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Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking, Federal Communications Commission, 2020

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July 16, 2020
FACT SHEET *
Ensuring Just and Reasonable Rates and Charges for Inmate Calling Services
Report and Order on Remand and Fourth Further Notice of Proposed Rulemaking – WC Docket No. 12-375
Background: Access to affordable communications services is critical for all Americans, including
incarcerated members of our society. Studies have long shown that inmates who have regular contact with
family members are more likely to succeed after release and have lower recidivism rates. Unlike virtually
every other American, however, inmates and the individuals they call generally have no choice in their
telephone service provider. Typically, their only option is the inmate calling services provider chosen by the
correctional facility that, once selected, operates as a monopolist. Absent effective regulation, rates for
inmate calling services calls can be unjustly and unreasonably high, thereby impeding the ability of inmates
and their loved ones to maintain vital connections.
The Communications Act divides jurisdiction for regulating communications services—including inmate
calling services—between the Commission and the states. The Act empowers the Commission to regulate
interstate and international communications services and preserves for the states jurisdiction over intrastate
communications services. Because the Commission has not always respected this division, the U.S. Court of
Appeals for the District of Columbia Circuit has twice remanded the agency’s efforts to address the rates and
charges for inmate calling services. With this Report and Order on Remand and Fourth Further Notice of
Proposed Rulemaking, the Commission would respond to the court’s remands and take action to
comprehensively reform rates and charges for the inmate calling services within its jurisdiction.
What the Report and Order on Remand Would Do:
•

Respond to the D.C. Circuit’s directive that the Commission consider whether ancillary service
charges—separate fees that are not included in the per-minute rates that inmate calling services
providers charge for individual calls—can be segregated into interstate and intrastate components.

•

Find that ancillary service charges generally cannot be practically segregated between the interstate
and intrastate jurisdictions, except in a limited number of cases. As a result, inmate calling services
providers would generally be prohibited from imposing ancillary service charges other than those
allowed under the Commission’s rules and providers would generally be prohibited from imposing
such charges in excess of the Commission’s applicable ancillary service fee caps.

What the Fourth Further Notice of Proposed Rulemaking Would Do:
•

•

Propose new rate caps for interstate inmate calling services based on extensive analysis of the most
recent cost data submitted by inmate calling services providers.
o

Propose to lower the Commission’s current interstate rate caps of $0.21 per minute for debit
and prepaid calls and $0.25 per minute for collect calls to $0.14 per minute for debit,
prepaid, and collect calls from prisons and $0.16 per minute for debit, prepaid, and collect
calls from jails.

o

Propose these caps using a methodology that addresses the flaws underlying the
Commission’s 2015 and 2016 rate caps.

Propose to adopt rate caps for international inmate calling services, which remain uncapped today.

*
This document is being released as part of a “permit-but-disclose” proceeding. Any presentations or views on the
subject expressed to the Commission or its staff, including by email, must be filed in WC Docket No. 12-375, which
may be accessed via the Electronic Comment Filing System (https://www.fcc.gov/ecfs/). Before filing, participants
should familiarize themselves with the Commission’s ex parte rules, including the general prohibition on presentations
(written and oral) on matters listed on the Sunshine Agenda, which is typically released a week prior to the
Commission’s meeting. See 47 CFR § 1.1200 et seq.

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Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of
Rules for Interstate Inmate Calling Services

)
)
)
)

WC Docket No. 12-375

REPORT AND ORDER ON REMAND AND
FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING ∗
Adopted: []

Released: []

Comment Date: [[30]] days after date of publication in the Federal Register
Reply Comment Date: [[60]] days after date of publication in the Federal Register
By the Commission:
TABLE OF CONTENTS
I. INTRODUCTION .................................................................................................................................. 1
II. BACKGROUND .................................................................................................................................... 5
III. REPORT AND ORDER ON REMAND ............................................................................................. 27
A. Ancillary Service Charges ............................................................................................................. 28
1. The Extent of the Commission’s Authority............................................................................. 29
2. Applying Our Authority to Particular Ancillary Services ....................................................... 33
3. Related Issues .......................................................................................................................... 47
B. Mandatory Pass-Through Taxes and Fees ..................................................................................... 54
C. Revisions to Certain Inmate Calling Services Rules ..................................................................... 56
IV. FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING .................................................... 59
A. Proposing New Interstate Rate Caps.............................................................................................. 63
1. Methodology ........................................................................................................................... 71
2. Necessary Adjustments to Data ............................................................................................... 85
3. Accounting for Correctional Facilities Costs .......................................................................... 92
4. Waiver Process for Outliers .................................................................................................... 99
5. Consistency with Section 276 of the Act .............................................................................. 103
6. Cost-Benefit Analysis............................................................................................................ 107
B. Proposing International Rate Caps............................................................................................... 113
V. PROCEDURAL MATTERS .............................................................................................................. 122
∗

This document has been circulated for tentative consideration by the Commission at its August 2020 open meeting.
The issues referenced in this document and the Commission’s ultimate resolution of those issues remain under
consideration and subject to change. This document does not constitute any official action by the Commission.
However, the Chairman has determined that, in the interest of promoting the public’s ability to understand the nature
and scope of issues under consideration, the public interest would be served by making this document publicly
available. The FCC’s ex parte rules apply and presentations are subject to “permit-but-disclose” ex parte rules. See,
e.g., 47 C.F.R. §§ 1.1206, 1.1200(a). Participants in this proceeding should familiarize themselves with the
Commission’s ex parte rules, including the general prohibition on presentations (written and oral) on matters listed
on the Sunshine Agenda, which is typically released a week prior to the Commission’s meeting. See 47 CFR §§
1.1200(a), 1.1203.

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VI. ORDERING CLAUSES ..................................................................................................................... 132
APPENDIX A – FINAL RULES
APPENDIX B – PROPOSED RULES
APPENDIX C – SUPPLEMENTAL FINAL REGULATORY FLEXIBILITY ANALYSIS
APPENDIX D – INITIAL REGULATORY FLEXIBILITY ANALYSIS
APPENDIX E – ANALYSIS OF RESPONSES TO THE SECOND MANDATORY DATA
COLLECTION
APPENDIX F – SENSITIVITY TESTING: ADDITIONAL STATISTICAL ANALYSIS OF COST
DATA
APPENDIX G – ESTIMATING A DISCOUNT FACTOR TO REMOVE MARKET RENTS FROM
GTL’S REPORTED COSTS
APPENDIX H – ANALYSIS OF SITE COMMISSION PAYMENTS
I.

INTRODUCTION

1.
The Communications Act divides jurisdiction for regulating communications services,
including inmate calling services, between the Commission and the states. Specifically, the Act
empowers the Commission to regulate interstate communications services and preserves for the states
jurisdiction over intrastate communications services. Because the Commission has not always respected
this division, the U.S. Court of Appeals for the District of Columbia Circuit has twice remanded the
agency’s efforts to address rates and charges for inmate calling services.
2.
Today, we respond to the court’s remands and take action to comprehensively reform
inmate calling services rates and charges. First, we address the D.C. Circuit’s directive that we consider
whether ancillary service charges—separate fees that are not included in the per-minute rates assessed for
individual inmate calling services calls—can be segregated into interstate and intrastate components for
the purpose of excluding the intrastate components from the reach of our rules. We find that ancillary
service charges generally cannot be practically segregated between the interstate and intrastate
jurisdictions except in the limited number of cases where, at the time a charge is imposed and the
consumer accepts the charge, the call to which the service is ancillary is a clearly intrastate-only call. As
a result, inmate calling services providers are generally prohibited from imposing any ancillary service
charges other than those permitted by the Commission’s rules and providers are generally prohibited from
imposing charges in excess of our applicable ancillary service fee caps.
3.
Second, we propose rate reform of the inmate calling services within our jurisdiction. As
a result of the D.C. Circuit’s decisions, the interim interstate rate caps of $0.21 per minute for debit and
prepaid calls and $0.25 per minute for collect calls that the Commission adopted in 2013 remain in effect
today. Based on extensive analysis of the most recent cost data submitted by inmate calling services
providers, we propose to lower our interstate rate caps to $0.14 per minute for debit, prepaid, and collect
calls from prisons and $0.16 per minute for debit, prepaid, and collect calls from jails. In so doing, we
use a methodology that addresses the flaws underlying the Commission’s 2015 and 2016 rate caps and
that is consistent with the mandate in section 276 of the Act that inmate calling services providers be
fairly compensated for each and every completed interstate call. Additionally, we propose to cap rates for
international inmate calling services, which remain uncapped today.
4.
We believe that our actions today will ensure that rates and charges for interstate and
international inmate calling services are just and reasonable as required by section 201(b) of the Act and
thereby enable inmates and their loved ones to maintain critical connections. At the same time, given that
the vast majority of inmate calls are intrastate calls, we urge our state partners to take action to address the
egregiously high intrastate inmate calling services rates across the country.
II.

BACKGROUND

5.
Access to affordable communications services is critical for all Americans, including
incarcerated members of our society. Studies have long shown that inmates who have regular contact
2

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with family members are more likely to succeed after release and have lower recidivism rates. 1 Unlike
virtually every other American, however, inmates and the individuals they call have no choice in their
telephone service provider. Instead, their only option is typically an inmate calling services provider
chosen by the correctional facility that, once chosen, operates as a monopolist.2 Absent effective
regulation, rates for inmate calling services calls can be unjustly and unreasonably high and thereby
impede the ability of inmates and their loved ones to maintain vital connections.
6.
Statutory Background. The Communications Act of 1934, as amended (the Act)
established a system of regulatory authority that divides power over interstate, intrastate, and international
communications services between the Commission and the states. 3 More specifically, Section 2(a) of the
Act empowers the Commission to regulate “interstate and foreign communication by wire or radio” as
provided by the Act. 4 This regulatory authority includes ensuring that “[a]ll charges, practices,
classifications, and regulations for and in connection with” interstate or international communications
services are “just and reasonable” in accordance with section 201(b) of the Act.5 Section 201(b) also
provides that “[t]he Commission may prescribe such rules and regulations as may be necessary in the
public interest to carry out” these provisions. 6
7.
Section 2(b) of the Act preserves for the states jurisdiction over “charges, classifications,
practices, services, facilities, or regulations for or in connection with intrastate communication service.”7
The Commission is thus “‘generally forbidden from entering the field of intrastate communication
service, which remains the province of the states.’” 8 Stated differently, Section 2(b) “erects a
presumption against the Commission’s assertion of regulatory authority over intrastate communications.” 9

1
See, e.g., Rates for Inmate Calling Services, WC Docket No. 12-375, Second Report and Order and Third Further
Notice of Proposed Rulemaking, 30 FCC Rcd 12763, 12766-67, para. 3 & n.13 (2015) (2015 ICS Order or 2015 ICS
Further Notice) (citing research and explaining that “family contact during incarceration reduces recidivism and
allows inmates to be more present parents for the 2.7 million children who suffer when an incarcerated parent cannot
afford to keep in touch”); Minnesota Department of Corrections, The Effects of Prisoner Visitation on Offender
Recidivism, at 8-9 (Nov. 2011), https://mn.gov/doc/assets/11-11MNPrisonVisitationStudy_tcm1089-272781.pdf
(Minnesota DOC Study) (citing studies finding that inmates “who received visits from family and friends were
significantly less likely to reoffend or be readmitted to prison”); id. at 27 (finding that “more frequent and recent
visits were associated with a decreased risk of recidivism”); see also Human Rights Defense Center Comments, WC
Docket No. 12-375, at 9 (filed Jul. 29, 2015) (“Many filings [i]n this Docket speak to lower recidivism rates and
better transitions back into society for prisoners who are able to stay connected with their families and support
networks while incarcerated.”); Worth Rises, Request for Emergency Action and Relief, WC Docket No. 12-375, at
4 (filed Apr. 7, 2020) (Worth Rises Request) (maintaining that “lack of communication [between incarcerated
people and their families] disrupts the real connections needed for successful reentry into society”).
2

See GlobalTel*Link v. FCC, 866 F.3d 397, 404 (D.C. Cir. 2017) (GTL v. FCC or GTL) (recognizing that
“[w]inning ICS providers . . . operate locational monopolies with a captive consumer base of inmates”).

3

Id. at 402.

4

47 U.S.C. § 152(a).

5

Id. § 201(b).

6

Id.

7

Id. § 152(b).

8

GTL v. FCC, 866 F.3d at 403 (quoting New England Pub. Commc’ns Council, Inc. v. FCC, 334 F.3d 69, 75 (D.C.
Cir. 2003) (citing 47 U.S.C. § 152(b)).

9

GTL v. FCC, 866 F.3d at 403; see also id. (“This is ‘not only a substantive jurisdictional limitation on the FCC’s
power, but also a rule of statutory construction’ in interpreting the Act’s provisions.”) (quoting La. Pub. Serv.
Comm’n v. FCC, 476 U.S. 355, 373 (1986)); GTL v. FCC, 866 F.3d at 409.

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8.
Although the Telecommunications Act of 1996 “chang[ed] the FCC’s authority with
respect to some intrastate activities,” “the strictures of [section 2(b)] remain in force.” 10 That is,
“[i]nosfar as Congress has remained silent . . . , [section 2(b)] continues to function.” 11 Thus, while
section 276 of the Act specifically directs the Commission to ensure that payphone service providers,
including inmate calling services providers, “are fairly compensated for each and every completed
intrastate and interstate call using their payphone,” 12 that provision does not authorize the Commission to
regulate intrastate rates. 13 Nor does section 276 give the Commission the authority to determine “just and
reasonable” rates. 14
9.
Prior Commission Actions. The Commission has taken repeated action to address inmate
calling services rates and charges. In the 2012 ICS Notice, the Commission sought comment on whether
to establish rate caps for interstate inmate calling services calls.15 In the 2013 ICS Order, the Commission
established interim interstate rate caps for debit and prepaid calls as well as collect calls and required all
inmate calling services providers to submit data (hereinafter, the First Mandatory Data Collection) on
their underlying costs so that the agency could develop a permanent rate structure. 16 In the 2014 ICS
Notice, the Commission sought comment on reforming charges for services ancillary to the provision of
inmate calling services and on establishing rate caps for both interstate and intrastate inmate calling
services calls. 17 In the 2015 ICS Order, the Commission attempted to adopt a comprehensive framework
for interstate and intrastate inmate calling services. More specifically, the Commission adopted limits on
ancillary service charges; set rate caps for interstate and intrastate inmate calling services calls; extended
the interim interstate rate caps it adopted in 2013 to intrastate calls pending the effectiveness of the new
rate caps; and sought comment on whether and how to reform rates for international inmate calling
services calls. 18 The Commission also addressed inmate calling services providers’ ability to recover
mandatory applicable pass-through taxes and regulatory fees. 19 Additionally, the Commission adopted a
Second Mandatory Data Collection to enable it to identify trends in the market and adopt further reform,
and it required inmate calling services providers to annually report information on their operations,
including their current interstate, intrastate, and international rates and their current ancillary service

10

GTL v. FCC, 866 F.3d at 403.

11

AT&T Corp. v. Iowa Utils. Bd., 525 U.S. 366, 381 n.8 (1999).

12

47 U.S.C. § 276(b)(1)(A); see also id. § 276(d) (defining “payphone service” to include “the provision of inmate
telephone service in correctional institutions, and any ancillary services”).

13

GTL v. FCC, 866 F.3d at 409-12.

14

Id. at 409.

15

See generally Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Notice of Proposed
Rulemaking, 27 FCC Rcd 16629 (2012) (2012 ICS Notice).
16

See Rates for Inmate Calling Services, WC Docket No. 12-375, Report and Order and Further Notice of Proposed
Rulemaking, 28 FCC Rcd 14107, 14111-12, paras. 5, 7 (2013) (2013 ICS Order).
17

See generally Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Second Further Notice of
Proposed Rulemaking, 29 FCC Rcd 13170 (2014) (2014 ICS Notice).

18
See 2015 ICS Order, 30 FCC Rcd at 12769, 12771, paras. 9, 11; see also Wireline Competition Bureau Addresses
Applicable Rates for Inmate Calling Services and Effective Dates for Provisions of the Inmate Calling Services
Second Report and Order, WC Docket No. 12-375, Public Notice, 31 FCC Rcd 2026, 2026-28 (WCB 2016) (2016
ICS Public Notice).
19

See 2015 ICS Order, 30 FCC Rcd at 12859, paras. 190-92.

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charge amounts. 20 In the 2016 ICS Reconsideration Order, the Commission increased its rate caps to
account for certain correctional facility costs related to the provision of inmate calling services. 21
10.
The Commission’s attempts to reform inmate calling services rates and charges have a
long history in the courts and have not always been well received. In January 2014, in response to inmate
calling services providers’ petitions for review of the 2013 ICS Order, the D.C. Circuit stayed the
application of certain portions of that Order but allowed the Commission’s interim rate caps to remain in
effect. 22 Later that year, the court held the petitions for review in abeyance while the Commission
proceeded to set permanent rates. 23 In March 2016, in response to inmate calling services providers’
petitions for review of the 2015 ICS Order, the D.C. Circuit stayed the application of that Order’s rate
caps and ancillary service charge cap for single-call services while the appeal was pending. 24 Later that
month, the court stayed the application of the Commission’s interim rate caps to intrastate inmate calling
services. 25 In November 2016, the court stayed the 2016 ICS Reconsideration Order pending the
outcome of the challenge to the 2015 ICS Order. 26 In 2017, in GTL v. FCC, the D.C. Circuit vacated the
rate caps in the 2015 ICS Order, finding that the Commission lacked the statutory authority to regulate
intrastate rates and that the methodology used to set the caps was arbitrary and capricious. 27 The court
remanded for further proceedings with respect to certain rate cap issues; remanded the ancillary service
charge caps in that Order; and vacated one of the annual reporting requirements in that Order. 28
11.
Because this procedural history is somewhat complicated, we provide background on the
relevant issues in turn below.
12.
Ancillary Service Charges. Ancillary service charges are fees that inmate calling services
providers assess on inmate calling service consumers 29 that are not included in the per-minute rates
assessed for individual calls. 30 In the 2015 ICS Order, in light of the continued growth in the number and
dollar amount of ancillary service charges, and the fact that such charges inflate the effective price that
consumers pay for inmate calling services, the Commission adopted reforms to limit such charges. 31 The
Commission established five types of permissible ancillary service charges, which are defined as follows:
(1) Fees for Single-Call and Related Services—billing arrangements whereby an inmate’s collect calls are
billed through a third party on a per-call basis, where the called party does not have an account with the
inmate calling services provider or does not want to establish an account; (2) Automated Payment Fees—
credit card payment, debit card payment, and bill processing fees, including fees for payments made by
interactive voice response, web, or kiosk; (3) Third-Party Financial Transaction Fees—the exact fees,
with no markup, that inmate calling services providers are charged by third parties to transfer money or
20

See id. at 12862, 12891-92, paras. 198, 266-67.

21

See Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Order on Reconsideration, 31 FCC Rcd
9300, 9307, para. 12 (2016) (2016 ICS Reconsideration Order).

22

Securus Techs. Inc. v. FCC, No. 13-1280 (D.C. Cir. Jan. 13, 2014).

23

GTL v. FCC, 866 F.3d at 405 (citing Securus Techs. Inc. v. FCC, No. 13-1280 (D.C. Cir. Dec. 16, 2014)).

24

Id. (citing GTL v. FCC, No. 15-1461 (D.C. Cir. Mar. 7, 2016)).

25

Id. at 405-06 (citing GTL v. FCC, No. 15-1461 (D.C. Cir. Mar. 23, 2016)).

26

Id. at 406 (citing Securus Techs. Inc. v. FCC, No. 16-1321 (D.C. Cir. Nov. 2, 2016)).

27

Id. at 402, 415-16.

28

Id.

29

See 47 CFR § 64.6000(e) (defining “Consumer” as “the party paying a Provider of Inmate Calling Services”).

30

See id. § 64.6000(a) (defining “Ancillary Service Charge” as “any charge Consumers may be assess[ed] for the
use of Inmate Calling services that are not included in the per-minute charges assessed for individual calls”).

31

2015 ICS Order, 30 FCC Rcd at 12838-39, paras. 144-45.

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process financial transactions to facilitate a consumer’s ability to make account payments via a third
party; (4) Live Agent Fees—fees associated with the optional use of a live operator to complete inmate
calling services transactions; and (5) Paper Bill/Statement Fees—fees associated with providing
customers of inmate calling services an optional paper billing statement. 32 The Commission then capped
the amount of each of these charges and prohibited inmate calling services providers from assessing any
other ancillary service charges. 33 The D.C. Circuit stayed the rule setting the ancillary service charge cap
for single-call services on March 7, 2016, 34 before the rest of the ancillary service charge caps were to go
into effect. Therefore, the ancillary service charge cap for single-call services never became effective. 35
13.
In the 2015 ICS Order, the Commission applied these caps to all services ancillary to
inmate calling services, regardless of whether the underlying service was interstate or intrastate. 36 In
particular, the Commission held that “section 276 of the Act authorizes the Commission to regulate
charges for intrastate ancillary services.” 37 On review, the D.C. Circuit held that “the Order’s imposition
of ancillary fee caps in connection with interstate calls is justified” given the Commission’s “plenary
authority to regulate interstate rates under § 201(b), including ‘practices . . . for and in connection with’
interstate calls.” 38 The court held, however, that just as the Commission lacks authority to regulate
intrastate rates pursuant to section 276, the Commission likewise “had no authority to impose ancillary
fee caps with respect to intrastate calls.” 39 Because the court could not “discern from the record whether
ancillary fees can be segregated between interstate and intrastate calls,” it remanded the issue “to allow
the Commission to determine whether it can segregate [the ancillary fee] caps on interstate calls (which
are permissible) and the [ancillary fee] caps on intrastate calls (which are impermissible).” 40
14.
Mandatory Pass-Through Taxes and Fees. In the 2015 ICS Order, the Commission
found record evidence that inmate calling services providers were charging end users fees under the guise
of taxes. 41 The Commission therefore held that such providers “are permitted to recover mandatoryapplicable pass-through taxes and regulatory fees, but without any additional mark-up or fees.” 42 To
implement this determination, the Commission added rules governing an “Authorized Fee” and a
“Mandatory Tax or Mandatory Fee.” 43 The rule regarding authorized fees included language precluding

32

47 CFR § 64.6000(a).

33
2015 ICS Order, 30 FCC Rcd at 12839-40, para. 147; see also id. (“For fees for single-call and related services
and third-party financial transaction fees, we allow providers to pass through only the charges they incur without
any additional markup. We limit automated payment fees to $3.00, live agent fees to $5.95, and paper statement
fees to $2.00. Apart from these specific fees, no additional ancillary service charges are allowed.”).
34
Global Tel*Link v. FCC, 2016 U.S. App. LEXIS 4934, at *7 (D.C. Cir. Mar. 7, 2016) (March 7, 2016 GTL
Order); see also 2016 ICS Public Notice, 31 FCC Rcd at 2026.
35

See 2016 ICS Public Notice, 31 FCC Rcd at 2026-27 (announcing that the rules limiting charges for ancillary
services “other than the rule related to single-call services, which the D.C. Circuit stayed” were to take effect on
March 17, 2016 for prisons and June 20, 2016 for jails).
36

2015 ICS Order, 30 FCC Rcd at 12861-62, para. 196.

37

Id.

