is cost, having fewer companies compete for contracts will mean
less choice for the facility that awards the contracts and less of an incentive for the companies to
offer good deals.”
Lee Petro, an attorney with the law firm of Drinker Biddle & Reath, LLP who represents
petitioners in the Wright Petition – a regulatory proceeding before the Federal Communications
Commission related to the cost of prison and jail phone services – told Prison Legal News that he
largely shares those concerns.
“The acquisition of ICSolutions by Securus is just another step in the consolidation of an
industry that already operates as a monopoly at the facility level. By acquiring ICSolutions,
Securus has eliminated a potential competitor that had actively bid for large jails and state prison
systems,” said Petro. “If this transaction is approved, it is likely that we will see just two or three
bidders for large facilities, and further elimination of controls over ICS rates and fees.”
Sources: www.prisonpolicy.org, www.riverfronttimes.com, www.nytimes.com,
www.documents.dps.ny.gov, www.moodys.com, www.law360.com, www.psc.state.wv.us

 

 

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