38

GTL v. FCC, 866 F.3d at 415 (emphasis in original) (quoting 47 U.S.C. § 201(b)).

39

Id. (emphasis in original).

40

Id. at 402, 415.

41

2015 ICS Order, 30 FCC Rcd at 12858-59, para. 190.

42

Id. at 12859, para. 191 (emphasis added).

43

Id. at 12920-21, Appx. A.

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markups in the absence of specific governmental authorization.44 The rule regarding mandatory taxes or
fees, however, contained no parallel language. 45 To correct this oversight, the Commission amended the
rule in the 2016 ICS Reconsideration Order to specify: “A Mandatory Tax or Fee that is passed through
to a Consumer may not include a markup, unless the markup is specifically authorized by a federal, state,
or local statute, rule, or regulation.” 46
15.
On review, the D.C. Circuit vacated the 2016 ICS Reconsideration Order “insofar as it
purport[ed] to set rate caps on inmate calling service” and remanded “the remaining provisions” of that
Order to the Commission “for further consideration . . . in light of the disposition of this case and other
related cases.” 47 As a result, the Commission’s rule governing Mandatory Taxes or Mandatory Fees was
vacated to the extent that it “purport[ed] to set rate caps.” 48
16.
Rate Caps. In the 2013 ICS Order, in light of record evidence that rates for inmate
calling services calls greatly exceeded the reasonable costs of providing service, the Commission adopted
interim interstate rate caps of $0.21 per minute for debit and prepaid calls and $0.25 per minute for collect
calls. 49 In the 2015 ICS Order, in light of “egregiously high” rates for intrastate inmate calling services
calls, the Commission relied on section 276 and section 201(b) of the Act to adopt rate caps for both
intrastate and interstate inmate calling services calls. 50 The Commission set tiered rate caps of $0.11 per
minute for prisons; $0.14 per minute for jails with average daily populations of 1,000 or more; $0.16 per
minute for jails with average daily populations of 350 to 999; and $0.22 per minute for jails having
average daily populations of less than 350. 51 The Commission calculated these rate caps using industrywide average costs and stated that this approach would allow providers to “recover average costs at each
and every tier.” 52 Additionally, the Commission held that site commissions—payments made by inmate
calling services providers to correctional facilities or state authorities that are often required to win the
contract for provision of service to a given facility 53—were not costs reasonably related to the provision

44

Id. at 12920, Appx. A.

45

Id. at 12921, Appx. A.

46

2016 ICS Reconsideration Order, 31 FCC Rcd at 9323.

47

Securus Techs. Inc. v. FCC, No. 16-1321, 2017 U.S. App. LEXIS 26360, at *1 (D.C. Cir. Dec. 21, 2017) (per
curiam) (Securus v. FCC or Securus).
48

Id. at *1.

49

2013 ICS Order, 28 FCC Rcd at 14111, para. 5. Under the Commission’s rules, “Debit Calling” means “a
presubscription or comparable service which allows an Inmate, or someone acting on an Inmate's behalf, to fund an
account set up though a Provider that can be used to pay for Inmate Calling Services calls originated by the Inmate.”
47 CFR § 64.6000(g). “Prepaid calling” means “a presubscription or comparable service in which a Consumer,
other than an Inmate, funds an account set up through a Provider of Inmate Calling Services. Funds from the account
can then be used to pay for Inmate Calling Services, including calls that originate with an Inmate.” Id. § 64.6000(p).
“Collect calling” means “an arrangement whereby the called party takes affirmative action clearly indicating that it
will pay the charges associated with a call originating from an Inmate Telephone.” Id. § 64.6000(d).
50

2015 ICS Order, 30 FCC Rcd at 12768, 12813-18, paras. 7, 106-16.

51

Id. at 12775, para. 22.

52

Id. at 12790, para. 52 & n.170.

53

See 2013 ICS Order, 28 FCC Rcd at 14124-25, paras. 33-34 (describing site commissions as “payments made
from ICS providers to correctional facilities and related state authorities” and recognizing that such payments “can
take the form of a percentage of gross revenue, a signing bonus, a monthly fixed amount, yearly fixed amount, or inkind contributions”); see also Implementation of the Pay Telephone Reclassification and Compensation Provisions
of the Telecommunications Act of 1996, CC Docket No. 96-128, Order on Remand and Notice of Proposed
Rulemaking, 17 FCC Rcd 3248, 3262, para. 38 (2002) (2002 ICS Order) (describing site commissions as “location

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of inmate calling services. 54 The Commission therefore excluded site commission payments from the cost
data used to set the rate caps. 55
17.
On reconsideration in 2016, the Commission increased the rate caps for both interstate
and intrastate inmate calling services to expressly account for correctional facility costs that are directly
and reasonably related to the provision of inmate calling services. 56 The Commission set the revised rate
caps at $0.13 per minute for prisons; $0.19 per minute for jails with average daily populations of 1,000 or
more; $0.21 per minute for jails with average daily populations of 350 to 999; and $0.31 per minute for
jails with average daily populations of less than 350. 57
18.
On review, the D.C. Circuit in GTL v. FCC vacated the rate caps adopted in the 2015 ICS
Order. First, the court held that the Commission lacked the statutory authority to cap intrastate inmate
calling services rates. 59 The court explained that the Commission’s authority over intrastate calls is,
except as otherwise provided by Congress, limited by section 2(b) of the Act and nothing in section 276
of the Act overcomes this limitation. 60 In particular, section 276 “merely directs the Commission to
‘ensure that all [inmate calling services] providers are fairly compensated’ for their inter- and intrastate
calls,” 61 and it “is not a ‘general grant of jurisdiction’ over intrastate ratemaking.” 62
58

19.
Second, the D.C. Circuit held that the “Commission’s categorial exclusion of site
commissions from the calculus used to set [inmate calling services] rate caps defie[d] reasoned
decisionmaking because site commissions obviously are costs of doing business incurred by [inmate
calling services] providers.” 63 The court directed the Commission to “assess on remand which portions of
site commissions might be directly related to inmate calling services and therefore legitimate, and which
are not.” 64 The court did not reach inmate calling services providers’ remaining arguments “that the
exclusion of site commissions denies [them] fair compensation under [section] 276 and violates the
Takings Clause of the Constitution because it forces providers to provide services below cost,” and it
stated that the Commission should address these issues on remand once it revisits the exclusion of site
commissions. 65
20.
Third, the D.C. Circuit held that the Commission’s use of industry-wide averages in
setting rate caps was arbitrary and capricious because it lacked justification in the record and was not
supported by reasoned decisionmaking. 66 More specifically, the court found the Commission’s use of a

rents that are negotiable by contract with the facility owners and represent an apportionment of profits between the
facility owners and the providers of the inmate payphone service”).
54

2015 ICS Order, 30 FCC Rcd at 12818-19, paras. 117-18.

55

Id. at 12819, para. 118.

56

See generally 2016 ICS Reconsideration Order.

57

Id. at 9314-15, para. 27.

58

GTL v. FCC, 866 F.3d at 402, 416.

59

Id. at 408-12.

60

See id. at 409-12.

61

Id. at 409 (quoting 47 U.S.C. § 276(b)(1)(A)).

62

Id. at 412 (internal citation omitted).

63

Id. at 413.

64

Id. at 414.

65

Id.

66

Id. at 402, 416.

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weighted average per-minute cost to be “patently unreasonable” given that such an approach made calls
with above-average costs unprofitable and thus did “not fulfill the mandate of [section] 276 that ‘each and
every’” call be fairly compensated. 67 Additionally, the court found that the 2015 ICS Order “advances an
efficiency argument—that the larger providers can become profitable under the rate caps if they operate
more efficiently—based on data from the two smallest firms,” which “represent less than one percent of
the industry,” and that the Order did not account for conflicting record data. 68 The court therefore
vacated this portion of the 2015 ICS Order and remanded to the Commission for further proceedings. 69
21.
Also in 2017, in Securus v. FCC, the D.C. Circuit ordered the 2016 ICS Reconsideration
Order “summarily vacated insofar as it purports to set rate caps on inmate calling service” because the
revised rate caps in that Order were “premised on the same legal framework and mathematical
methodology” rejected by the court in GTL v. FCC. 70 The court remanded “the remaining provisions” of
that Order to the Commission “for further consideration . . . in light of the disposition of this case and
other related cases.” 71 As a result of the D.C. Circuit’s decisions in GTL and Securus, the interim rate
caps that the Commission adopted in 2013 ($0.21 per minute for debit/prepaid calls and $0.25 per minute
for collect calls) are in effect for interstate inmate calling services calls.
22.
More Recent Developments. In the 2015 ICS Order, the Commission directed that the
Second Mandatory Data Collection be conducted two years from publication of Office of Management
and Budget (OMB) approval of the information collection. 72 The Commission received such approval in
January 2017 and publication occurred on March 1, 2017. 73 Accordingly, on March 1, 2019, inmate
calling services providers submitted their responses to the Second Mandatory Data Collection. 74 The
Commission’s Wireline Competition Bureau (Bureau) and Office of Economics and Analytics (OEA)
undertook a comprehensive analysis of the Second Mandatory Data Collection responses and conducted
multiple follow-up discussions with inmate calling services providers to supplement and clarify their
responses. 75

67

Id. at 414 (internal citation omitted).

68

Id. at 415.

69

Id.

70

Securus v. FCC, No. 16-1321, 2017 U.S. App. LEXIS 26360, at *4-5 (D.C. Cir. Dec. 21, 2017) (per curiam).

71

Id. at *5.

72

2015 ICS Order, 30 FCC Rcd at 12862, para. 198.

73

See FCC, Rates for Interstate Inmate Calling Services; Correction, 82 Fed. Reg. 12922 (Mar. 8, 2017), correcting
FCC, Rates for Interstate Inmate Calling Services, 82 Fed. Reg. 12182 (Mar. 1, 2017).

74
Wireline Competition Bureau Reminds Providers of Inmate Calling Services of the March 1, 2019 Deadline for
Data Collection Responses, WC Docket No. 12-375, Public Notice, 34 FCC Rcd 515 (WCB 2019) (2019 Data
Collection Public Notice).
75

See, e.g., Letter from Chérie R. Kiser, Counsel for Global Tel*Link Corp., Cahill Gordon & Reindel LLP, to
Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed May 19, 2020) (amending GTL’s Second
Mandatory Data Collection response “to address questions raised by Commission staff”); Letter from Sharon R.
Warren, Consultant to Crown Correctional Telephone, Inc., Inteserra Consulting Group, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 12-375 (filed May 5, 2020); Letter from Sharon R. Warren, Consultant to Network
Communications International Corp, Inteserra Consulting Group, to Marlene H. Dortch, Secretary, FCC, WC
Docket No. 12-375 (filed May 5, 2020) (explaining NCIC’s amendment to its Mandatory Data Collection responses
in response to questions raised by Commission staff); Letter from Marcus W. Trathen, Counsel to Pay Tel
Communications, Inc., Brooks Pierce, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375 (filed Apr. 28,
2020) (amending Pay Tel’s Second Mandatory Data Collection response and noting questions raised by Commission
staff).

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23.
In February 2020, the Bureau issued a public notice seeking to refresh the record on
ancillary service charges in light of the D.C. Circuit’s remand in GTL v. FCC. 76 The Bureau sought
comment on, among other issues, (1) whether each permitted inmate calling services ancillary service
charge may be segregated between interstate and intrastate calls and, if so, how; (2) how the Commission
should proceed in the event any permitted ancillary service is “jurisdictionally mixed” and cannot be
segregated between interstate and intrastate calls; and (3) any steps the Commission should take to ensure
that providers of interstate inmate calling services do not circumvent or frustrate the Commission’s
ancillary service charge rules. 77
24.
In April 2020, inmate calling services providers submitted data pursuant to the
Commission’s annual reporting requirements and they did so using a revised annual reporting form and
accompanying instructions. 78 First, the Bureau made minor revisions to the form and instructions in light
of the D.C. Circuit’s vacatur of the Commission’s annual reporting requirement for video visitation
services offered by inmate calling services providers. 79 The GTL court held that the video visitation
services reporting requirement adopted in the 2015 ICS Order was “too attenuated to the Commission’s
statutory authority to justify this requirement.” 80 Accordingly, the Bureau eliminated questions regarding
video visitation from the annual reporting reform. 81
25.
Second, the Bureau made additional revisions to the annual reporting form and
instructions based on its experience in analyzing past annual reports and based on formal and informal
input from inmate calling services providers, thereby making the annual reports easier to understand and
analyze. 82 Bureau and OEA staff used the April 2020 annual report responses to supplement their
understanding of the Second Mandatory Data Collection responses.
26.
Commission staff also analyzed the intrastate rate data submitted as part of inmate calling
services providers’ most recent annual reports. Staff’s analysis reveals that the vast majority of inmate
calls—roughly 80%—are reported to be intrastate and that inmate calling services providers are charging
egregiously high intrastate rates across the country. Intrastate rates for debit or prepaid calls substantially
exceed interstate rates in 45 states, with 33 states allowing rates that are at least double the Commission’s
cap and 27 states allowing excessive “first-minute” charges up to 26 times that of the first minute of an
interstate call. Indeed, while interstate rates for the first minute and all subsequent minutes may not
exceed $0.25, inmate calling services providers’ first-minute charges for intrastate calls may range from
$1.65 to $6.50. For example, one provider reported the first-minute intrastate rate of $5.341 and the
76
Wireline Competition Bureau Seeks to Refresh the Record on Ancillary Service Charges Related to Inmate
Calling Services, WC Docket No. 12-375, Public Notice, 35 FCC Rcd 189 (WCB 2020) (Ancillary Services Refresh
Public Notice).
77

Id.

78

Wireline Competition Bureau Announces OMB Renewal of Information Collection Concerning Inmate Calling
Services, WC Docket No. 12-375, Public Notice, 35 FCC Rcd 1456 (WCB 2020) (2020 OMB Renewal Public
Notice).
79

GTL v. FCC, 866 F.3d at 415.

80

See id. (vacating the reporting requirement because the Commission failed to “explain how its statutory authority
extends to video visitation services as a ‘communication[] by wire or radio’ under § 201(b) for interstate calls or as
an ‘inmate telephone service’ under § 276(d) for interstate or intrastate calls”).

81

See 2020 OMB Renewal Public Notice, 35 FCC Rcd at 1456, n.6.

82

See id. at 1456 (stating that the Bureau made revisions pursuant to authority delegated by the Commission in the
2015 ICS Order, 30 FCC Rcd at 12892, para. 268, and pursuant to OMB approval); see also Letter from Pamela
Arluk, Chief, Pricing Policy Division, Wireline Competition Bureau, FCC, to Marcus Trathen, Counsel for Pay Tel
Communications, Inc., 32 FCC Rcd 4154 (WCB 2017) (responding to a request for clarification of aspects of the
annual reporting requirements).

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additional per-minute intrastate rate of $1.391 in Arkansas while reporting the per-minute interstate rate
of $0.21 for the same correctional facility. 83 Similarly, another provider reported the first-minute
intrastate rate of $6.50 and the additional per-minute intrastate rate of $1.25 in Michigan while reporting
the per-minute interstate rate of $0.25 for the same correctional facility. 84 Further, Commission staff
identified instances in which a 15-minute intrastate debit or prepaid call costs as much as $24.80—almost
seven times more than the maximum $3.15 that an interstate call of the same duration would cost. 85
III.

REPORT AND ORDER ON REMAND

27.
In this Report and Order on Remand (Remand Order), we respond to the D.C. Circuit’s
directive in GTL v. FCC that the Commission determine whether ancillary service charges can be
segregated between interstate and intrastate inmate telephone service calls. 86 We also amend our rule
regarding mandatory pass-through taxes and fees in light of the court’s vacatur and remand in Securus v.
FCC. Additionally, we revise certain of our other inmate calling services rules to comport with the D.C.
Circuit’s decisions in those cases.
A.

Ancillary Service Charges

28.
We find that ancillary service charges generally cannot be practically segregated between
the interstate and intrastate jurisdiction except in the limited number of cases where, at the time a charge
is imposed and the consumer accepts the charge, the call to which the service is ancillary is a clearly
intrastate-only call. The record strongly supports this determination. As such, providers are generally
prohibited from imposing any ancillary service charges in connection with inmate calling services other
than those specified in our rules and providers are generally prohibited from imposing charges in excess
of our applicable ancillary service fee caps.
1.

The Extent of the Commission’s Authority

29.
In creating a dual federal-state regulatory regime to govern interstate and intrastate
communications services in sections 1 and 2(b) of the Act, Congress “attempt[ed] to divide the world of
telephone regulation neatly into two separate components.” 87 However, “since most aspects of the
communications field have overlapping interstate and intrastate components, these two sections do not
create a simple division.” 88 Decades of precedent reconciling these statutory provisions recognizes that
the Commission may regulate services having both interstate and intrastate components, referred to as
“jurisdictionally mixed” services, where it is impossible or impracticable to separate out their interstate
and intrastate components. 89
83

Annual Report of Securus Technologies, LLC, for 2019, WC Docket No. 12-375 (filed Mar. 31, 2020) (Securus
Annual Report) (Tab II. ICS Rates - Domestic, Row 91 and Tab II(a). Narrative - New, Row 97).
84

Legacy Long Distance International, Inc., FCC Form 2301(a) and 2301(b) – Inmate Calling Services Annual
Report, WC Docket No. 12-375 (filed Apr. 9, 2020) (Legacy Annual Report) (Tab Section II - Redacted, Row86 and
Tab Section II(a) - Redacted, Row 246).
85

47 CFR § 64.6030 (setting an interim interstate rate cap of $0.21 per minute for prepaid and debit calls).

86

GTL v. FCC, 866 F.3d at 415. Because the ancillary service charge cap for single-call services never became
effective as a result of the D.C. Circuit’s March 7, 2016 Order (GTL v. FCC, 2016 U.S. App. LEXIS 4934, at *7
(D.C. Cir. Mar. 7, 2016)), we also reinstate that rule as part of our response to the D.C. Circuit’s remand on ancillary
service charges.
87

Pub. Util. Comm’n of Tex. v. FCC, 886 F.2d 1325, 1329 (D.C. Cir. 1989).

88

Id.

89

See, e.g., La. Pub. Serv. Comm’n v. FCC, 476 U.S. 355, 375 n.4 (1986) (recognizing that the Commission may
pre-empt state regulation when it is not possible to separate the interstate and intrastate components of the
Commission’s regulation); see also Vonage Holdings Corporation Petition for Declaratory Ruling Concerning an
Order of the Minnesota Public Utilities Commission, WC Docket No. 03-211, Memorandum Opinion and Order, 19

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30.
Courts have recognized that as “a basic underpinning of our federal system . . . state
regulation will be displaced to the extent that it stands as an obstacle to the accomplishment and execution
of the full purposes and objectives of Congress.” 90 Thus, although the Commission is “generally
forbidden from entering the field of intrastate communication service,” 91 courts have interpreted the Act
and the Supremacy Clause of the U.S. Constitution to allow federal regulation of the intrastate portion of
jurisdictionally mixed services in spite of section 2(b) where: “(1) the matter to be regulated has both
interstate and intrastate aspects; (2) FCC preemption [regulation] is necessary to protect a valid federal
regulatory objective; and (3) state regulation would ‘negate[] the exercise by the FCC of its own lawful
authority’ because regulation of the interstate aspects of the matter cannot be ‘unbundled’ from regulation
of the intrastate aspects.” 92 When all three criteria are met, the Commission may regulate the
jurisdictionally mixed service falling within the “impossibility exception” as jurisdictionally interstate. 93
31.
Stated differently, where the Commission has jurisdiction under section 201(b) of the Act
to regulate rates, charges, and practices of interstate communications services, the impossibility exception
extends that authority to the intrastate portion of jurisdictionally mixed services “where it is impossible or
impractical to separate the service’s intrastate from interstate components” and state regulation of the
intrastate component would interfere with valid federal rules applicable to the interstate component. 94
32.
The Bureau’s public notice seeking to refresh the record sought comment on how the
Commission should proceed in the event a permitted ancillary service is “jurisdictionally mixed” and
cannot be segregated between interstate and intrastate calls. 95 No commenter disputed the Commission’s
authority to regulate jurisdictionally mixed ancillary services charges that cannot be segregated. 96 Where
FCC Rcd 22404, 22413, para. 17 (2004) (Vonage Order) (describing jurisdictionally mixed services as “[s]ervices
that are capable of communications both between intrastate end points and between interstate end points”), aff’d by
Minn. Pub. Utils. Comm’n v. FCC, 483 F.3d 570 (8th Cir. 2007).
90

La. Pub. Serv. Comm’n, 476 U.S. at 374.

91

GTL v. FCC, 866 F.3d at 403 (quoting New England Pub. Comm’ns Council, Inc. v. FCC, 334 F.3d 69, 75 (D.C.
Cir. 2003)).
92

Pub. Serv. Comm’n of Md. v. FCC, 909 F.2d 1510, 1515 (D.C Cir. 1990) (citing Illinois Bell Tel. Co. v. FCC, 883
F.2d 104, 113 (D.C. Cir. 1989); National Assn. of Regulatory Util. Cmmrs. v. FCC, 880 F.2d 422, 431 (D.C. Cir.
1989)); Wright Petitioners Comments, WC Docket No. 12-375, at ii (filed Mar. 20, 2020) (Wright Petitioners Mar.
20, 2020 Comments); Pay Tel Communications, Inc. Comments, WC Docket No. 12-375, at 12-14 (filed Mar. 20,
2020) (Pay Tel Mar. 20, 2020 Comments); accord Vonage Order, 19 FCC Rcd at 22413, para. 17.
93

California v. FCC, 905 F.2d 1217, 1242-44 (9th Cir. 1990); accord Vonage Order, 19 FCC Rcd at 22414-15,
para. 19 (treating jurisdictionally mixed service at issue as jurisdictionally interstate for regulatory purposes);
MTS/WATS Market Structure Separations Order, CC Docket No. 78-72, Decision and Order, 4 FCC Rcd 5660,
5660 n.7 (1989); Petition for Emergency Relief and Declaratory Ruling Filed by the BellSouth Corporation,
Memorandum Opinion and Order, 7 FCC Rcd 1619, 1620, para. 7 (1992) (BellSouth MemoryCall Order).
94

Vonage Order, 19 FCC Rcd at 22413, para. 17; Wright Petitioners Mar. 20, 2020 Comments at 2, 11-12; see also
Pay Tel Mar. 20, 2020 Comments at 12-14; Wright Petitioners Reply, WC Docket No. 12-375, at 4 (filed Apr. 21,
2020) (Wright Petitioners Apr. 21, 2020 Reply). As the Vonage Order made clear, “we need not demonstrate
absolute future impossibility to justify federal preemption here. We need only show that interstate and intrastate
aspects of a regulated service or facility are inseverable as a practical matter in light of prevailing technological and
economic conditions.” Vonage Order, 19 FCC Rcd at 22423, para. 29 (internal quotation marks and citation
omitted).
95

Ancillary Services Refresh Public Notice, 35 FCC Rcd at 190.

96

See, e.g., Pay Tel Communications, Inc. Reply, WC Docket No. 12-375, at 7 (filed Apr. 21, 2020) (Pay Tel Apr.
21, 2020 Reply) (stating that “[a]ll commenters agree that the Commission has the authority to regulate ICS
ancillary service charges so long as they are jurisdictionally mixed, incapable of segregation, and a failure to
regulate would interfere with the Commission’s valid regulatory goals.”).

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a consumer of inmate calling services would incur an ancillary service charge in connection with inmate
telephone service and the charge is not clearly and entirely applicable to intrastate calling, we apply the
impossibility exception criteria to determine whether that ancillary service charge should be subject to our
authority and rules. 97
2.

Applying Our Authority to Particular Ancillary Services

33.
Single-Call Service (and Related Service) Fees. Where no prepaid or debit inmate calling
services account has been established, an inmate can make individual collect calls to family members or
others. Third parties assess fees on a per-call basis to bill the called family member or other party for
such calls. 98 In 2015, the Commission adopted rules that would preclude inmate calling services
providers from charging more than the exact fee the third-party charges for these transactions, with no
markup. 99
34.
Because single-call service is associated with a specific call, we find that the ancillary
service can be jurisdictionally determined based on the classification—interstate or intrastate—of the
underlying call. 100 Single-call service (and related service) associated with an interstate call is subject to
our ancillary service charge rules. 101 Single-call service (and related service) associated with an intrastate
call is beyond the reach of our regulations.
35.
Automated Payment Fees. Automated payments fund prepaid or debit accounts that can
be used to pay for inmate calling services. Inmate calling services consumers typically make these
payments to fund their accounts to pay for future calls to family or other loved ones and any associated
ancillary services charge fees. 102 These payments occur through multiple methods or types of transactions
97

We reject one federal District Court’s suggestion that GTL v. FCC held that the Commission may not cap
ancillary fees “except to the extent those for interstate calls ‘can be segregated’ from intrastate calls.” Mojica v.
Securus Technologies, Inc., 2018 WL 3212037 at *6 (W.D. Ark. June 29, 2018) (Mojica v. Securus). As Pay Tel
points out, the District Court did “not engage in the relevant preemption analysis—indeed not once [did] the
decision even mention the term ‘mixed jurisdiction.’” Pay Tel Mar. 20, 2020 Comments at 15. And no party argues
that Mojica v. Securus provides the appropriate reading of GTL v. FCC. Given the long history of Supreme Court
and federal appellate court precedent on jurisdictionally mixed services and the specific language of the D.C. Circuit
in GTL v. FCC (which remanded the issue of “whether ancillary fees can be segregated between interstate and
intrastate calls” to the Commission “for further consideration”), we find that the D.C. Circuit did not instruct the
Commission on how it should proceed if it were impossible or impracticable to segregate some ancillary fees but
instead left that question open for the Commission to resolve in the first instance.
98

47 CFR § 64.6000(a)(1).

99

See 2015 ICS Order, 30 FCC Rcd at 12857, paras. 186-87; id. at 12920, Appendix A (new section 64.6020(b)(2)).

100

Securus Technologies, LLC Comments, WC Docket No. 12-375, at 4 (filed Mar. 20, 2020) (Securus Mar. 20,
2020 Comments); Wright Petitioners Mar. 20, 2020 Comments at 21.
101
In the 2015 ICS Order, the Commission held that “for single call and related services, we permit ICS providers to
charge the amount of the third-party financial transaction (with no markup) added to a per-minute rate no higher
than the applicable rate cap.” 2015 ICS Order, 30 FCC at 12857, para. 186; see also id. at 12857, para. 187; id. at
12920, Appx. A (new section 64.6020(b)(2)). However, the D.C. Circuit stayed section 64.6020(b)(2) before that
rule took effect. March 7, 2016 Order, 2016 U.S. App. LEXIS 4934, at *7. The D.C. Circuit in GTL remanded the
“imposition of ancillary fee caps” in the 2015 ICS Order without specifically addressing the effect of that remand on
the single-call service rule or dissolving the court’s earlier stay of that rule. GTL v FCC, 868 F.3d at 415. The “nomark-up” portion of the single-call service rule never became effective. Because the D.C. Circuit remanded section
64.6020(b)(2) without vacating, finding fault, or otherwise addressing the no-markup clause, we reinstate section
64.6020(b)(2) today for the same reasons we adopted this prohibition in 2015. See 2015 ICS Order at 12857-58,
paras. 188-89. Nothing in the record of this proceeding since that time suggests we should refrain from doing so,
and hence we have good cause to reinstate section 64.6020(b)(2) without further notice and comment. See 5 U.S.C.
§ 553(b).
102

Wright Petitioners Mar. 20, 2020 Comments at 14.

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including “credit card payment, debit card payment, and bill processing fees, including fees for payments
by interactive voice response[], web, or kiosk.” 103 They are also made to pay inmate calling service bills
for calls that have already been made. 104 The Commission limits these fees to a maximum of “$3.00 per
use,” based on its prior finding that a $3.00 cap would “more than ensure[] that ICS providers [could]
recoup the costs of offering these services.” 105
36.
Because a prepaid or debit account can generally be used to make both interstate and
intrastate calls, automated payment fees are generally jurisdictionally mixed and subject to our ancillary
service charge rules. For example, accounts that allow the dialing of any mobile telephone number (such
as one assigned by a mobile wireless provider or a nomadic interconnected voice over Internet Protocol
(VoIP) provider) are inherently jurisdictionally mixed because the called party need not be located in the
same state as the inmate at the time of a call. This is true even if the called party’s residence, as
commenters point out, is in the same state as the correctional facility.106 And it is true even if the area
code and NXX prefix of the called party’s telephone number are associated with the state of the
correctional facility. 107 Similarly, if the account only allows a certain number of non-mobile numbers to
be called, such an account is jurisdictionally mixed if any one of those numbers is assigned to a fixed
location in a different state. 108 Indeed, accounts where an inmate may make a call to any telephone
number or add a telephone number to the list of authorized numbers (even if that telephone number must
go through a screening process before it is authorized) may be inherently jurisdictionally mixed. Because
automated payments typically are made to fund accounts before calls are completed or fees are incurred,
the record suggests that it may be impractical, if not impossible, to connect these payments to any specific
subsequent calls made. 109 When automated payments cannot be segregated by jurisdiction, they are
subject to our ancillary service charge rules. 110
37.
We recognize, however, that automated payments are sometimes made to pay inmate
calling service bills after calls have already been made. 111 In that circumstance, an inmate calling services
provider could potentially confirm that not one call with an outstanding balance was made that crossed
state lines and thus that the service charge would be ancillary only to intrastate inmate calling services.
Because we must respect the boundary on our jurisdiction drawn by Congress, we cannot impose our
automated payment fee cap in such circumstances.
103

47 CFR § 64.6000(a)(1).

104

Id.

105

2015 ICS Order, 30 FCC Rcd at 12847-48, para. 167; see 47 CFR § 64.6020(b)(1).

106

Pay Tel Mar. 20, 2020 Comments at 8-9; Wright Petitioners Apr. 21, 2020 Reply at 5.

107

Ten-digit telephone numbers in the United States are “composed of a 3-digit numbering plan area code (NPA
code), a 3-digit central office code (NXX code) and a 4-digit line number.” Implementation of the Local
Competition Provisions of the Telecommunications Act of 1996 et al., CC Docket No. 96-98 et al., Third Order on
Reconsideration of Second Report and Order and Memorandum Opinion and Order, 14 FCC Rcd 17964, 17970,
para. 5 (1999).
108

See Securus Mar. 20, 2020 Comments at 4. We use a fixed landline telephone number in our example here but
recognize that fixed wireless technology may also have the same “fixed” location characteristics as fixed wireline
service and thus the same jurisdictional analysis would apply.
109

See, e.g., Pay Tel Mar. 20, 2020 Comments at 8 (arguing that inmate calling services “accounts are not
segregated into interstate versus intrastate components, nor could they reliably be so segregated”); Wright
Petitioners Mar. 20, 2020 Comments at ii-iii (asserting that “it is clearly impossible to attribute [an automated
payment] fee to as yet unmade interstate or intrastate calls). But see Securus Mar. 20, 2020 Comments at 5-6.
110

Global Tel*Link Corporation Comments, WC Docket No. 12-375, at 4-5 (filed Mar. 20, 2020) (GTL Mar. 20,
2020 Comments); Wright Petitioners Mar. 20, 2020 Comments at 14-16.
111

47 CFR § 64.6000(a)(1) (referencing “bill processing fees”).

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38.
We reject Securus’ claim that “since the jurisdiction of any given payment transaction
depends on the specific circumstances surrounding the transaction, Securus does not believe that the
Commission can reach any conclusion regarding the application of these [Automated Payment Fee] caps
as a generic matter.” 112 It is precisely because providers generally impose (and consumers are charged)
these fees before it is possible to determine whether such payments are ancillary to interstate or intrastate
calls that precedent dictates that we find these automated payments to be jurisdictionally mixed—and thus
application of our rule to all such transactions is necessary to protect interstate callers.
39.
Third-Party Financial Transaction Fees. Consumers often make use of third parties,
such as Western Union or MoneyGram, to transfer money or process financial transactions that enable
these consumers to make payments to inmate calling services accounts.113 These third parties charge fees
to inmate calling services providers, which the providers then pass on to consumers. 114 Our ancillary
services charges rules limit the amount of third-party fees that an inmate calling services provider can
pass on to consumers to the exact third-party fees, with no markup. 115
40.
As with automated payments, because third-party financial transactions typically fund
accounts before calls are placed or associated fees are incurred, it is generally impossible to know
whether the fees will be applied to interstate calls, intrastate calls, or a mix of the two. 116 Therefore, thirdparty financial transactions are generally jurisdictionally mixed and subject to our ancillary service charge
rules in the same way as automated payments. 117
41.
To the extent Securus suggests that third-party financial transactions “raise no
jurisdictional dispute,” 118 we agree so long as such a transaction is tied to a particular jurisdictionally
identifiable call—which, as with automated payments, we would expect would only occur if the fee is
imposed after calls have been made. And such an inquiry would only matter where the inmate calling
services provider can confirm that no call with an outstanding balance was interstate or international—
otherwise, the only way to protect the interstate caller from unjust and unreasonable fees is to apply our
ancillary service charge rules to the entire third-party financial transaction.
42.
Live Agent Fees. Consumers may optionally use live operators to complete a range of
inmate calling services-related tasks, including setting up an account, adding money to an account, or
assisting with making a call. 119 In practice, multiple transactions can be, and often are, made via a single
live operator interaction, which the Commission caps at $5.95 per interaction, regardless of the number of
tasks the live operator completes in a single session. 120

112

Securus Mar. 20, 2020 Comments at 5-6.

113

Wright Petitioners Mar. 20, 2020 Comments at 18.

114

Securus Mar. 20, 2020 Comments at 4.

115

47 CFR § 64.6020(b)(5); 2015 ICS Order, 30 FCC Rcd at 12848-49, para. 168; 47 CFR § 64.6020(b)(4).

116
Pay Tel Mar. 20, 2020 Comments at 11-12 (asserting that differentiating third-party fees between interstate or
intrastate services is not feasible).
117

We decline at this time to consider NCIC’s suggestion that we further cap third-party processing fees. See
Network Communications International Corp. Comments, WC Docket No. 12-375, at 5 (filed Mar. 20, 2020) (NCIC
Mar. 20, 2020 Comments). Setting aside whether the Commission would have the authority to prohibit an inmate
calling services provider from passing along the costs it itself incurs for conducting a service on a consumer’s
behalf, NCIC’s suggestion is beyond the scope of the remand in this proceeding.
118

Securus Mar. 20, 2020 Comments at 4.

119

47 CFR § 64.6000(a)(3).

120

2015 ICS Order, 30 FCC Rcd at 12848-49, para. 168; 47 CFR § 64.6020(b)(3).

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43.
As with automated payments and third-party financial transactions, because live agents
are often used to set up accounts or add money to accounts before any call is made, live agent services are
generally jurisdictionally mixed and subject to our ancillary service charge rules. In contrast, to the extent
a live agent is used to place a particular call, then that service can be jurisdictionally determined by the
classification of the call, just as single-call services are. And to the extent a live agent is used after calls
have been made to, for example, pay a bill, then our ancillary service charge rules apply unless every call
with an outstanding balance can be determined to be intrastate. Similarly, to the extent a live agent
session is used to complete multiple tasks, we find that service is jurisdictionally mixed (and thus subject
to our ancillary service charge rules) unless the inmate calling services provider can demonstrate that each
action taken by the live agent was ancillary only to an intrastate telephone service. 121
44.
We reject Securus’ claim that because Live Agent fees are based on multiple different
types of transactions, we cannot reach a conclusion as to whether or not the Commission’s ancillary
service charge rule applies. 122 Again, we can reach a conclusion here precisely because we have found
that live agent services can, and do, involve both interstate and intrastate tasks within a single transaction
session. 123 As a result, failing to treat live agent services as generally jurisdictionally mixed would
conflict with the federal law requiring these fees to be just and reasonable for all interstate callers.
45.
Paper Bill Fees. Inmate calling services consumers have the option to obtain paper bills
or statements reflecting all charges that occurred during a billing cycle, including those related to calls
and ancillary service charges. 124 The Commission has capped fees for paper bills at $2.00 per
statement. 125
46.
Because the creation of a paper bill occurs only after calls have been made, it may be
possible to jurisdictionally segregate this service. Generally, we would expect such bills to be
jurisdictionally mixed as inmates may make calls to those both in and outside of the state of the
correctional facility—and thus subject to our ancillary service charge rules. 126 However, if an inmate
calling services provider can confirm that no call on the bill is interstate or international, then the paper
bill service would only be ancillary to intrastate calls and beyond the reach of our rules.
3.

Related Issues

47.
Effect on State Regulation. As in prior cases, we exercise our authority under the
Supremacy Clause to preempt state regulation of jurisdictionally mixed services to the extent that such
regulation conflicts with federal law. 127 Our rules apply to all ancillary service charges imposed for and
in connection with interstate inmate calling services. To the extent those charges relate to accounts or
121

See, e.g., Pay Tel Mar. 20, 2020 Comments at 10; Wright Petitioners Mar. 20, 2020 Comments at 16-17.

122

Securus Mar. 20, 2020 Comments at 5-6.

123

2015 ICS Order, 30 FCC Rcd at 12848, para. 168 (limiting the live agent fee to one charge per interaction with a
live operator “regardless of the number of tasks completed in the call”).
124

47 CFR § 64.6000(a)(4).

125

2015 ICS Order, 30 FCC Rcd at 12849, para. 169; 47 CFR § 64.6020(b)(4).

126

See Pay Tel Mar. 20, 2020 Comments at 11; Wright Petitioners Mar. 20, 2020 Comments at 19-20; see also
Securus Mar. 20, 2020 Comments at 5 (arguing that any paper bill statement is subject to the Commission’s
jurisdiction and fee cap based on the Truth-in-Billing principles).

127

See, e.g., Vonage Order, 19 FCC Rcd at 22418, para. 23 n.86; Qwest Corp. v. Minnesota Pub. Utils. Comm’n,
380 F.3d 367, 372 (8th Cir. 2004) (explaining that “[t]he FCC has authority to preempt state regulation of
telecommunications where it is not possible to separate the interstate and intrastate aspects of a communications
service, and where the Commission concludes that federal regulation is necessary to further a valid federal
regulatory objective.”); BellSouth MemoryCall Order, 7 FCC Rcd at 1622-23, paras. 17-22 (using preemption under
the Supremacy Clause for a Georgia voice mail regulation of jurisdictionally mixed service).

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transactions having interstate as well as intrastate components, the federal requirements will operate as
ceilings limiting potential state action.128 To the extent a state allows or requires an inmate calling
services provider to impose fees for ancillary services other than those permitted by our rules, or to charge
fees higher than the caps imposed by our rules, that state law or requirement is preempted except where
such ancillary services are provided only in connection with intrastate inmate calling services. In
contrast, to the extent a state allows or requires an inmate calling services provider to impose fees lower
than those contained in our rules, that state law or requirement is not preempted by our action here.
48.
Attempts to Exploit the Dual Regulatory Environment and Evade Our Rules. We share
the concern of commenters that inmate calling services providers may undermine or negate our caps on
ancillary service charges for interstate inmate calling services (and, in turn, our interstate rate caps) by
departing from their current business practices and taking new steps to segregate interstate and intrastate
activity. 129 For example, commenters point out that providers may newly decide to create separate paper
bills for intrastate and interstate services in order to evade our cap on paper bill fees. 130 We recognize, in
view of the D.C. Circuit’s decision in GTL, that the Commission lacks authority to limit the fees
providers assess for purely intrastate activity. 131 But it is within the Commission’s authority to ensure that
fees for interstate activity are just and reasonable.132 And because providers have not historically
distinguished between interstate and intrastate ancillary service charges,133 we anticipate that the costs
associated with providing jurisdictionally separate ancillary services, should providers seek to do so in the
future, would often or always be “common” to both the interstate and intrastate service. It would frustrate
our efforts to ensure that charges for interstate ancillary services are just and reasonable if providers could
recover, through their interstate ancillary service charges, costs that should be allocated to a parallel
intrastate ancillary service, or that providers have already recovered through their intrastate ancillary
service charges.
49.
To ensure that providers do not negate the effectiveness of our caps on interstate ancillary
service charges in this manner, we determine that if a provider takes new steps to segregate interstate and
intrastate activity (for example, by providing separate paper bills for interstate and intrastate inmate
calling services, and assessing separate ancillary service charges for those bills), the Commission will
presumptively consider such actions as unjust and unreasonable practices that are prohibited under federal
law. We direct the Wireline Competition Bureau and the Enforcement Bureau to take appropriate action
128

See 2015 ICS Order, 30 FCC Rcd at 12864, para. 205; Connect America Fund et al., WC Docket No. 10-90 et
al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17935, para. 801 (2011)
(USF/ICC Transformation Order), pets. for review denied sub nom., In re: FCC 11-161, 753 F.3d 1015 (10th Cir.
2014); see also Letter from Andrew D. Lipman, Morgan, Lewis & Bockius, LLP, to Marlene H. Dortch, Secretary,
FCC, WC Docket No. 12-375, at 1-2 (filed July 23, 2015).
129

See Pay Tel Mar. 20, 2020 Comments at 4-6; Pay Tel Apr. 21, 2020 Reply at 7; Wright Petitioners Apr. 21, 2020
Reply at 8-9; see also Ancillary Services Refresh Public Notice, 35 FCC Rcd at 191 & n.18 (seeking comment on
any additional steps the Commission should adopt so that “its actions on remand ‘properly reflect[]’ the reforms
adopted in 2015 and that providers of interstate ICS do not circumvent or frustrate the Commission’s ancillary
service charge rules”).
130

See Pay Tel Mar. 20, 2020 Comments at 11; Wright Petitioners Mar. 20, 2020 Comments at 20.

131
See GTL v. FCC, 866 F.3d at 415 (holding that the agency lacks “authority to impose ancillary fee caps with
respect to intrastate calls”).
132

47 U.S.C. § 201(b).

133

See GTL Mar. 20, 2020 Comments at 4 (“GTL has not divided ancillary service charges into “interstate” and
“intrastate” categories.”); see also Pay Tel Mar. 20, 2020 Comments at 6-7 (stating that “the provider has no
practical way of assessing the fee such that it is only associated with interstate calls”); Securus Technologies, LLC
Reply, WC Docket No. 12-375, at 3-4 (filed Apr. 21, 2020) (Securus Apr. 21, 2020 Reply) (asserting that there is no
evidence that any provider has “tr[ied] to impose separate interstate and intrastate ancillary charges on a single
transaction”).

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should they become aware of such actions. Any carrier that takes such actions should be prepared to
demonstrate to the Commission that their affected interstate ancillary service charges are just and
reasonable, including that the affected charges do not recover jurisdictionally common costs that are
already, or should properly be, recovered through the provider’s corresponding intrastate ancillary service
charges.
50.
Classifying Calls by Jurisdiction. There is significant debate within the record on
whether it is possible for inmate calling services providers to classify the jurisdiction of certain calls and
thus the jurisdiction of the services ancillary to such calls. On the one hand, GTL argues that the
“jurisdictional nature of calls themselves is easily classified as either interstate or intrastate based on the
call’s points of origin and termination,” 134 and Securus asserts that an inmate calling services provider
knows the jurisdiction of a call because it is “from a known originating telephone number to a single,
known terminating number.” 135 On the other hand, Pay Tel argues that we should generally treat inmate
calling services as jurisdictionally mixed across the board because providers cannot practically and
reliably determine the location of each called party.136
51.
This confusion calls for some clarification. First, we remind providers that the
jurisdictional nature of a call depends on the physical location of the endpoints of the call 137 and not on
whether the area code or NXX prefix of the telephone number are associated with a particular state.138

134

GTL Mar. 20, 2020 Comments at 4.

135

Securus Mar. 20, 2020 Comments at 4; id. (asserting it is easy to determine the jurisdictional nature of a singlecall service).
136

Pay Tel Mar. 20, 2020 Comments at 9-10.

137

See, e.g., Vonage Order, 19 FCC Rcd at 22413, para. 17; see also Federal-State Board on Universal Service, CC
Docket No. 96-45, Memorandum Opinion and Order and Further Notice of Proposed Rulemaking, 13 FCC Rcd
21252, 21255, para. 6 (1998) (“In general, the jurisdictional nature of a call depends solely upon where the call
originates and where it terminates.”).
138

In other words, certain providers are incorrect to argue that comparing the inmate’s local access and transport
area and phone number with the account holder’s will let an inmate calling services providers identify whether a call
or account is interstate or intrastate. Inmate Calling Solutions, LLC Comments, WC Docket No. 12-375, at 1 (filed
Mar. 20, 2020); NCIC Mar. 20, 2020 Comments at 3. Although that may be true for legacy wireline networks, more
modern networks such as wireless networks and interconnected VoIP networks allow the portability of such
numbers across state lines. And given the prevalence of such networks and the increasing reliance on mobile
wireless and VoIP services, it would be unreasonable for an inmate calling services provider to rely on a telephone
number alone to determine the location of a particular called party. See FCC, Voice Telephone Services as of
12/31/17, Tables: Nationwide and State-Level Data for 2008-present (Aug. 28, 2019), https://www.fcc.gov/voicetelephone-services-report; see also 2018 Communications Marketplace Report et al., GN Docket No. 18-231 et al.,
Report, 33 FCC Rcd 12558, 12668, para. 203 (2018). Today, a phone number provides little indication of the
physical location of a called party or a calling party. Telephone numbers have been readily ported between wireline
providers, and between wireline and wireless service providers, since at least 2003. Telephone Number Portability;
CTIA Petitions for Declaratory Ruling on Wireline-Wireless Porting Issues, CC Docket No. 95-116, Memorandum
Opinion and Order and Further Notice of Proposed Rulemaking, 18 FCC Rcd 23697 (2003). And VoIP providers
have been porting numbers since at least 2008. Telephone Number Requirements for IP-Enabled Services Providers
et al., WC Docket No. 07-243 et al., Report and Order, Declaratory Ruling, Order on Remand, and Notice of
Proposed Rulemaking, 22 FCC Rcd 19531, 19566, paras. 79-80 (2007). Thus, a telephone number only identifies
the state and rate center where the number was originally assigned, and not where it is currently assigned. Number
Portability Administration Center, How LNP Works, https://www.npac.com/number-portability/how-lnp-works (last
visited July 10, 2020). Moreover, because a wireless telephone user may make or receive a call anywhere there is
wireless reception, their phone number readily may not indicate their location. And the chance of a phone number
being one that is used by a mobile phone is high: The telephone numbers used by mobile phones make up about
half of all assigned telephone numbers. FCC, Numbering Resource Utilization in the United States at 10, Tbl. 1

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Second, we disagree with Pay Tel’s argument that the location of a wireless caller is unknowable.139 As
Securus points out, “wireless carriers can determine the locations of their customers at the time of each
call, so it is possible to establish the jurisdiction of each individual call.” 140 Third, we recognize that just
because some provider can establish the location of a caller (and thus the jurisdiction of a call) does not
mean that every inmate calling services provider can or does do so. As such we agree with Pay Tel that,
to the extent an inmate calling services provider cannot definitively establish the jurisdiction of a call, it
may and should treat the call as jurisdictionally mixed and thus subject to our ancillary service charge
rules. Such treatment is necessary to carry out the requirement of the Communications Act that all
interstate charges and practices be just and reasonable. Or to put it another way, any other treatment of
jurisdictionally indeterminate calls would strip interstate callers of the protections guaranteed by federal
law.
52.
Ancillary Service Charges Rule Revisions. We revise our ancillary services charge rules
consistent with our findings herein. 141 These amendments reflect the D.C. Circuit’s holding that the
Commission lacks authority over intrastate inmate calling services as well as our actions exercising our
authority to ensure just and reasonable rates under section 201(b) for ancillary services charges for and in
connection with jurisdictionally mixed inmate calling services for which it is impossible or impracticable
to segregate the interstate and intrastate components. 142
53.
We also change section 64.6020(a)’s cross-reference to section 64.600 to more precisely
cross-reference section 64.6000(a). 143 We find good cause to correct the cross-reference without notice
and comment because this change is non-substantive. 144 It is well established that the Commission need
not seek comment on amendments to our rules designed “to ensure consistency in terminology and cross
references across various rules or to correct inadvertent failures to make conforming changes when prior
rule amendments occurred.” 145
B.

Mandatory Pass-Through Taxes and Fees

54.
As a result of the D.C. Circuit’s decision in Securus, the rule amendments in the 2016
ICS Reconsideration Order to include language precluding markups of a “Mandatory Tax or Mandatory
Fee” in the absence of specific governmental authorization were vacated to the extent they capped rates.
We therefore amend our rules to reinstate the language added in the 2016 ICS Reconsideration Order in
response to the court’s vacatur and remand. We also add language clarifying that this rule applies only in
connection with interstate and international inmate calls. 146 This amendment will ensure that end users
will pay for “the cost of the service they have chosen and any applicable taxes or fees, and nothing more”
(2019), https://docs.fcc.gov/public/attachments/DOC-359118A1.pdf (calculated by dividing Mobile Wireless
Assigned Numbers by All Reporting Carriers Assigned Numbers).
139

Pay Tel Mar. 20, 2020 Comments at 9-10.

140

Securus Apr. 21, 2020 Reply at 2.

141

Appx. A (Final Rules).

142

GTL v. FCC, 866 F.3d at 415.

143

See 47 CFR § 64.6020(a).

144

See Unlicensed Operation in the TV Broadcast Bands, ET Docket Nos. 04-186, 02-380, Second Memorandum
Opinion and Order, 25 FCC Rcd 18661, 18724, para. 154 (2010) (concluding that the correction of an erroneous
cross-reference is “not substantive” and that the Commission may make such a change on its own motion without
prior notice and comment).
145

Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket
No. 17-84, Order, 33 FCC Rcd 5660, 5688-89, para. 63 (2017) (finding notice and comment unnecessary for nonsubstantive changes to the Commission’s rules).
146

Appx. A.

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for inmate calling services subject to our jurisdiction, 147 thereby helping ensure that the charges imposed
in connection with those services are just and reasonable.
55.
The amendment is consistent with the Commission’s prior intent regarding mandatory
taxes or fees and the record previously developed in this proceeding. 148 We base our reinstatement on the
same record, and find no basis to depart from our prior determination that adopting this rule best comports
with our application of section 201(b). 149 Further, this amendment harmonizes the rules regarding a
“Mandatory Tax or Mandatory Fee” and an “Authorized Fee” to prohibit markups on either category of
charges, thereby eliminating at least some potential confusion from the disparate definitions regarding
whether inmate calling services providers may mark up such charges.150
C.

Revisions to Certain Inmate Calling Services Rules

56.
Finally, we revise certain of our rules governing inmate calling services to comport with
the D.C. Circuit’s decisions in GTL and Securus. 151 First, the court vacated the rate caps that the
Commission adopted in the 2015 ICS Order and the 2016 ICS Reconsideration Order, 152 and we thus
eliminate section 64.6010, which contained those rate caps. 153 Second, the GTL court vacated the
reporting requirement the Commission had adopted for video visitation services. 154 We thus eliminate
section 64.6060(a)(4), which contained that rule. 155 Third, the GTL court found that the Commission
lacks ratemaking authority over intrastate inmate calling services rates.156 We thus revise sections
64.6000(b), 64.6000(n), 64.6030, 64.6050, 64.6070, 64.6080, 64.6090, and 64.6100 to reflect that these
147
2015 ICS Order, 30 FCC Rcd at 12859, para. 192; see, e.g., Truth-in-Billing and Billing Format et al., CC
Docket No. 98-1770 et al., Declaratory Ruling, and Second Further Notice of Proposed Rulemaking, 20 FCC Rcd
6448, 6460-61, paras. 25-27 (2005) (observing that it is “a misleading practice for carriers to state or imply that a
charge is required by the government when it is the carriers’ business decision as to whether and how much of such
costs they choose to recover directly from consumers through a separate line item charge”).
148

See 2015 ICS Order, 30 FCC Rcd at 12859, para. 191 (holding that inmate calling services providers should be
“permitted to recover mandatory applicable pass-through taxes and regulatory fees, but without any additional markup or fees”); see 2016 ICS Reconsideration Order, 31 FCC Rcd at 9317-18, para. 31.

149
In the absence of any indication of changed circumstances regarding the markup of Mandatory Taxes or
Mandatory Fees, we find it unnecessary to seek additional comment on these matters. See, e.g., Chamber of
Commerce v. SEC, 443 F.3d 890, 900 (D.C. Cir. 2006).
150
See Petition of Michael S. Hamden for Partial Reconsideration, WC Docket No. 12-375, at 15-16 (filed Jan. 19,
2016) (claiming “confusion” regarding the Commission’s definitions of the terms “‘authorized fee,’” “‘mandatory
tax,’” and “’mandatory fee’” in the 2015 ICS Order) (citing Letter from Robert Pickens, President, Securus
Technologies, to Clients (Nov. 13, 2015)); Wright Petitioners’ Opposition to Petition for Partial Reconsideration,
WC Docket No. 12-375, at 4 (filed Mar. 23, 2016); Inmate Calling Solutions, LLC, Opposition to Petition for Partial
Reconsideration, WC Docket No. 12-375, at 15 (filed Feb. 26, 2016) (“ICSolutions does not oppose further
clarification [of these terms] from the FCC.”). But see Response of Securus Technologies, Inc., to Petition for
Partial Reconsideration of Michael S. Hamden, WC Docket No. 12-375, at 4 (filed Mar. 23, 2016) (arguing these
terms were adequately defined); Response of Telmate, LLC. to Petition for Partial Reconsideration, WC Docket No.
12-375, at 5 (filed Mar. 23, 2016).
151

See GTL v. FCC, 866 F.3d 397.

152

Id. at 402; Securus. v. FCC, No. 16-1321, 2017 U.S. App. LEXIS 26360, at *1 (D.C. Cir. Dec. 21, 2017) (per
curiam).
153

47 CFR § 64.6010.

154

GTL v. FCC, 866 F.3d at 415.

155

47 CFR § 64.6060(a)(4).

156
GTL v. FCC, 866 F.3d at 412 (concluding that Commission’s “attempted exercise of authority” over intrastate
inmate calling services is “beyond the statutory authority of the Commission”).

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rules only apply to interstate and international inmate calling services. 157 Fourth, we revise section
64.6000(t) of our rules to change the reference to “ICS” therein to “Inmate Calling Services.” 158
57.
We find good cause to implement these revisions without notice and comment. The
Administrative Procedure Act states that notice and comment procedures do not apply “when the agency
for good cause finds (and incorporates the finding and a brief statement of the reasons therefor in the rules
issued) that notice and public procedure thereon are impracticable, unnecessary or contrary to the public
interest.” 159 With the exception of our change to section 64.6000(t), our revisions are non-discretionary
changes to the Commission’s rules necessary to effectuate the D.C. Circuit’s decisions in GTL and
Securus. Seeking notice and comment before implementing the D.C. Circuit’s non-discretionary mandate
would serve no purpose because commenters could not say anything during a notice and comment period
that would change the D.C. Circuit’s decision and the Commission does not have discretion to depart
from the court’s mandate. 160
58.
We also find good cause to revise section 64.6000(t) without notice and comment
because this change is non-substantive. 161 The Commission need not seek comment on amendments to
our rules designed “to ensure consistency in terminology and cross references across various rules or to
correct inadvertent failures to make conforming changes when prior rule amendments occurred.” 162
IV.

FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING

59.
As a result of the D.C. Circuit’s decisions in GTL and Securus, the interim interstate rate
caps that the Commission adopted in the 2013 ICS Order—$0.21 per minute for debit and prepaid calls
and $0.25 per minute for collect calls—remain in effect today. Based on extensive analysis by
Commission staff of the most recent cost data submitted by inmate calling services providers, we propose
comprehensive rate reform of the inmate calling services within our jurisdiction.
60.
First, we propose to lower our rate caps for interstate inmate calling services to $0.14 per
minute for debit, prepaid, and collect calls from prisons and $0.16 per minute for debit, prepaid, and
collect from jails. In so doing, we account for reasonable correctional facility costs, consistent with the
157

47 CFR §§ 64.6000(b), 64.6000(n), 64.6020(a), 64.6030, 64.6050, 64.6070, 64.6080, 64.6090, 64.6100.

158

47 CFR § 64.6000(t).

159

See 5 U.S.C. § 553(b)(3)(B); see also EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 134 (D.C. Cir.
2015) (affirming agency good cause that notice and comment were unnecessary when a court order invalidated a
rule and “commentators could not have said anything during a notice and comment period that would have changed
that fact”); Accelerating Wireless Broadband Deployment by Removing Barriers to Infrastructure Investment, WT
Docket No. 17-79, Order, 34 FCC Rcd 9366, para. 2 (WTB 2019) (“The Bureau finds that notice and comment are
unnecessary for these rule amendments under 5 U.S.C. § 553(b), because this ministerial order merely implements
the mandate of the United States Court of Appeals for the District of Columbia Circuit, and the Commission lacks
discretion to depart from this mandate.”); 2014 Quadrennial Regulatory Review—Review of the Commission’s
Broadcast Ownership Rules and Other Rules Adopted Pursuant to Section 202 of the Communications Act, MB
Docket No. 14-50 et al., Order, 34 FCC Rcd 12360, 12361, para. 2 (MB 2019) (finding notice and comment
unnecessary when amending rules pursuant to a court order).

160
See EME Homer City Generation, L.P. v. EPA, 795 F.3d 118, 134 (D.C. Cir. 2015); Accelerating Wireless
Broadband Deployment by Removing Barriers to Infrastructure Investment, WT Docket No. 17-79, Order, 34 FCC
Rcd 9366, 9366, para. 2 (WTB 2019).
161

See Unlicensed Operation in the TV Broadcast Bands, ET Docket Nos. 04-186, 02-380, Second Memorandum
Opinion and Order, 25 FCC Rcd at 18661, 18724, para. 154 (2010) (concluding that the correction of an erroneous
cross-reference is “not substantive” and that the Commission may make such a change on its own motion without
prior notice and comment).
162

Accelerating Wireline Broadband Deployment by Removing Barriers to Infrastructure Investment, WC Docket
No. 17-84, Order, 33 FCC Rcd 5660, 5688-89, para. 63 (2017) (finding notice and comment unnecessary for nonsubstantive changes to the Commission’s rules).

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court’s opinion in GTL, and we account for the fair compensation mandate of section 276 of the Act. We
further propose to find that the benefits of our interstate rate cap proposal far exceed the costs.
61.
Second, we propose to cap rates for international inmate calling services, which remain
uncapped today. Specifically, we propose to adopt a rate cap formula that permits a provider to charge an
international inmate calling services rate up to the sum of the provider’s per-minute interstate rate cap for
the inmate’s facility plus the amount that the provider must pay its underlying international service
provider for that call on a per-minute basis. We believe these proposals will ensure that the rates that
inmates and their loved ones pay for interstate and international inmate calling services are just and
reasonable as required by section 201(b) of the Act.
62.
We seek comment on our proposals, including their impact on small businesses, and we
seek comment on any alternative proposals.
A.

Proposing New Interstate Rate Caps

63.
We propose to adopt permanent rate caps for interstate inmate calling services of $0.14
per minute for debit, prepaid, and collect calls from prisons and $0.16 per minute for such calls from jails.
These rate caps would apply to all calls that a provider identifies as interstate and to calls that the provider
cannot definitively identify as intrastate.
64.
The proposed rates are based on our analyses of detailed cost data submitted by inmate
calling services providers in their Second Mandatory Data Collection responses. These data demonstrate
that the proposed rates, in conjunction with the fees permitted for ancillary services, will generally allow
providers to recover their costs, including their overheads, and reimburse correctional facilities for any
costs that they incur that are directly related to the provision of inmate calling services. 163 We establish
our proposed rate caps based on (1) our calculated mean contract costs per paid minute to provide inmate
calling services as reported by providers plus one standard deviation; and (2) an allowance for recovery of
correctional facility costs directly related to the provision of inmate calling services observed in that
data. 164 Our proposed rate cap methodology and its impact on providers’ ability to recover their costs
differ materially from the methodology and impact that were before the D.C. Circuit in GTL v. FCC. We
seek comment on each aspect of our proposed rate cap methodology and on whether it will result in
interstate inmate calling services rates that are just and reasonable as required by the Communications
Act.
65.
Uniform Caps for Prepaid/Debit and Collection Calls. We propose to adopt identical
interstate rate caps for prepaid/debit and collect calls based on the absence of any data demonstrating a
material difference in the costs of providing these different types of calls. 165 What is more, collect calling
is no longer a popular method of inmate calling, and data show that the number of collect calls is small

163

We define “overheads” as the difference between the costs inmate calling services providers assigned to their
contracts and their total inmate calling services costs.

164

See GTL v. FCC, 866 F.3d at 414. “Contract costs per paid minute” refers to the sum of a contract’s direct costs
and allocated overheads divided by the number of paid minutes of use reported for that contract. We calculate the
mean of this value across all contracts for each facility type and use those averages in determining our proposed rate
caps.
165

2015 ICS Order, 30 FCC Rcd at 12805-07, paras. 86-90. For convenience, we refer herein to prepaid and debit
calls collectively as prepaid/debit calls. While each of these call types is separately defined in the Commission’s
rules, 47 CFR § 64.6000(g), (p), each involves a form of advanced payment for inmate telephone calls as
distinguished from collect calls for which payment is sought from the called party at the time that the inmate call is
placed. 47 CFR § 64.6000(d).

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and has been declining relative to prepaid or debit calls. 166 We seek comment on current trends for collect
calling, and on our proposal to adopt a single rate cap for prepaid/debit and collect calls made from the
same facilities and on the overall data upon which we base our proposal. Are there cost differences
between collect and prepaid/debit calls that providers failed to identify in response to our data collection?
If so, commenters should submit additional data on this point into the record. We also seek comment on
whether attempting to distinguish between the costs of providing prepaid/debit calls and collect calls is
necessary (or administratively efficient) given that collect calls appear to be a disappearing service.
66.
We do note one apparent difference between collect and prepaid/debit calls: Specifically,
collect calls are more likely to be initiated through the use of a live operator. We tentatively do not
believe, however, that this difference merits different rates because inmate calling service providers are
already permitted to charge a separate fee if an inmate makes use of a live operator to place an interstate
collect call. 167 This additional ancillary service charge is on top of the per-minute rate for the interstate
collect call. 168 Are there nevertheless reasons to maintain different interstate rate caps for collect versus
prepaid/debit calling? If so, commenters should explain these reasons in detail.
67.
Different Caps for Prisons and Jails. We propose to distinguish between two distinct
facility types, proposing a rate cap for jails that is $0.02 per minute higher than the rate cap we propose
for prisons. This $0.02 per-minute differential reflects our analysis of the cost data, which shows greater
variations from mean costs for jails than prisons (and therefore a greater standard deviation from the mean
for jail than prisons). This two-tier rate structure departs from the four-tier rate structure the Commission
adopted in the 2015 ICS Order, which established a rate cap for prisons as well as three different rate caps
for jails, based on the jails’ average daily populations. 169 As discussed in greater detail in Appendix F,
staff analysis of the data submitted by the providers indicates that the average daily population for jails
does not meaningfully influence per-minute costs. 170 The analysis similarly indicates that per-minute
costs are not materially influenced by other characteristics of the facilities being examined. We seek
comment on this analysis.
68.
We seek comment on our proposal to adopt a single rate cap for prisons and a single rate
cap for jails. Are there differences in the costs of serving different types of prisons or jails that are not
apparent from the data submitted in response to the Second Mandatory Data Collection? If so,
commenters should provide additional analysis or data establishing those differences and explain how we
should take them into account in setting interstate rate caps for different types of facilities.
69.
Cost Recovery at the Contract Level. The Second Mandatory Data Collection responses
make clear that inmate calling services providers seek to recover their costs at the contract, rather than
facility, level. The providers therefore do not typically keep, and have not submitted, data that would
capture cost differences among facilities of differing sizes under the same contract. In these
circumstances, we propose to set interstate rate caps based on our analysis of costs at the contract level.
We invite comment on this approach.
70.
Effective Date for New Interstate Rate Caps. We propose that our new rate caps take
effect 90 days after notice of them is published in the Federal Register. This is the same transition
timeframe that the Commission adopted when providers first became subject to the current interim caps,

166

In 2014, collect call minutes represented 4.9% of all paid call minutes. In 2018, the share of collect calls in all
paid call minutes had fallen to 2.2%. These findings are based on staff analysis of the data received in the Second
Mandatory Data Collection.
167

See 47 CFR § 64.6020(b)(3).

168

2015 ICS Order, 30 FCC Rcd at 12848, para. 168.

169

Id. at 12785-86, paras. 44-46.

170

See generally Appx. F (discussing the Lasso analysis results).

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and the record in this proceeding indicates that implementation occurred without difficulty. 171 We seek
comment on this view and on our proposal. Any commenter favoring a shorter or longer transition period
should provide a detailed explanation of precisely what steps providers and correctional facilities must
take before they can implement new rate caps for interstate inmate calling services and how much time
they anticipate it will take to accomplish each of those steps.
1.

Methodology

71.
Calculating Mean Contract Costs per Paid Minute. Our rate cap methodology begins
with the calculation of mean contract costs per paid minute in the provision of inmate calling services.
This calculation is based on data for the most recent year (2018) submitted in providers’ Second
Mandatory Data Collection responses, as supplemented and clarified in the record via follow-up
discussions with each provider. 172 Although we requested data for each facility a provider serves,
including information such as the average daily inmate population, the number of calls annually, the
number of annual call minutes, and the cost of serving that facility, 173 in many instances providers
reported data only at the contract level.174 The cost data include both (1) costs that may be directly
attributed to the provider’s inmate calling services operations and, in many instances, to a given inmate
calling services contract; and (2) costs, such as general corporate overheads, that cannot be directly
attributed to a particular facility or even, in some cases, a particular line of business. 175
72.
The collected data are subject to certain limitations based on differences in recordkeeping
practices among the respondent providers. For example, many providers assess their inmate calling
services operations on a contract-by-contract basis, although many contracts include multiple correctional
facilities. 176 These providers therefore reported information—and we analyze that information—on a
contract, rather than a facility, basis. 177 We seek comment on this approach, in the absence of information
provided about the costs incurred on a facility-by-facility basis.

171

2015 ICS Order, 30 FCC Rcd at 12884, para. 251 (“The record does not indicate that providers experienced
difficulties implementing the rate caps within 90 days after the 2013 Order’s publication in the Federal Register.”).
172
Id. at 12862, para. 198;2019 Data Collection Public Notice, 34 FCC Rcd at 515. While the Second Mandatory
Data Collection collected data for 2014 to 2018, we rely on data from 2018 because it this is likely to be most
representative of the current situation. E.g., Letter from Sharon R. Warren, Consultant to Network Communications
International Corp (NCIC), Inteserra Consulting Group, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375, at 1 (filed May 5, 2020) (amending NCIC’s Second Mandatory Data Collection response in response to
questions from Commission staff); Letter from Marcus W. Trathen, Counsel to Pay Tel Communications, Inc.,
Brooks, Pierce, McLendon, Humphrey & Leonard, LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12375, at 1 (filed Apr. 28, 2020) (amending Pay Tel’s Second Mandatory Data Collection response in response to
questions from Commission staff); Letter from Stephanie A. Joyce, Counsel to Securus Technologies, Inc., Arent
Fox LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1 (filed July 22, 2019) (amending
Securus’ Second Mandatory Data Collection response in response to a request from the Commission staff).
173

See Inmate Calling Services Mandatory Data Collection, WC Docket No. 12-375, General Instructions, at 7-11,
https://docs.fcc.gov/public/attachments/DOC-343708A3.docx (Second Mandatory Data Collection Instructions).

174

See generally Appx. E (describing the Commission staff’s data processing steps).

175

See Second Mandatory Data Collection Instructions at 3; Appx. E (describing the collected information in greater
detail and summarizing several statistical attributes in Table 1).
176
See, e.g., Description and Justification for CenturyLink Public Communications, Inc.’s Mandatory Data
Collection Report (Redacted for Public Inspection) at 3 (filed Mar. 1, 2019) (CenturyLink Description &
Justification) (“[T]he company’s contract with the Texas Department of Criminal Justice, for example, covers more
than 100 facilities.”). Based on staff analysis of the data, CenturyLink treated the Wisconsin DOC contract
similarly, and GTL treated many, and perhaps all, of its multifacility contracts similarly.
177

See, e.g., CenturyLink Description & Justification at 3.

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73.
The Second Mandatory Data Collection sought information about costs in several steps.
A filer must first identify which of its and its corporate affiliates’ total costs are directly attributable to
inmate calling services and which are directly attributable to other operations. The filer must then
allocate the remainder of the inmate calling services provider’s and its affiliates’ total costs (i.e., the costs
identified as indirect costs or overhead) between inmate calling services and the affiliate groups’ other
operations. The filer may then choose to allocate some or all of these costs to its particular inmate calling
services contracts or even to a given facility. We note that some providers interpreted different steps in
different ways. We seek comment on each aspect of the submitted data and invite parties to submit their
own analyses consistent with the terms of the Protective Order in this proceeding. 178 Are there other
issues regarding the data that we should consider? Are there other types of data we could seek to more
fully capture industry costs beyond the detailed and comprehensive data we have already collected and
which providers claim reflects the level of granular cost data they keep? We invite parties to submit
alternative proposals for us to consider in further evaluating the Second Mandatory Data Collection
responses. To the extent that commenters believe we should collect additional data, we seek comment on
the likelihood that inmate calling services providers would be able to provide the requested data, and, if
so, at what cost and in what timeframe.
74.
The Second Mandatory Data Collection did not require providers to allocate costs that are
not directly associated with a specific contract among their different contracts. We therefore need to
perform such an allocation. We propose to use the reported minutes of use associated with each contract
to perform that allocation. 179 We seek comment on this allocation method, including whether reported
minutes of use provides a reasonable allocator. Would a different allocator better capture how costs are
caused, and if so, why? Are there systematic differences in costs or systematic differences in the way
costs are calculated that we should consider in our analysis?
75.
In developing its Second Mandatory Data Collection response, one provider, GTL,
allocated indirect costs between its inmate calling services operations and its other operations based on
the percentages of total company revenue each operation generated. GTL and certain other providers also
used relative revenues to allocate their indirect costs among contracts. The Commission has long
disclaimed this allocation methodology because it fails to provide a reliable method for determining the
costs of providing inmate calling services given that “revenues measure only the ability of an activity to
bear costs, and not the amount of resources used by the activity.” 180 One way of viewing the problem of
using revenues as a cost allocation key is to consider two identical services that have different prices. A
revenue cost allocation key would allocate costs to the two services differently even though, by definition,
they have the exact same costs. 181 A related problem is that using revenues to allocate costs is somewhat

178

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Order, 28 FCC Rcd 16954 (WCB 2013)
(Protective Order) (setting forth the procedure by which “Outside Counsel” and “Outside Consultant[s]” may obtain
access to highly confidential data).
179
See Appx. E (explaining our allocation method in greater detail, and explaining the shortcoming of alternative
allocation methods).
180

Separation of Costs of Regulated Telephone Service from Costs of Nonregulated Activities, CC Docket No. 86111, Report and Order, 2 FCC Rcd 1298, 1318, para. 160 (1987) (Joint Cost Order) (internal quotation marks
omitted).
181

Consider allocating costs between the interstate and intrastate jurisdiction based on costs. The record shows no
reason to think that intrastate costs should be any higher than interstate costs. However, because intrastate calls
have higher prices and earn higher revenues per minute, such a mechanism would imply intrastate costs are
significantly higher than interstate costs. See generally Appx. E (explaining why a profit-based allocation will not
effectively constrain prices); see also, e.g., Securus Annual Report (Tab II. ICS Rates - Domestic, Row 91 and Tab
II(a). Narrative - New, Row 97) (reporting, for example, the first-minute intrastate rate of $5.341 and the additional
per-minute intrastate rate of $1.391 in Arkansas while reporting the per-minute interstate rate of $0.21 for the same
facility); Legacy Annual Report (Tab Section II - Redacted, Row 86 and Tab Section II(a) - Redacted, Row 246)

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circular—because the whole point of allocating costs is to help determine what revenues need to be to
cover those costs. Thus, a revenue-based allocator tends to “lock in” the historical pricing decisions of
providers rather than drive rates toward actual costs. We instead considered several other means of
allocating costs: call minutes, call numbers, contracts, and facilities, and determined call minutes to be
the most reasonable. 182 We invite comment on these observations and this allocator, and ask parties to
suggest alternative ways to more appropriately allocate costs for rate-making purposes that would provide
more reliable results.
76.
Calculating Interstate Rate Caps for Prisons and Jails. We next calculate proposed
interstate rate caps for both prisons and jails. Those proposed caps equal the mean contract costs per
minute for all reporting providers, plus one standard deviation, plus an additional $0.02 for correctional
facility costs. 183 Our calculations use total industry costs, both interstate and intrastate, because the
available data do not suggest that there are any differences between the costs of providing interstate and
intrastate inmate calling services. Nor does such data suggest a method for separating reported costs
between the intrastate and interstate jurisdictions that might capture such differences, if any. Finally,
providers do not assert any such differences. We seek comment on these views.
77.
Our analysis of the cost data shows greater variations from mean costs for jails than for
prisons, and our proposed rate caps reflect these standard deviations. We examined whether various
characteristics, such as location or size, would reveal additional, meaningful differences in costs that
would justify separate rate caps for different groups of contracts. We found the main predictors of both
costs per minute and high-cost contracts were the provider’s identity and the state where the facilities
subject to a particular contract are located. We also found that facility type (whether the contracts
covered prisons or jails) was a less strong predictor of costs per minute and high-cost contracts. By
contrast, other variables such as facility size (measured by average daily population) and rurality, or
combinations of such variables provided negligible predictive value. 184 We seek comment on this
analysis and on whether we nevertheless should set interstate rate caps on a more granular basis. We
invite parties to suggest alternative approaches. Any commenter proposing an alternative approach
should submit an explanation of how the data support such an approach, as well as a discussion of the
administrative feasibility of the proposed alternative.
78.
We believe our proposed rate caps will permit cost recovery for interstate inmate calling
services and we seek comment on this view. We specifically invite comment on whether our proposed
interstate rate caps would allow providers to recover their costs of providing interstate inmate calling
services, including their direct costs of providing interstate inmate calling services under each of their
contracts and correctional facility costs directly related to the provision of inmate calling services, while
making reasonable contributions to providers’ indirect costs that are associated with inmate calling
services.
79.
Our calculations show a limited number of contracts where providers’ reported costs plus
our allocation of overhead exceed the revenues that the proposed interstate rate caps would generate:
specifically, in only two out of 131 prison contracts, and 114 out of 2,804 jail contracts. 185 If revenues

(reporting, for example, the first-minute intrastate rate of $6.50 and the additional per-minute intrastate rate of $1.25
in Michigan while reporting the per-minute interstate rate of $0.25 for the same facility).
182

See Appx. E at 66-70.

183

Part IV.A.3, below, explains the basis for this $.02 allowance and how we calculated it based on the data.

184

See generally Appx. F (describing the Lasso analysis).

185

We note that the inmate calling services providers’ reported costs exclude site commission payments, although
they do report information on site commission payments. The Commission has determined previously that some
portion of these site commission payments do reflect legitimate costs that correctional facilities incur that are

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that are currently generated from certain ancillary services, such as automated payment fees and paper
billing and statement fees, are included, only 42 jail contracts fail to recover costs under our allocation of
overheads. Over half of these 42 jail contracts belong to a single provider, but account for a small portion
of that provider’s broad contract portfolio. 186 In addition, we do not include revenues earned from live
operator fees because those data were not collected, even though the costs of live operators were collected
and are included in our analysis. We seek comment on this approach and on whether we should exclude
both the costs of, and revenues from, live operator interactions from our analysis.
80.
In GTL v. FCC, the Court found the Commission’s reliance on industry average costs
unreasonable because even if any cost component of site commissions were disregarded, the proposed
caps were “below average costs documented by numerous ICS providers and would deny cost recovery
for a substantial percentage of all inmate calls.” 187 Unlike that result, however, we propose a
methodology that begins with an industry mean cost, increases that mean by a standard deviation, and
then adds an additional amount—$0.02 per minute—to account for correctional facility costs. The
revenues from the proposed rate caps would enable the vast majority of providers to recover at least their
reported costs, leaving only 1.5% (or 42/2,804) of all jail contracts with reported average costs above
what the proposed interstate rate caps would recover (and we seek comment below on potentially waiving
our caps in these extraordinary cases).
81. As discussed in Appendix E, we assigned costs to contracts based on relative minutes of use.
For robustness, we also take the data at face value and analyze our propose caps against those data. In
that scenario, only one prison contract and 32 jail contracts would fail to recover reported direct costs
based on our analysis. And only one prison contract or 0.8% (1/131) of prison contracts and 21 or 0.7%
(21/2,804) of jail contracts would fail to recover their reported direct costs after accounting for certain
ancillary service fees. We seek comment on this analysis. We also ask whether it would be appropriate
to set rates based on the costs of the vast majority of providers (for example, all but the one or two
providers with the highest average costs per minute), in order to incent providers with above average
costs to be more efficient.188
82.
The presence of a number of prisons and jails with rates below our proposed interstate
rate caps is further evidence that leads us to conclude that our proposed caps will broadly allow cost
reasonably related to the provision of inmate calling services. Based on our analysis, our proposed rate caps include
a $0.02 per minute allowance for these correctional facility costs.
186

Based on staff analysis of these 42 jail contracts, approximately {[

double brackets {[
187

]}. Material set off by
]} is confidential and is redacted from the public version of this document.

GTL v. FCC, 866 F.3d at 414.

188

See, e.g., Sw. Bell Tel. Co. v. FCC, 168 F.3d 1344, 1352 (D.C. Cir. 1999) (“The use of industry-wide averages in
setting rates is not novel. Indeed, the Supreme Court has affirmed ratemaking methodologies employing composite
industry data or other averaging methods on more than one occasion.”); Price Cap Performance Review for Local
Exchange Carriers, WC Docket No. 94-1, First Report and Order, 10 FCC Rcd 8961, 9002, para. 91 (1995) (“Both
economic theory and our own experience support the views of many commenters in this docket that these purposes
[of ratesetting] generally are best accomplished by actual competition or, where this does not exist or is not fully
effective, by policies that replicate the effects of competition to the extent possible. Effective competition
encourages firms to improve their productivity and introduce improved products and services, in order to increase
their profits. With prices set by marketplace forces, the more efficient firms will earn above-average profits, while
less efficient firms will earn lower profits, or cease operating. Over time, the benefits of competition flow to
customers and to society, in the form of prices that reflect costs, maximize social welfare, and efficiently allocate
resources.”). While the court in GTL rejected an efficiency argument advanced by the Commission, its concern in
that case was that the “average rates” relied on cost data from firms representing only a small fraction of the industry
and were not sufficiently supported by the record. See GTL, 866 F.3d at 415. The approach we propose here,
however, is based on the costs of a majority of providers and is consistent with the record.

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recovery. We have identified nearly 800 prisons in 35 states that have set their interstate debit, prepaid,
and collect inmate calling service rates at levels below our proposed cap of $0.14. These include prisons
in locations as diverse as Alabama, California, New Jersey, New Mexico, West Virginia, and Wyoming.
Similarly, nearly 200 jails in 35 states, set all of their interstate debit, prepaid, and collect inmate calling
service rates at levels below our proposed caps. 189 Confirming our analysis of the cost data, facility size
also does not seem to matter in these cases. We seek comment on whether these data suggest that our
proposed interstate rate caps should be lowered even further notwithstanding the fact that our proposed
rates reflect what the providers have most recently reported as their inmate calling services costs. Is this
evidence that some providers have indeed reported costs in excess of their actual costs?
83.
We note that our rate cap calculations do not account for revenues earned from certain
ancillary services, even though the costs of these services, which were not independently collected, are
included in reported inmate calling services costs. We invite comment on whether we should adjust the
proposed interstate rate caps to address ancillary services. For example, should we exclude the costs from
these services from our calculations? We note that while revenues from such services are small or do not
exist for many contracts, in other cases, they are significant. For example, the contract mean of
automated payment and paper bill/statement revenues per paid minute of use is approximately $0.05. 190
We seek comment on how we should take these revenue sources into account in setting interstate rate
caps. Should we reduce our proposed interstate caps by $0.05 across the board or would this distort
providers’ pricing decisions, especially in the case of contracts where automated payment and paper
bill/statement fees are small or zero? Should we instead impose an interstate revenue cap and let
providers decide how to raise those revenues? Or would that type of discretion lead to rates that are hard
to police in practice? What alternative mechanisms could be applied to ensure that a provider’s totals
revenue from interstate inmate calling services and related ancillary services allows the provider an
opportunity to recover its costs of providing those services without subjecting inmates and those they call
to unreasonably high interstate rates?
84.
We also ask whether there is any other source of revenue from inmate calling services
that we should consider in our analysis. For example, in the 2015 ICS Further Notice, the Commission
expressed concern regarding alleged revenue sharing arrangements between inmate calling services
providers and financial companies. 191 Some commenters argue that certain inmate calling services
providers have entered into revenue-sharing arrangements with third-party processing companies such as
Western Union and MoneyGram 192 where a third-party processing company shares its revenues generated

189

See, e.g., Global Tel*Link Corporation Annual Report and Certification, WC Docket No. 12-375 (filed Apr. 1,
2020) (GTL Annual Report) (Tab II. ICS Rate, showing $0.04 per-minute interstate rate for Franklin County
Corrections, Ohio); Securus Annual Report (Tab II. ICS Rates – Domestic, showing $0.02 per-minute interstate rate
for Travis County Correctional Complex, Texas).
190

This is calculated by taking mean of the quotient of revenues from automated payment and paper bill and
statement fees and paid minutes of use for each contract.
191

2015 ICS Further Notice, 30 FCC Rcd at 12914-15, paras. 324-26.

192
In contrast to typical third-party processing companies such as Western Union and MoneyGram, Pay Tel argues
that affiliates of an inmate calling services provider should not be treated as a third-party in applying the
Commission rules as the affiliated processing company’s revenues will end up in the same bucket as the affiliated
inmate calling services provider’s revenues. Pay Tel Communications, Inc. Comments, WC Docket No. 12-375, at
16 (filed Jan. 19, 2016) (Pay Tel Jan. 19, 2016 Comments); see also CenturyLink Public Communications, Inc.
Comments, WC Docket No. 12-375, at 12-13 (filed Jan. 19, 2016) (CenturyLink Jan. 19, 2016 Comments) (arguing
that “[i]f an ICS provider has a financial interest in a payment firm, such as a full or partial ownership interest,
revenue-sharing agreement, or the like, the ICS provider should not be able to pass through any charge from that
firm if that charge exceeds the caps”).

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from processing transactions for an inmate calling services provider’ customers. 193 The commenters
further argue that the shared revenue is an additional source of profits for these inmate calling services
providers. 194 We invite comment on whether our fee cap rule for third-party financial transactions already
precludes providers from passing on any of this shared revenue to consumers. 195 We also invite comment
on how we should account for any revenue that providers receive from such arrangements in our rate cap
calculations. For example, should we reduce the amount that a provider may recover through per-minute
rates and ancillary fees by the amount it receives from sharing arrangements with third parties?
2.

Necessary Adjustments to Data

85.
The interstate rate caps we propose reflect certain adjustments to some provider data to
correct for anomalies that would improperly skew our results and lead to unreasonably high interstate rate
caps vis-à-vis rate caps that approximate the true costs of providing inmate calling service. We seek
comment on these adjustments. Specifically, to calculate the return component of its costs, GTL uses
what it refers to as the “invested capital of GTL.” 196 That value equals the amount GTL’s current owners
paid in 2011 to purchase the company from its prior owners plus the amounts GTL paid for subsequent
acquisitions. 197 Those amounts as a matter of basic financial theory reflect GTL’s estimate of the future
profit streams the company would generate as an ongoing concern in the provision of inmate calling
services and the other services GTL provides inmates. Consequently, these prices include any expected
market rents embodied in those profit streams. 198 Use of GTL’s invested capital as a basis for a regulated

193
Pay Tel Jan. 19, 2016 Comments at 16; Prison Policy Initiative Comments at 2-4 (filed Jan. 19, 2016) (providing
examples in which inmate calling services providers acknowledge the existing revenue-sharing scheme); Human
Rights Defense Center Comments, WC Docket No. 12-375, at 10 (filed Jan. 19, 2016) (agreeing with the comment
submitted by Prison Policy Initiative).
194
See, e.g., Wright Petitioners et al. Comments, WC Docket No. 12-375, at 20-22 (filed Jan. 19, 2016) (arguing that
the revenue-sharing of ancillary fees inflates the profits of inmate calling services providers); Pay Tel Jan. 19, 2016
Comments at 16.
195

See 47 CFR § 64.6020(b)(2) (limiting third-party financial transaction fees to “the exact transaction fee charged
by the third-party provider, with no markup, plus the adopted, per minute rate) (emphasis added). CenturyLink
argues that our rule already prohibits any types of markups that would result in higher charges to a consumer
regardless of whether the driving force for the higher charge is an explicit fee on top or a revenue-sharing
arrangement. CenturyLink Jan. 19, 2016 Comments at 12-13 (“Simply put, if an arrangement between an ICS
provider and a third party results in a higher cost to an end-user than would otherwise be charged by that third party
directly (a ‘base’” cost), a markup has occurred. In other words, there is a markup regardless of whether it is the
result of an explicit fee on top of the base cost, or whether a revenue-sharing agreement drives the cost above this
base cost. The Second Report and Order appropriately should be interpreted to prohibit both of these types of
markups.”)
196

See Letter from Chérie R. Kiser, Counsel to GTL, Cahill Gordon & Reindel LLP, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 12-375, at 10 (filed May 19, 2020) (GTL Amended & Restated Description &
Justification) (asserting that GTL relies upon the “invested capital of GTL,” which equals the amount GTL’s current
owners paid in 2011 to purchase the company from its prior owners plus the amounts GTL paid for subsequent
acquisitions); see also Appx. G.
197

GTL Amended & Restated Description & Justification at 10. In December 2011, American Securities purchased
GTL from Goldman Sachs Capital Partners and Veritas Capital Fund Management LLC for $1 billion, including a
$50 million contingencies bonus. That purchase price significantly exceeded the $345 million that Goldman Sachs
and Veritas had paid to purchase GTL in February 2011. Ryan Dezember and Gillian Tan, American Securities Puts
Prison-Phone Operator GTL on Block (Apr. 17, 2014), https://www.wsj.com/articles/american-securities-putsprison-phone-operator-gtl-on-block-1397761278.
198
“Market rents” refers to the stream of profits that a company expects to earn that it would not otherwise earn if
faced with effective competitive market constraints.

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cost-based rate is inconsistent with the well-established principle that the purchase prices of companies
that possess market power “are not a reliable or reasonable basis for ratemaking.”199
86.
We propose to reduce the costs reported by GTL by 10% in order to reduce or eliminate
the distortion caused by our estimate of the market rents reflected in its reported costs and to use those
reduced costs in calculating our interstate rate caps for inmate calling services. We adjust our proposed
interstate rate caps to reflect our reasoned estimate of the market rents captured in GTL’s reported costs.
As explained more fully in Appendix G, we estimate those market rents by analyzing GTL’s goodwill, as
reported on its balance sheet. GTL’s goodwill reflects the unamortized portion of excess purchase price
and, presumably, market rents. This excess purchase price includes the value remaining after accounting
for fair market values for tangible and intangible assets (excluding goodwill) and liabilities at the time of
acquisition. We compute the share of GTL’s net assets that its goodwill represents, and then further
reduce this computed share to represent only the portion that corresponds with capital costs. 200 We invite
comment on this approach. Do commenters believe it overstates, or understates, the market rents
included in GTL’s cost calculations? Would another adjustment method yield more accurate results?
Would it be better to refrain from any adjustment to account for this apparent overstatement of GTL’s
costs? If so, why?
87.
We recognize that additional measures may be needed to eliminate what appear to be
other significant overstatements in the inmate calling services costs reported by GTL. Indeed, our
analysis of the cost data from all providers makes clear that GTL’s reported costs are likely significantly
overstated—both vis-à-vis other providers and in absolute terms. First, our analysis shows that GTL’s
reported costs are substantially greater than the industry average, an anomalous result given that we
would expect GTL—as the largest provider in the inmate calling services market—to benefit from
economies of scale and scope. 201 GTL’s reported share of the total costs reported by all providers of
inmate calling services is roughly 1.5 times greater than its reported share of the industry’s minutes of
use. 202 Indeed, GTL’s per paid minute contract costs are higher than those of all but two of the other
providers. This data is difficult to reconcile with GTL’s scale and scope, and apparent efficiency, which
suggest that GTL’s per-minute costs should be lower than other provider’s costs. 203 Second, even after a
199

Implementation of Sections of the Cable Television Consumer Protection & Competition Act of 1992: Rate
Regulation, CS Docket No. 94-28, Second Report and Order, First Order on Reconsideration, and Further Notice of
Proposed Rulemaking, 11 FCC Rcd 2220, 2244, para. 52 (1996); see, e.g., Illinois Bell Tel. Co. v. FCC, 911 F.2d
776 (D.C. Cir. 1990).

200

See generally Appx. G (explaining the computations performed).

201

See generally Appx. E (illustrating that GTL has a {[

]}. We note that ICSolutions and CenturyLink have just filed section 214 transfer of control
applications with the Commission whereby ICSolutions would acquire control of all of CenturyLink’s inmate
calling services business, except for the Texas Department of Corrections contract which CenturyLink subcontracts
with Securus. See Applications Filed for the Transfer of Control of CenturyLink Public Communications, Inc., to
Inmate Calling Solutions, LLC d/b/a ICSolutions, WC Docket No. 20-150, Public Notice, DA 20-673 (June 25,
2020).
202

{[

are {[

]} Securus and ICSolutions are GTL’s nearest peers, yet GTL’s per paid minute contract costs
]}. See generally Appx. E.

203

Scale economies arise when certain upfront costs, such as ICS platform costs, can be shared over increasing
volumes of service. Consistent with this, GTL, in its 2018 Description and Justification, reports {[ ]}% of its
assets to be intellectual property. GTEL Holdings, Inc., and Subsidiaries Consolidated Financial Statements for
2017-18, at 2, 14 (filed May 19, 2020). The costs of developing and maintaining such assets are generally not

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10% reduction, GTL is still an outlier among the larger providers, having a materially higher share of
reported costs than minutes and with reported costs still substantially above the industry average. 204
Third, the highest per minute rates charged on many, including some large GTL contracts, are materially
less than our estimate of the contract’s per paid minute costs. 205
88.
While some of this imbalance stems from GTL’s inflated asset valuations, other aspects
of GTL’s Second Mandatory Data Collection response suggest that the company’s costing methodology
systematically overstated its inmate calling services costs. For example, the Second Mandatory Data
Collection required all providers to identify their direct costs (i.e., those costs that are completely
attributable to a specific service, such as inmate calling services).206 GTL ignored this instruction and
instead identified as direct inmate calling services costs only those costs “that could be directly
attributable to a particular correctional facility contract.” 207 This failure to comply with the instructions
resulted in GTL incorrectly reporting as indirect inmate calling services costs its “expenses for
originating, switching, transporting, and terminating ICS calls” and “costs associated with security
features relating to the provision of ICS,” among other costs that appear to be completely attributable to
and thus properly identifiable as direct costs of inmate calling services. 208 The net result of this failure is
that GTL’s only reported direct inmate calling services cost is its “bad debt expense.” 209
89.
Viewed in isolation, GTL’s noncompliance with the instructions could have merely
shifted its inmate calling services costs from one contract to another, a result that would have no impact
on GTL’s total reported costs for inmate calling services. GTL’s Second Mandatory Data Collection
response, however, leaves open the possibility that the company also failed to properly identify the direct
costs of its non-inmate calling services operations. In that case, then GTL’s method of identifying its
indirect inmate calling services cost—“multiplying its total indirect costs by a percentage received from
ICS divided by its total revenue”—almost certainly overstated its inmate calling services costs. Indeed,
allocating total company costs based on revenue is particularly inappropriate for a company, like GTL,
that is not only expanding beyond a core business—inmate calling services—by investing in other lines of
business, but that also reaps revenues from egregiously high intrastate rates that serve to increase the
amount of indirect costs allocated to inmate calling services reported under this methodology. 210

related to extension of supply of call minutes, and so as call minutes increase, the per minute share of these costs
decline. Economies of scope arise when certain upfront costs, such as a payment platform, can be shared over
increasing numbers of services, such as inmate calling services, commissary services, and tablet access and Internet
access. This again applies to GTL. While GTL may not face fully competitive pressure when it bids to supply
inmate calling services, it is the largest provider in the industry. This suggests it is a reasonably effective
competitor, which in turn suggests it is not a high cost provider, and therefore, its reported costs are likely
significantly overstated.
204
While the reduction lowers GTL’s average costs from {[
]} per minute, GTL’s average costs
remain {[
]} above the industry average per minute cost. Upon reducing GTL’s costs by the
proposed percentage, the industry average per minute cost falls from $0.089 to $0.084 (staff analysis of Second
Mandatory Data Request).
205

E.g., according to GTL’s Annual Report filing, the {[
}] has a maximum per
minute rate for interstate and intrastate calls of {[
]}, but a per paid minute cost of {[
]}; and
]}. Similar, results obtain for GTL prison contracts in at least {[ ]}
other geographically diverse states, and for GTL jail contracts in at least {[
]} geographically diverse states.
206
Second Mandatory Data Collection Instructions at 3.
207

GTL Amended & Restated Description & Justification at 9.

208

Id. at 8-9.

209

Id. at 9.

210

See GTL Annual Report, WC Docket No. 12-375 (filed Apr. 1, 2020).

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90.
In light of the impact that overstatements of this magnitude by one of the market’s largest
providers may have on our analysis, the Wireline Competition Bureau (Bureau) has directed GTL to
provide additional information regarding its operations, costs, revenues, and cost allocation procedures. 211
The information GTL files in response to this directive will be available to commenters, subject to the
Protective Order in this proceeding. 212 How should we properly value GTL’s assets in a manner that
excludes all market rents? How should we properly identify the direct costs of GTLs’ inmate calling
services and other operations? How should we allocate GTL’s indirect costs using methods that reflect
how those costs are incurred? We ask parties to address all aspects of GTL’s responsive submission that
may affect our ability to meaningfully evaluate GTL’s cost data and methodology. We also ask how we
should use the information in that submission in setting interstate rate caps for inmate calling services.
91.
It also appears that other providers, notably Securus, may have also overstated their
inmate calling services costs, although likely not to the same degree as GTL.213 We invite each provider
to reexamine its costing methodology in light of this Further Notice and to address in detail in its
comments whether that methodology properly identifies and allocates its inmate calling services costs.
Providers should also update their Second Mandatory Data Collection responses to correct any
discrepancies. To the extent that providers do not do so, should we discount their reported costs and, if
so, to what extent? Or should we instead require them to provide additional information regarding their
operations, costs, revenues, and cost allocation procedures so that we can meaningfully evaluate their cost
data and methodologies? 214
3.

Accounting for Correctional Facilities Costs

92.
Our proposed interstate rate caps of $0.14 per minute for prisons and $0.16 per minute
for jails include $0.02 per minute to account for the costs correctional facilities incur that are directly
related to the provision of inmate calling services and that represent a legitimate cost for which providers
of inmate calling services may have to compensate facilities. 215 This $0.02 per-minute allowance reflects
our analysis of data submitted in response to the Second Mandatory Data Collection. The Second
Mandatory Data Collection indicate that payments in excess of $0.02 per minute would exceed the costs
correctional facilities incur in the provision of inmate calling services. Nevertheless, we recognize that
for contracts covering only smaller jails, the facility costs at these particular facilities may exceed $0.02
per minute. We therefore consider adopting higher allowances for correctional facility costs for such
contracts if the record in response to this Further Notice supports such allowances. We invite comment
on these proposals.
93.
Background. Site commissions are payments that inmate calling services providers make
to correctional facilities. 216 They have two components. They compensate correctional facilities for the
211
See Letter from Kris Anne Monteith, Chief, Wireline Competition Bureau, FCC, to Chérie R. Kiser, Cahill
Gordon & Reindel LLP, Counsel for Global Tel*Link Corporation and Its Subsidiaries, WC Docket No. 12-375, DA
20-740 (WCB Jul. 15, 2020) (WCB July 15, 2020 Letter to GTL).
212

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Order, 28 FCC Rcd 16954 (WCB 2013)
(Protective Order).

213

The mean contract per minute costs of Securus are nearly {[
]}.

214

See WCB July 15, 2020 Letter to GTL at 1.

215

See GTL v. FCC, 866 F.3d at 414 (“We also leave it to the Commission to assess on remand which portions of
site commissions might be directly related to the provision of ICS and therefore legitimate, and which are not.”).

216

Our rules define site commissions as:
[A]ny form of monetary payment, in-kind payment, gift, exchange of services or goods, fee, technology
allowance, or product that a Provider of Inmate Calling Services or affiliate of an Provider of Inmate
Calling Services may pay, give, donate, or otherwise provide to an entity that operates a correctional

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costs they reasonably incur in the provision of inmate calling services, and they compensate those
facilities for the transfer of their market power over inmate calling services to the inmate calling services
provider. 217 That market power is created by inmates’ inability to choose an inmate calling services
provider other than the provider the correctional facility selects, effectively creating a monopoly for
inmate calling services within a prison or jail. This dynamic produces site commission payments that
exceed correctional facilities’ costs. The responses to the Second Mandatory Data Collection show that
inmate calling services providers paid {[
]} in site commissions which amounts to {[
]}
of total inmate calling services-related revenues in 2018. 218
94.
Allowing inmate calling services providers to treat all their site commission payments as
“costs” would almost inevitably result in unjust and unreasonably high rates for inmates and their loved
ones to stay connected. Prior to 2016, the Commission viewed these payments solely as an
apportionment of profits between providers and facility owners even though it recognized some portion of
them may be attributable to legitimate facility costs.219 In the 2016 ICS Reconsideration Order, however,
the Commission recognized that “some facilities likely incur costs that are directly related to the provision
of ICS,” 220 and determined that “it is reasonable for those facilities to expect ICS providers to compensate
them for those costs . . . [as] a legitimate cost of ICS that should be accounted for in [the] rate cap
calculations.” 221 The Commission therefore increased the rate caps it had adopted in 2015 to allow for the
recovery of the facilities’ legitimate costs. Because the qualitative record before it indicated that those
per-minute costs increased as facilities’ inmate populations decreased, the Commission varied its
allowance for site commission payments based on correctional facilities’ average daily populations. 222
95.
In 2017, the D.C. Circuit held that the “wholesale exclusion of site commission payments
from the FCC’s cost calculus” in the 2015 ICS Order was “devoid of reasoned decision-making and thus
arbitrary and capricious.” 223 The court therefore vacated the Commission’s decision to exclude site
commission payments from its cost calculus and remanded the matter to the Commission for further
consideration. 224
institution, an entity with which the Provider of Inmate Calling Services enters into an agreement to
provide ICS, a governmental agency that oversees a correctional facility, the city, county, or state where a
facility is located, or an agent of any such facility.
47 CFR § 64.6000(t).
217

See 2016 ICS Reconsideration Order, 31 FCC Rcd at 9304, para. 7.

218
The record in previous proceedings and the First Mandatory Data Collection also showed high site commission
payments. In the 2013 ICS Order, the record showed that site commission payments are often based on a percentage
of revenues, which could range from 20% to 88%. 2013 ICS Order, 28 FCC Rcd at 14125, para. 34. Data from the
First Mandatory Data Collection showed that site commissions for at least one contract had reached as much as 96%
of gross revenues. 2015 ICS Order, 30 FCC Rcd at 12821, para. 122.
219

See, e.g., 2013 ICS Order, 28 FCC Rcd at 14112, para. 7.

220

2016 ICS Reconsideration Order, 31 FCC Rcd at 9307, para. 12.

221

Id.

222
2016 ICS Reconsideration Order, 31 FCC Rcd at 9307, para. 12. The rate caps for prepaid/debit inmate calling
services calls were increased to “$0.31 per minute for jails with an average daily population (ADP) below 350,
$0.21 per minute for jails with an ADP between 350 and 999, $0.19 per minute for jails with an ADP of 1,000 or
more, and $0.13 per minute for prisons.” The Commission also increased the rate caps for collect calls by a
commensurate amount. Id. at 9315, para. 27. The Commission based these adjustment factors on comments and
information provided in the record at that time but did not base its adjustments on an analysis of provider-submitted
data as we do herein.
223

GTL v. FCC, 866 F.3d at 417.

224

Id.

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96.
Allowance for Reasonable Correctional Facility Costs. Consistent with the D.C.
Circuit’s opinion in GTL v. FCC, 225 we propose to include an allowance for site commission payments in
the interstate rate caps to the extent those payments represent legitimate correctional facility costs that are
directly related to the provision of inmate calling services. The $0.02 per minute that we propose reflects
our analysis of the costs correctional facilities incur that are directly related to providing inmate calling
services and that the facilities recover from inmate calling services providers as reflected by comparing
provider cost data for facilities with and without site commission requirements. 226 We request comment
on this analysis, which is discussed in more detail in Appendix H. Does it properly capture the costs that
providers should reasonably be expected to pay correctional facilities to cover the costs those facilities
reasonably incur in connection with interstate inmate calling services? If not, how should we adjust our
analysis? Should we, for example, vary the allowance for reasonable correctional facility costs based on a
facility’s average daily population, annual minutes of use, or other measure of expected calling volume?
We ask correctional facilities to provide detailed information concerning the specific costs they incur in
connection with the provision of interstate inmate calling services, to the extent those costs are not
already reflected in providers’ costs, and why those costs should be considered directly related to the
provision of inmate calling services. 227 We also seek alternative analyses that explain whether a $0.02
per-minute allowance would properly cover those correctional facility costs that are legitimately related to
inmate calling services. We similarly seek comment on whether we should reduce the allowance for
prisons to $0.01 based on the analysis reflecting the differential of providers’ costs with and without a site
commission obligation for prison facilities. 228
97.
We also invite comment on whether a $0.02 per minute allowance would be adequate to
cover the costs that smaller jails incur in connection with the provision of interstate inmate calling
services. We ask that parties seeking a higher allowance in this situation document in detail the specific
costs smaller jails reasonably incur in the provision of interstate inmate calling services. We also seek
comment on whether there is any other category of contracts or correctional facilities for which a $0.02
per-minute allowance may be inadequate.
98.
Finally, in GTL v. FCC, the D.C. Circuit directed that the Commission address on remand
the issue of whether “the exclusion of site commissions . . . violates the Takings Clause of the
Constitution because it forces providers to provide services below cost.” 229 We do not believe that there
are any potential taking concerns arising from our rate cap proposals. 230 Inmate calling services
225

Id. at 413.

226

See Appx. H. This analysis treats any costs associated with site commission payments as correctional facility
costs, and not inmate calling services provider costs. Id.

227

See Letter from Mary J. Sisak, Counsel for the National Sheriffs’ Association, Blooston, Mordkofksy, Dickens,
Duffy & Prendergast, LLP, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 2 (filed June 12,
2015) (National Sheriffs’ Association Ex Parte); see also 2015 ICS Order, 30 FCC Rcd at 12823, para. 126 n.415.
228

See generally Appx. H.

229

GTL v. FCC, 866 F.3d at 414; see also U.S. Const. amend. V (“[P]rivate property [shall not] be taken for public
use, without just compensation.”).
230
The Commission has not received any post-remand comments addressing the takings issue with respect to
adopting permanent interstate rate caps. The Commission did, however, receive a single comment from an inmate
calling services provider in response to the Worth Rises Request that inmate calling services providers offer
“unlimited free service” during Covid-19 in the event ICS providers did not sign the Chairman’s Keep America
Connected Pledge. The “takings” reference in that response, however, pertained to a request that providers offer
service with no compensation, unlike the actions proposed herein where the Commission proposes just and
reasonable rate caps that include recovery for facility provider costs, based on providers’ reported costs. See Letter
from Andrew D. Lipman, Attorney for Securus Technologies, LLC, and Dennis J. Reinhold, Senior Vice President
and General Counsel, Securus Technologies, LLC, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375,
at 1 (filed Apr. 17, 2020) (responding to Worth Rises Request).

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providers’ payment of site commissions is consistent with agreements between other types of payphone
providers and property owners. 231 The Commission has acknowledged that, as a result of the dynamic
between payphone operators and property owners, we would “not expect to see money-losing
payphones[.]” 232 Because site commissions are part of voluntary, negotiated agreements between inmate
calling services providers and the correctional facilities they serve, we similarly do not expect inmate
calling services providers to be forced to provide services at a loss, provided that the rate caps allow them
to recover their actual costs plus a reasonable opportunity for profit. 233 Here, our proposed rate caps
include an allowance of $0.02 per minute, as indicated above, to account for correctional facility costs
included in reasonable site commissions; thus they reflect the actual costs of providing service as reported
by providers in the record, plus a reasonable opportunity for profit. Because our proposed rate caps allow
the correctional facility and the inmate calling services provider to recover all of their costs that are
reasonably related to the provision of inmate calling services plus a reasonable opportunity for profit,
there is no concern that the proposed rate caps violate the Takings Clause.234 We seek comment on these
views.
4.

Waiver Process for Outliers

99.
We propose to adopt a waiver process that permits inmate calling services providers to
seek waivers on a facility-by-facility or contract basis if the rate caps adopted by the Commission
pursuant to this Further Notice would prevent the provider from recovering the costs of providing
interstate inmate calling services at that facility or at the facilities covered by that contract. We seek
comment on this proposal. Since first adopting interstate rate caps in the 2013 ICS Order, the
Commission has permitted an inmate calling services provider to file a petition for waiver if it believed it
could not recover its costs under the Commission-adopted rate caps. 235 The Commission has required
that, for “substantive and administrative reasons, waiver petitions would be evaluated at the holding
company level.” 236 We propose to revise the waiver process so that it must be evaluated at a facility or
contract level. 237 We seek further comment on administering the waiver process to address cost recovery
on a facility or contract basis. In particular, are there ways to decrease the administrative burdens of
processing such requests on a facility or contract basis?
231

Because “many of the payphone locations are controlled by owners that can limit the entry of competing
payphones,” the property owners “attempt to limit entry to increase the profitability of payphones and then demand
at least a share of the profits in the form of a location rent.” Implementation of the Pay Telephone Reclassification
and Compensation Provisions of the Telecommunications Act of 1996, CC Docket No. 96-128, Third Report and
Order, and Order on Reconsideration of the Second Report and Order, 14 FCC Rcd 2545, 2562, para. 37 (1999)
(Payphone Third Report and Order).
232

Id. at 2564, para. 39.

233

See 47 U.S.C. § 276 (providing that all payphone service providers be fairly compensated).

234

See Texas Office of Pub. Util. Counsel v. FCC, 183 F.3d 393, 437 (5th Cir. 1999) (stating that to succeed on a
‘takings’ claim, a party must demonstrate that the losses caused by the regulation in question “are so significant that
the ‘net effect’ is confiscatory”).
235
2013 ICS Order, 28 FCC Rcd at 14153, para. 82. The Commission reaffirmed its waiver process for inmate
calling services providers in the 2015 ICS Order. See 2015 ICS Order, 30 FCC Rcd at 12871, para. 219; see also 47
CFR § 1.3. These portions of the 2015 ICS Order were left unaltered by the court’s 2017 vacatur. See generally
GTL v. FCC, 866 F.3d 397.
236

2015 ICS Order, 30 FCC Rcd at 12870, para. 217 (internal citations and quotation omitted).

237

See, e.g., Securus Technologies, Inc. Comments at iii, WC Docket No. 12-375, at 40-41 (filed Jan. 12, 2015)
(asserting that “the current standard for obtaining a waiver is far too onerous” and suggesting that the Commission
permit carriers to seek waivers on a site-by-site basis); Global Tel*Link Corporation Comments, WC Docket No.
12-375, at 13-14 (filed Jan. 12, 2015) (stating that “[a]s explained in the Joint Provider Proposal Form, waivers of
rate caps should be permissible only [on] a facility-by-facility basis”).

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100.
We propose that a provider seeking a waiver of our interstate rate caps must demonstrate,
through the submission of reliable, accurate, and transparent cost, demand, and revenue data, including
data on any ancillary services it provides, that it will be unable to recover its costs for each facility or
contract for which a waiver is sought. At a minimum, we propose that a provider seeking such a waiver
be required to submit, among other information: (a) the providers’ total company costs, including the
original costs of the assets it uses to provide inmate calling services at the facility or under the contract;
(b) the provider’s methods for identifying its direct costs and for allocating its indirect costs among its
various operations, contracts, and facilities; (c) the revenue the provider receives from interstate inmate
calling services, including the portion of any permissible ancillary services fees attributable to interstate
inmate calling services at the contract and facility level; (d) an unredacted copy of the contract with the
correctional facilities and any amendments to such contract; and (e) a copy of the initial request for
proposals and bid response. We seek comment on these proposed requirements. Is there additional
information available on a contract or facility level that we should require providers to submit besides the
information, documents, and data we have proposed?
101.
We also propose to require that the provider explain why circumstances associated with
that facility or contract differ from other similar facilities it serves, and from other facilities within the
same contract, if applicable. Finally, we propose to require a company officer with knowledge of the
underlying information to attest to the accuracy of all of the information the provider submits in support
of its waiver request. We seek comment on these proposals.
102.
Consistent with our past waiver process for inmate calling services, 238 we propose to
direct the Bureau to rule on such petitions for waiver, and to seek any additional information as needed.
We also propose to direct the Bureau to endeavor to complete its review of any such petitions within 90
days of the provider’s submission of all information necessary to justify such a waiver, although the
Bureau may extend this timeframe for good cause. We propose that, if a provider carries its burden of
demonstrating that our rate caps are insufficient to cover the costs it incurs to serve a particular facility,
the Bureau would waive the otherwise applicable rate cap and allow the provider to charge a rate
sufficient to allow the provider an opportunity to recover its costs of providing interstate inmate calling
services at that facility. We seek comment on this proposed approach and on the proposed remedies. We
also seek comment on whether there are alternative procedures that would more efficiently facilitate the
effective operation of the waiver process.
5.

Consistency with Section 276 of the Act

103.
Section 276(b)(1)(A) of the Act requires that the Commission “ensure that all payphone
service providers are fairly compensated for each and every completed intrastate and interstate call.” 239 In
this Further Notice, we propose to adopt rules that satisfy this statutory mandate by setting rate caps for
interstate calls that generate sufficient revenue for such calls (including any ancillary fees attributable to
those calls) that (1) allow the provider to recover from those calls the direct costs of that call and
(2) reasonably contribute to the provider’s indirect costs related to inmate calling services. This approach
would recognize that inmate calling services contracts typically apply to multiple facilities and that
inmate calling services providers do not expect each call to make the same contribution toward indirect
costs. We invite comment on this proposal.
104.
In the 2015 ICS Order, the Commission set tiered rate caps, applicable to both interstate
and intrastate inmate calling services using industry-wide average costs derived from inmate calling

238

See 2013 ICS Order, 28 FCC Rcd at 14154, para. 84; 2015 ICS Order, 30 FCC Rcd at 12868, para. 212.

239

47 U.S.C. § 276(b)(1)(A).

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services providers’ responses to the First Mandatory Data Collection. 240 In GTL v. FCC, the D.C. Circuit
rejected as “patently unreasonable” the Commission’s “averaging calculus” in setting the 2015 rate
caps. 241 The court explained that the Commission erred in setting rate caps using industry average costs,
because calls with above-average costs would be “unprofitable,” in contravention of the “mandate of
§ 276 that ‘each and every’ inter- and intrastate call be fairly compensated.” 242
105.
We find that our proposed rules are consistent with GTL v. FCC in this regard. Though
the D.C. Circuit found that the Commission’s averaging calculus did not comport with the fair
compensation mandate under section 276, this finding does not mean that each and every completed call
must make the same contribution to a provider’s indirect costs. Instead, compensation is fair if each call
“recovers at least its incremental costs, and no one service recovers more than its stand-alone cost.” 243
Our proposed rate methodology, as detailed in Appendix E, is consistent with this approach. As the
Commission recognized in the 2002 ICS Order, the “lion’s share of payphone costs are those that are
‘shared’ or ‘common’ to all services,” and there are “no logical or economic rules that assign these
common costs to ‘each and every call.’” 244 As a result “a wide range of compensation amounts may be
considered ‘fair.’” 245 We seek comment on this view. Is compensation “fair” if inmate calling services
providers can recover their direct costs for a given call and receive a reasonable contribution to their
indirect costs? Why or why not? Can inmate calling services providers assign indirect or common costs
for each and every call? If so, how? Commenters arguing that indirect costs can be assigned to each call
must provide data regarding how that assignment can be done and a justification for why a given
allocation is reasonable.
106.
We have estimated that more than 99% of existing contracts for both prisons and jails
would recover their reported costs at our proposed rates, even accepting all the providers’ costs
submissions at face value with no adjustments. To the extent that our proposed rates would make it
impossible in the unusual case where a contract was not able to recover its costs, providers may avail
themselves of our waiver process. Moreover, the record in this proceeding strongly suggests that inmate
calling services providers do not, in fact, expect that each call or even facility will make a contribution to
their indirect costs. This is evidenced most acutely by the fact that providers largely fail to even record
their costs on anything less than a contract basis, often where multiple facilities exist under one contract.
For example, CenturyLink reports its inmate calling services cost data “by correctional system,”
explaining that “each facility within that correction[al] system reflects the costs developed for serving that
contract.” 246 This evidence suggests that CenturyLink bids for contracts covering multiple facilities
within a single correctional system, offering service at a single rate for all of those facilities, even though
they may have different costs. Thus, the company does not expect to make the same profit from each
facility or expect each call to contribute equally to CenturyLink’s indirect costs. Similarly, Securus
explains that its “accounting systems track costs as a company, and not on a customer or facility level”
240

2015 ICS Order, 30 FCC Rcd at 12790, para. 52 (“Costs per minute were calculated using a weighted average
per minute cost . . . .”) & n.170 (explaining that providers will be able to “recover average costs at each and every
tier”).
241

GTL v. FCC, 866 F.3d at 414.

242

Id. (quoting Am. Pub. Commc’ns Council v. FCC, 215 F.3d 51, 54, 57-58 (D.C. Cir. 2000).

243

2002 ICS Order, 17 FCC Rcd at 3256, para. 18.

244

Id. at 3255, para. 16.

245
Id. (citing Implementation of the Pay Telephone Reclassification and Compensation Provisions of the
Telecommunications Act of 1996, CC Docket No. 96-128, Third Report and Order, and Order on Reconsideration of
the Second Report and Order, 14 FCC Rcd 2545, 2570, para. 56 (1999)).
246

Letter from John E. Benedict, Vice President – Federal Regulatory Affairs & Regulatory Counsel, CenturyLink,
to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach. at 3 (filed Mar. 1, 2019) (CenturyLink
Second Mandatory Data Collection Response).

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but that “facility-specific costs are taken from a separate data base used to track profits and losses for each
site.” 247 And the assertion that Securus tracks costs “as a company” rather than on a customer or facility
level strongly suggests that Securus, like other providers, bids for contracts, rather than specific facilities,
with the idea that the company will profit from the contract as a whole but will not make the same amount
from each facility or each call. It also appears that inmate calling services providers bid on contracts
covering multiple facilities and offer a single interstate rate for calls from those facilities even though the
provider may incur different costs to serve various facilities covered by a single contract. Do commenters
agree? What factors do providers of inmate calling services consider in bidding on contracts, particularly
contracts covering more than one facility? We seek comment on this issue and on whether commenters
agree that our proposed rate caps would meet the fair compensation standard of section 276 of the Act.
6.

Cost-Benefit Analysis

107.
We propose to find that, independent of our statutory obligation, the benefits of our
interstate rate cap proposal (reducing our current caps on interstate inmate calling rates to $0.14 per
minute for prisons and $0.16 per minute for jails) exceeds the costs at least five-fold. Specifically, we
expect an increase in interstate inmate call volumes elicited by lowered rates would conservatively
generate approximately $7 million in direct benefits due to expanded call volumes, primarily to the
benefit of inmates, their families, and friends. We also expect resulting expanded call volumes to reduce
recidivism, which will in turn reduce prison operating costs, foster care costs, and crime. We estimate
these secondary benefits to well-exceed $23 million. We estimate the one-time cost of implementing the
interstate rate cap changes to be $6 million. We seek comment on these estimates.
108.
Expected Benefits of Expanded Call Volumes. To estimate the benefits of our proposed
lower rates we estimate how many call minutes are currently made at prices above those rates, the price
decline on those call minutes that moving to our rates would imply, and the responsiveness of demand to
a change in price. We estimate, in 2018, approximately 592 million interstate prepaid and debit minutes
and 3.3 million interstate collect minutes were made to or from prison inmates at rates above our
proposed caps, and approximately 453 million interstate prepaid and debit minutes and 2 million
interstate collect minutes were made to and from jail inmates at rates above our proposed caps. 248 These
estimates are calculated as the difference between total interstate minutes in each category and the
equivalent interstate minutes from nine states—Alaska, Delaware, Hawaii, Maryland, New Mexico,
Texas, Vermont, Washington, and West Virginia—where either the rates of some important contracts are
below the caps we propose, or all of the rates are below the caps we propose. These estimates likely
understate the number of interstate minutes with rates that exceed our proposed caps because we exclude
from our calculations many contracts which have rates in excess of our proposed rates, even if in some
cases we include those relatively rare contracts with rates below our proposed rates. We estimate prices
for those call minutes decline by half of the difference between our current caps and our proposed caps. 249
Finally, we estimate, relying on a price elasticity of demand at the lower end of those estimated for
interstate calling, a price elasticity of demand at the lower end of those estimated for interstate calling:

247
See Description and Justification for Securus Technologies, Inc.’s Mandatory Data Collection Report (Redacted
for Public Inspection) at 1 (filed Mar. 1, 2019).
248

We used rate information from the 2019 Annual Reports and interstate minutes from the Second Mandatory Data
Collection.
249

Our current interim rate caps are $0.21 for debit and prepaid calls and $0.25 for collect calls. Our proposed rates
imply the following price declines from these rates: for prison debit and prepaid calls, 33% (= ($0.21-$0.14)/$0.21);
for prison collect calls, 44% (= ($0.25-$0.14)/$0.25); for jail debit and prepaid calls, 24% (= ($0.21-$0.16)/$0.21);
and for prison collect calls, 36% (= ($0.25-$0.16)/$0.25). To allow for contracts with rates below the current caps,
we assume inmate calling services rates fall only one-half the difference between the existing rate caps and the
proposed caps.

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that for each percentage point drop in rates, inmate calling services demand will increase by 0.2%. 250
Under these assumptions, we estimate annual benefits of approximately $1 million, or a present value
over ten years of approximately $7 million. 251 Additionally, even at current demand levels, we estimate
the cost savings to inmates, their families, and friends, from lower calling rates alone, to be $32 million
per year or $225 million in present value terms over 10 years. 252
109.
We also expect greater call volumes to reduce recidivism, generating further benefits well
in excess of $23 million. 253 Although we do not know exactly how much increased inmate telephone
contact would reduce recidivism, savings of more than $3 million per year, or more than $20 million over
10 years in present value terms, would result if only 100 fewer inmates were jailed due to recidivism each

250

We assume a price elasticity of -0.2. This estimate comes from the most recent data available to us and is
conservative relative to most other estimates we reviewed. See Michael R. Ward and Glenn Woroch, The Effect of
Prices on Fixed and Mobile Telephone Penetration: Using Price Subsidies as Natural Experiments, 22 Information
Economics and Policy 1, 1-120 (2010), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1459075. On the one
hand, this is likely an understatement because on average inmates and their families and friends have lower incomes
than the general population. See Bernadette Rabuy and Daniel Kopf, Prisons of Poverty: Uncovering the PreIncarceration Incomes of the Imprisoned, Prison Policy Initiative (July 9, 2015), https://www.prisonpolicy.org
/reports/income.html. On the other hand, inmates may not be fully able to respond to lower prices given limits on
making calls. For example, call lengths are often limited to 15 or 20 minutes (based on staff analysis of the Second
Mandatory Data Collection). For price elasticity estimates, we also reviewed Christopher Garbacz & Herbert
Thompson, Jr., Assessing the Impact of FCC Lifeline and Link-Up Programs on Telephone Penetration, 11 Journal
of Regulatory Economics 67, 67-78, https://link.springer.com/content/pdf/10.1023%2FA%3A1007902329324.pdf;
Jerry Hausman & Howard Shelanski, Economic Welfare and Telecommunications Regulation: The E-Rate Policy
for Universal-Service Subsidies, 16 Yale J. on Reg. 36, 36-39 (1999), https://digitalcommons.law.yale.edu/
yjreg/vol16/iss1/3/; Michael Ward & Glenn Woroch, Usage Substitution Between Mobile Telephone and Fixed Line
in the U.S. (2004), https://eml.berkeley.edu/~woroch/usage%20substitution.pdf; Jeffery Wheatley, Price Elasticities
for Telecommunications Services with Reference to Developing Countries, Department of Media and
Communications, London School of Economics and Political Science (2006), https://idl-bnc-idrc. dspacedirect.org/
handle/10625/41878; Frank Wolak, The Welfare Impacts of Competitive Telecommunications Supply: A HouseholdLevel Analysis, 1996 Brookings Papers on Economic Activity. Microeconomics 269, 269-350 (1996),
https://www.brookings.edu/wp-content/uploads/1996/01/1996_bpeamicro_wolak.pdf.
251

The present value of a 10-year annuity of $1 million at a 7% discount rate is approximately $7 million. See
OMB, Circular A-4, Regulatory Analysis, 33 (Sept. 17, 2003). The Office of Management and Budget recommends
using discount rates of 7% and 3%. Erring on the side of understatement, we use the 7% rate.
252

We note this benefit is not a “net” benefit, however, given that it is offset for purposes of our analysis by the loss
of the inmate calling service industry of $218 million in revenues in present value terms over 10 years.
253

It is well established that family-to-inmate contact reduces recidivism. See, e.g., Minnesota DOC Study at 27
(demonstrating that one visit reduced the risk of recidivism by 13% to 25%); William D. Bales & Daniel P. Mears,
Inmate Social Ties and the Transition to Society: Does Visitation Reduce Recidivism?, 45 Journal of Research in
Crime and Delinquency 287, 287-321 (2008), https://www.researchgate.net/publication/
237298166_Inmate_Social_Ties_and_the_Transition_to_Society_Does_Visitation_Reduce_Recidivism (explaining
that each additional family visit lowered the likelihood of recidivism two years after release by 3.8%).

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year. 254 Other savings would also be realized, for example, through reduced crime, 255 and fewer children
being placed in foster homes. 256 The potential scale of fiscal saving—in addition to the immense social
benefits—is suggested by the fact that administrative and maintenance costs incurred by state and local
governments average $25,782 per foster placement. 257 We seek comment on these expected societal cost
reductions.
110.
Costs of Reducing Rates for Interstate Inmate Calling Services Calls. The costs of
reducing rates for interstate inmate calling services calls are likely to be modest for providers, estimated
at approximately $6 million. Including the Federal Bureau of Prisons and Immigration and Customs
Enforcement, approximately 3,000 inmate calling services contracts would need to be revised if we were
to adopt our proposed rules, and a smaller number of administrative documents may need to be filed to
incorporate lower interstate rates. We estimate that these changes would require approximately 25 hours
of work per contract. We use a $70 per hour labor cost to implement billing system changes, adjust
contracts, and to make any necessary website changes. 258 The estimated cost of these actions is
$5,139,750 (= 2,937 (number of contracts)*25 (hours of work per contract) *$70 per hour), which we
round up to $6 million to be conservative. We seek comment on this estimate of costs.
111.
We also recognize that lowering per-minute rates could result in lower investment
because a substantial proportion of industry costs do not vary with minutes carried, but must be covered.
We do not expect, however, reduced investment to be a significant concern, however, given our findings
that the proposed rates would more than recover efficient total costs of operation. We seek comment on
this view.

254

Approximately $33,274 per year would be saved for every case of recidivism avoided, or $3.3 million per year
for 100 cases avoided. See Vera, Prison Spending in 2015, https://www.vera.org/publications/price-of-prisons2015-state-spending-trends/price-of-prisons-2015-state-spending-trends/price-of-prisons-2015-state-spendingtrends-prison-spending (last visited July 13, 2020) (estimating the 2015 average cost per state prison inmate at
$33,274 for 45 states accounting for 1.29 million of the 1.33 million total persons incarcerated in state prisons). The
average annual cost of incarceration for federal inmates was a comparable $34,704 in Fiscal Year 2016. See Bureau
of Prisons, Department of Justice, Annual Determination of Average Cost of Incarceration, 83 Fed. Reg. 18863
(Apr. 30, 2018), https://www.govinfo.gov/content/pkg/FR-2018-04-30/pdf/2018-09062.pdf. One hundred fewer
cases of recidivism in each year would represent approximately 0.02% of those released from prison each year, a
negligible decline in the recidivism rate. To allow for releases to continue to exceed admissions (id. at 1), the
calculation assumes that 500,000 persons are released every year. In 2018, approximately 600,000 persons were
admitted to prison. See E. Ann Carson, Bureau of Justice Statistics, Department of Justice, Prisoners in 2018, at 13
(Apr. 30, 2020), https://www.bjs.gov/content/pub/pdf/p18.pdf. The present value of a ten-year annuity of $3.3
million at a discount rate of 7% is approximately $23.2 million.
255

Council of Economic Advisors, Returns on Investments in Recidivism-Reducing Programs, at 3 (May 2018),
https://www.whitehouse.gov/wp-content/uploads/2018/05/Returns-on-Investments-in-Recidivism-ReducingPrograms.pdf.
256

United States Government Accountability Office, Child Welfare: More Information and Collaboration Could
Promote Ties Between Foster Care Children and Their Incarcerated Parents, at 11 (Sept. 2011),
https://www.gao.gov/assets/590/585386.pdf.
257

Nicholas Zill, Better Prospects, Lower Costs: The Case for Increasing Foster Care Adoption, at 3 (May 2011),
https://www.adoptioncouncil.org/images/stories/NCFA_ADOPTION_ADVOCATE_NO35.pdf.
258

We use an hourly wage for this work of $42. (We examined several potential wage costs. For example, in 2019,
the median hourly wage for computer programmers was $41.61, and for accountants and auditors, it was $34.40.
We chose the higher of these. See Bureau of Labor Statistics, Occupational Employment Statistics.
https://www.bls.gov/oes/.) This rate does not include non-wage compensation. To capture this, we markup wage
compensation by 46%. In March 2020, hourly wages for the civilian workforce averaged $25.91, and hourly
benefits averaged $11.82 yielding a 46% markup on wages. See Bureau of Labor Statistics, National Compensation
Survey, https://www.bls.gov/ncs/. The result is an hourly rate of $61.32 (= $42 x 1.46), which we round up to $70.

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112.
Summary of Benefits and Costs. On net, we estimate that the actions we propose today
would result in benefits which far exceed their costs. While we identify a range of benefits, for the
purposes of a cost benefit analysis, we only quantify the direct benefits from some of these. Looking out
only ten years, the conservative estimate of these benefits alone is approximately $30 million in present
value terms. We expect other substantial benefits due to reduced recidivism. By contrast, we
conservatively estimate the high side of costs of our actions to be approximately $6 million. We seek
comment on ways to improve these estimates, including how to quantify any indirect or secondary
benefits we were unable to quantify here, as well as on any additional costs and benefits of our proposed
actions that we have not considered.
B.

Proposing International Rate Caps

113.
We propose to establish a rate cap formula that inmate calling services providers must
use in setting the maximum permissible per-minute rates for international inmate calling services. We
seek comment on our proposal to cap international inmate calling service rates. In the 2015 ICS Further
Notice, the Commission sought specific comment on whether and how to reform rates for international
inmate calling services, 259 including on extending its domestic inmate calling service rate caps to
international inmate calling service calls. 260 The Commission has also collected international inmate
calling service rate and cost data from inmate calling services providers, including in annual reports and
the Second Mandatory Data Collection. 261
114.
There is no question that we have authority to adopt rate caps for international inmate
calling services pursuant to section 201(b) of the Act. 262 Moreover, while the record on the need for
international inmate calling service reform is mixed,263 our most recent data reflecting international
calling rates for many inmate service providers convinces us such reform is needed.
259

2015 ICS Further Notice, 30 FCC Rcd at 12911-14, paras. 316-23.

260

Id. at 12912, para. 320.

261
See, e.g., 47 CFR § 64.6060(a)(1) (requiring inmate calling services providers to report international rates
annually). See generally Instructions for Inmate Calling Services Mandatory Data Collection (June 16, 2014),
https://www.fcc.gov/document/instructions-inmate-calling-services-mandatory-data-collection (First Mandatory
Data Collection Instructions); 2019 Data Collection Public Notice, 34 FCC Rcd at 515. The Second Mandatory
Data Collection required inmate calling services providers to report cost data, including total costs for international
calling, at the facility level for calendar years 2014 to 2018. Second Mandatory Data Collection Instructions at 2.
262

See, e.g., 2015 ICS Order, 30 FCC Rcd at 12912, para. 318 (stating that section 201(b) of the Act provides the
Commission with the authority to ensure that carriers’ rates for “foreign” communications are just and reasonable)
(internal quotation marks omitted); Reporting Requirements for U.S., Providers of International
Telecommunications Services, IB Docket No. 04-112, 26 FCC Rcd 7274, 7315, para. 121 (2011); American
Telephone and Telegraph Co., 57 FCC 2d 1103, 1106, para. 13 (1976) (“Sections 201-205 of the Communications
Act require that all charges of United States carriers for international services shall be just and reasonable.”).
263

Some commenters have urged the Commission to regulate international inmate calling services rates, arguing that
the Commission has the authority and obligation to ensure just and reasonable rates. See Wright Petitioners, D.C.
Prisoners’ Legal Services Project, and Citizens United for Rehabilitation of Errants Reply, WC Docket No. 12-375,
at 16 (filed Feb. 8, 2016); Letter from Karina Wilkinson and Alix Nguefack, New Jersey Advocates for Immigrant
Detainees, and Rebecca Hufstader and Alina Das, New York University School of Law Immigrant Rights Clinic, to
Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 3-4 (filed June 30, 2015) (NJAID/NYU IRC June
30, 2015 Ex Parte); Human Rights Defense Center Reply, WC Docket No. 12-375, at 11-12 (filed Feb. 8, 2016)
(requesting that the Commission implement rate caps that are just and reasonable after it “has reviewed sufficient
cost data for international calls”). Another party has claimed that international calling is such a small percentage of
inmate calling that it need not be regulated. Pay Tel Jan. 19, 2016 Comments at 14; cf. Letter from Anthony J.
Annucci, Acting Commissioner, New York Department of Corrections and Community Supervision, to Gregory V.
Haledjian, Attorney Advisor, FCC, WC Docket No. 12-375 at 3 n. ii (filed July 16, 2013) (explaining that
international calling accounts for less than 1% of the Department’s inmate calling volume).

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115.
Calculating International Rate Caps. We propose to adopt a rate cap formula for
international inmate calling services calls that permits a provider to charge a rate up to the sum of the
inmate calling services provider’s per-minute interstate rate cap for the inmate’s facility plus the amount
that the provider must pay its underlying international service provider for that call on a per-minute basis
(without a markup). 264 We seek comment on this proposal. Our proposal is designed to enable the
provider to recover the full costs of the international telephone service it is essentially reselling to the
inmate calling services consumer, 265 plus the cost it incurs to make that service available to inmates in that
facility. As a result, we believe this international rate cap would be just and reasonable under section
201(b) of the Act and would enable inmate calling services providers to account for the widely varying
costs and associated international rates they are charged by their wholesale suppliers of international
calling capability. We seek comment on this view.
116.
We believe our proposal has the benefit of simplicity and ease of administrability. It
would allow inmate calling services providers to recover the additional costs they incur to resell
international calling services, yet should result in substantial reductions in international calling rates for
inmates and their families based on what many providers report for certain international calling rates in
their latest Annual Reports. Additionally, it would account for the varied international rates identified by
some commenters, 266 and enable providers to charge higher international calling services rates than
charged for domestic calls to the extent international settlement rates and foreign termination rates make
the costs to transport and terminate international calls higher than those for domestic calls. 267 We seek
comment on this proposed approach. Would capping international rates in this way ensure that inmates
and their families and other loved ones do not pay unreasonably high international rates? Why or why
not? Would it address the concerns of GTL and Pay Tel that imposing a single rate cap would be difficult
because international calling rates vary based on factors including the location called or the type of
call? 268 Are there other factors besides the costs incurred by inmate calling services providers in paying
their underlying facilities-based or wholesale international services providers that the Commission should
consider in formulating international rate caps? If so, what are those factors and how could we account
for them in determining appropriate rate caps?
117.
The record contains a wealth of information regarding international inmate calling
services rates. CenturyLink suggests that “[t]he cost to terminate residential or business international
calls is often many times greater than the cost to terminate calls in the United States, even for frequently
called countries like Canada and Mexico.”269 CenturyLink also explains that “simple network and
264

This allowance for international transmission capability would exclude any amount that is rebated to, or
otherwise shared with, the inmate calling services provider. Cf. Letter from Martin Ryan, President, California State
Sheriffs’ Association, to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, at 1 (filed Oct. 14, 2015)
(expressing concern that the Commission’s proposed rate caps “will not provide enough revenue to . . . allow for
appropriate revenue sharing whether through site commissions or some other mechanism”) (emphasis added).
265

See Pay Tel Jan. 19, 2016 Comments at 10 (observing that some inmate calling services providers “resell ICS . . .
provisioned by others”); Human Rights Defense Center Comments, WC Docket No. 12-375, at 8 (filed Jan. 12,
2015) (explaining allegations that GTL “[purchases its] minutes for calls terminating within the United States for
less than 3/10 of a penny-per minute and . . . often resell[s] the minutes it buys at more than 100 times their cost
. . . .”) (internal quotation marks and citation omitted).
266

Global Tel*Link Corporation Comments, WC Docket No. 12-375, at 8-9 (filed Jan. 19, 2016) (GTL Jan. 19,
2016 Comments); Pay Tel Jan. 19, 2016 Comments at 14-15.
267

CenturyLink Jan. 19, 2016 Comments at 11; GTL Jan. 19, 2016 Comments at 8.

268

GTL Jan. 19, 2016 Comments at 8-9; Pay Tel Jan. 19, 2016 Comments at 14-15; see also California State
Sheriffs’ Association Comments, WC Docket No. 12-375, at 2 (filed Jan. 19, 2016) (explaining that “the costs and
requirements of providing international ICS potentially vary by facility”).
269

CenturyLink Jan. 19, 2016 Comments at 11.

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termination costs—ignoring other prison-specific costs related to such things as security, billing and
consumer services—to many African and East European countries can be $0.25 per minute or greater.” 270
According to some commenters, international rates are exceedingly high in some correctional facilities,
some as high as $45 for a 15-minute call. 271 Another commenter cites rates of $0.75 per minute, or
$11.25 for a 15-minute international call, at a facility in California. 272 These data compare with a total
permissible rate of $6.90 or $7.50 for a 15-minute debit/prepaid or collect call, respectively, under the
Commission’s interim interstate rate caps ($3.15 or $3.75) plus the $0.25 per minute that CenturyLink’s
suggests are the costs for some international calls ($3.75). We believe our proposal addresses the
differences in international inmate calling services costs even without more specific information about
each individual cost component of any specific international inmate calling services call. Do commenters
agree? If not, why not, and what data should we rely on instead to establish international rate caps?
118.
We disagree with commenters that suggest that because international inmate calling
services calls represent such a small percentage of all inmate calls that the Commission should not
consider establishing rate caps. 273 In 2018, international call minutes represented 0.195% of all calling
minutes.” 274 From 2014 to 2018, international calling in prisons did not exceed 0.5% of total annual
minutes of use, while for jails, international calling never exceeded 0.4% of total minutes of use. But we
are unable to determine from the record, however, whether these small percentages result from the needs
of the inmate population or excessively high rates for international inmate calling services calls. For
example, one provider reports international calling rates as high as $8.58 per minute for debit calls, 275 yet
other providers report far lower international rates (but still more than two to five times higher than
interstate rate caps) for debit calls to that same country. 276 What is more, just because international calls
from correctional facilities may represent a small overall percentage of inmate calls does not mean
inmates and their loved ones reliant upon international telephone calls to stay in touch are not entitled to
the same just and reasonable protections afforded domestic callers under the Act. This is especially the
270

Id.

271

See New Jersey Advocates for Immigrant Detainees and New York University School of Law Immigrant Rights
Clinic Comments, WC Docket No. 12-375, at 2 (filed Jan. 10, 2015) (NJAID/NYU IRC Second FNPRM
Comments); see also NJAID/NYU IRC June 30, 2015 Ex Parte, at 3 (providing a table showing international inmate
calling services rates in New Jersey immigration detention facilities).
272

Margaret Bick Reply, WC Docket No. 12-375, at 1 (filed Feb. 1, 2016).

273

See, e.g., Pay Tel Jan. 19, 2016 Comments at 14.

274

See generally Second Mandatory Data Collection.

275

See Letter from Chérie Kiser, Counsel to Global Tel*Link, Cahill Gordon & Reindel LLP, to Marlene H. Dortch,
Secretary, FCC, WC Docket No. 12-375, Attach. at Tab II (filed Apr. 1, 2020) (showing a prepaid/debit rate of
$8.58 at the CCA-Cimarron Correctional facility in Oklahoma).
276

GTL fails to provide the Commission with the international rate it charges to call each country, and instead
provides only the highest rate charged for an international call at each facility it serves without identifying the
country to which that rate applies. Comparing that GTL international rate to the highest international rate other
providers charge to serve any country and assuming that highest rate is to the same country GTL charges $8.58 to
serve (for example CenturyLink’s highest international rate to any country is $1.00 per minute; NCIC’s highest is
$1.50; Pay Tel’s highest is $0.95; Prodigy’s highest rate is $0.50 and ICSolutions’s highest is $1.00) makes it
difficult to believe such huge disparities in rates to the same foreign country is really attributable to cost
differentials. We also note that while GTL claims its per country rates are available on its website as required by the
Commission’s rules, visits to that website by Commission staff and calls to GTL’s customer service lines shows that
such rates are not publicly available. See Letter from Chérie Kiser, Counsel to GTL, Cahill Gordon & Reindel LLP,
to Marlene H. Dortch, Secretary, FCC, WC Docket No. 12-375, Attach. (Spreadsheet), II. ICS Rate (filed Apr. 1,
2020) (asserting that “[t]he international rates listed in Section II are the highest international per-minute rates. GTL
has not provided the per-minute rate for each country for each individual correctional facility contract, but does
maintain international rates by country on its website per 47 C.F.R. § 42.10(b).”).

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case when loved ones residing in foreign locations may be unable to take advantage of in-person
visitation. 277
119.
Alternative Proposals. We seek comment on alternative proposals for establishing an
international rate cap. We invite commenters to propose specific alternative methodologies and
associated rate caps for international calls that ensure that inmates and their families pay just and
reasonable rates for international inmate calling services while inmate calling providers receive fair
compensation.
120.
Waiver Process for Outliers. In the event that our proposed international rate cap would
prevent a provider from recovering the costs of providing international inmate calling services at a facility
or facilities covered by a particular contract, we propose to adopt a waiver process similar to that
discussed above for our proposed interstate rate caps. We seek comment on this proposal.
121.
Consistency with Section 276 of the Act. We propose to find that our international rate
cap proposals are consistent with section 276 of the Act’s “fair compensation” provisions for the same
reasons we propose to find our interstate rate cap proposals to be consistent with section 276. We seek
comment on this proposal.
V.

PROCEDURAL MATTERS

122.
Filing of Comments and Replies. Pursuant to sections 1.415 and 1.419 of the
Commission’s rules, 47 CFR §§ 1.415, 1.419, interested parties may file comments and reply comments
on or before the dates indicated on the first page of this document. Comments may be filed using the
Commission’s Electronic Comment Filing System. See FCC, Electronic Filing of Documents in
Rulemaking Proceedings, 63 Fed. Reg. 24121 (May 1, 1998).
•

Electronic Filers: Comments may be filed electronically using the Internet by accessing
the ECFS: http://apps.fcc.gov/ecfs/.

•

Paper Filers: Parties who choose to file by paper must file an original and one copy of
each filing. If more than one docket or rulemaking number appears in the caption of this
proceeding, filers must submit two additional copies for each additional docket or
rulemaking number.
o

Filings can be sent by commercial overnight courier, or by first-class or
overnight U.S. Postal Service mail. All filings must be addressed to the
Commission’s Secretary, Office of the Secretary, Federal Communications
Commission.

o

Commercial overnight mail (other than U.S. Postal Service Express Mail and
Priority Mail) must be sent to 9050 Junction Drive, Annapolis Junction, MD
20701. U.S. Postal Service first-class, Express, and Priority mail must be
addressed to 445 12th Street, SW, Washington DC 20554.

o

Effective March 19, 2020, and until further notice, the Commission no longer
accepts any hand or messenger delivered filings. This is a temporary measure
taken to help protect the health and safety of individuals, and to mitigate the
transmission of COVID-19. See FCC Announces Closure of FCC Headquarters
Open Window and Change in Hand-Delivery Policy, Public Notice, DA 20-304
(March 19, 2020), https://www.fcc.gov/document/fcc-closes-headquarters-openwindow-and-changes-hand-delivery-policy.

123.
Comments and reply comments must include a short and concise summary of the
substantive arguments raised in the pleading. Comments and reply comments must also comply with
277
See Worth Rises Request at 2 (explaining that “in-person visits to jail and prisons have been prohibited in order
to minimize the transfer of COVID-19 to incarcerated populations”).

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section 1.49 and all other applicable sections of the Commission’s rules. We direct all interested parties
to include the name of the filing party and the date of the filing on each page of their comments and reply
comments. All parties are encouraged to use a table of contents, regardless of the length of their
submission. We also strongly encourage parties to track the organization set forth in the Fourth Further
Notice of Proposed Rulemaking in order to facilitate our internal review process.
124.
People with Disabilities. To request materials in accessible formats for people with
disabilities (braille, large print, electronic files, audio format), send an e-mail to fcc504@fcc.gov or call
the Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-418-0432 (TTY).
125.
Ex Parte Presentations. The proceeding that this Fourth Further Notice of Proposed
Rulemaking initiates shall be treated as a “permit-but-disclose” proceeding in accordance with the
Commission’s ex parte rules. 278 Persons making ex parte presentations must file a copy of any written
presentation or a memorandum summarizing any oral presentation within two business days after the
presentation (unless a different deadline applicable to the Sunshine period applies).
126.
Persons making oral ex parte presentations are reminded that memoranda summarizing
the presentation must (1) list all persons attending or otherwise participating in the meeting at which the
ex parte presentation was made, and (2) summarize all data presented and arguments made during the
presentation. If the presentation consisted in whole or in part of the presentation of data or arguments
already reflected in the presenter’s written comments, memoranda, or other filings in the proceeding, the
presenter may provide citations to such data or arguments in his or her prior comments, memoranda, or
other filings (specifying the relevant page and/or paragraph numbers where such data or arguments can be
found) in lieu of summarizing them in the memorandum. Documents shown or given to Commission
staff during ex parte meetings are deemed to be written ex parte presentations and must be filed
consistent with section 1.1206(b) of the Commission’s rules. Participants in this proceeding should
familiarize themselves with the Commission’s ex parte rules.
127.
Congressional Review Act. [The Commission will submit this draft Report and Order to
the Administrator of the Office of Information and Regulatory Affairs, Office of Management and
Budget, for concurrence as to whether this rule is “major” or “non-major” under the Congressional
Review Act, 5 U.S.C. § 804(2).] The Commission will send a copy of this Report and Order on Remand
to Congress and the Government Accountability Office pursuant to 5 U.S.C. § 801(a)(1)(A).
128.
Initial Regulatory Flexibility Act Analysis. As required by the Regulatory Flexibility Act
of 1980, as amended (RFA), 279 the Commission has prepared this Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on small entities by the policies and rules proposed in
this Fourth Further Notice of Proposed Rulemaking (Fourth Further Notice). The IRFA is set forth in
Appendix D. The Commission requests written public comments on this IRFA. Comments must be
identified as responses to the IRFA and must be filed by the deadlines for comments provided on the first
page of the Fourth Further Notice. The Commission will send a copy of the Fourth Further Notice,
including this IRFA, to the Chief Counsel for Advocacy of the Small Business Administration (SBA). 280
In addition, the Fourth Further Notice and the IRFA (or summaries thereof) will be published in the
Federal Register. 281

278

47 CFR §§ 1.1200 et seq.

279

See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
280

See 5 U.S.C. § 603(a).

281

Id.

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129.
Final Regulatory Flexibility Act Analysis. As required by the Regulatory Flexibility Act
of 1980 (RFA), as amended, the Commission has prepared a Supplemental Final Regulatory Flexibility
Analysis (FRFA) relating to this Report and Order on Remand. 282 The FRFA is set forth in Appendix C.
130.
Paperwork Reduction Act Analyses. Final Paperwork Reduction Act Analysis. This
Report and Order on Remand does not contain new or modified information collection requirements
subject to the Paperwork Reduction Act of 1995 (PRA). 283 In addition, therefore, it does not contain any
new or modified information collection burden for small business concerns with fewer than 25
employees, pursuant to the Small Business Paperwork Relief Act of 2002 (SBPRA). 284
131.
Initial Paperwork Reduction Act Analysis. This Fourth Further Notice of Proposed
Rulemaking may propose new or modified information collections subject to the PRA requirements. If
the Commission adopts any new or modified information collection requirements, they will be submitted
to OMB for review under section 3507(d) of the PRA. The Commission, as part of its continuing effort to
reduce paperwork burdens, invites OMB, the general public, and other federal agencies to comment on
any new or modified information collection requirements contained in this Fourth Further Notice of
Proposed Rulemaking, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In
addition, pursuant to the Small Business Paperwork Relief Act of 2002,156 we seek specific comment on
how we might “further reduce the information collection burden for small business concerns with fewer
than 25 employees.”157
VI.

ORDERING CLAUSES

132.
Accordingly, IT IS ORDERED that, pursuant to the authority contained in sections 1, 2,
4(i)-(j), 20l(b), , 218, 220, 276, and 403 of the Communications Act of 1934, as amended, 47 U.S.C.
§§ 151, 152, 154(i)-(j), 201(b), 218, 220, 276, and 403, this Report and Order on Remand and Fourth
Further Notice of Proposed Rulemaking ARE ADOPTED.
133.
IT IS FURTHER ORDERED, pursuant to the authority contained in sections 1, 2, 4(i)(j), 20l(b), 218, 220, 276, and 403 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 151,
152, 154(i)-(j), 201(b), 218, 220, 276, and 403, that the amendments to the Commission’s rules as set
forth in Appendix A ARE ADOPTED, effective 30 days after publication of a summary in the Federal
Register.
134.
IT IS FURTHER ORDERED that, pursuant to applicable procedures set forth in Sections
1.415 and 1.419 of the Commission’s Rules, 47 CFR §§ 1.415, 1.419, interested parties may file
comments on this Fourth Further Notice of Proposed Rulemaking on or before 30 days after publication
of a summary of this Fourth Further Notice of Proposed Rulemaking in the Federal Register and reply
comments on or before 60 days after publication of a summary of this Fourth Further Notice of Proposed
Rulemaking in the Federal Register.
135.
IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order on
Remand and Fourth Further Notice of Proposed Rulemaking, including the Initial and Supplemental
Final Regulatory Flexibility Analysis, to the Congress and the Government Accountability Office
pursuant to the Congressional Review Act, see 5 U.S.C. § 801(a)(1)(A).

282

See 5 U.S.C. § 604. The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 847 (1996). The SBREFA
was enacted as Title II of the Contract with America Advancement Act of 1996 (CWAAA).
283

The Paperwork Reduction Act of 1995 (PRA), Pub. L. No. 104-13, 109 Stat. 163 (1995) (codified in Chapter 35
of title 44 U.S.C.).
284

Small Business Paperwork Relief Act of 2002, Public Law 107-198; see 44 U.S.C. § 3506(c)(4),

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136.
IT IS FURTHER ORDERED that the Commission’s Consumer and Governmental
Affairs Bureau, Reference Information Center, SHALL SEND a copy of this Report and Order on
Remand and Fourth Further Notice of Proposed Rulemaking, including the Initial Regulatory Flexibility
Analysis and the Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy
of the Small Business Administration.
FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch
Secretary

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APPENDIX A
Final Rules
For the reasons set forth above, the Federal Communications Commission amends Part 64, subpart FF of
Title 47 of the Code of Federal Regulations as follows:
PART 64—MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1. The authority citation for part 64 is revised to read as follows:
AUTHORITY: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220, 222, 225, 226, 227, 227b, 228,
251(a), 251(e), 254(k), 262, 276, 403(b)(2)(B), (c), 616, 620, 1401-1473, unless otherwise noted;
Pub. L. 115-141, Div. P, sec. 503, 132 Stat. 348, 1091.
2. Section 64.6000 is revised to read as follows:
§ 64.6000 Definitions.
As used in this subpart:
(a) Ancillary Service Charge means any charge Consumers may be assessed for, or in connection
with, the interstate or international use of Inmate Calling Services that are not included in the perminute charges assessed for such individual calls. Ancillary Service Charges that may be
assessed are limited only to those listed in subparagraphs (a)(1)-(5) of this section. All other
Ancillary Service Charges are prohibited. For purposes of this definition, “interstate” includes
any Jurisdictionally Mixed Charge, as defined in paragraph (u) of this section.
***
(b) Authorized Fee means a government authorized, but discretionary, fee which a Provider must
remit to a federal, state, or local government, and which a Provider is permitted, but not required,
to pass through to Consumers for or in connection with interstate or international Inmate Calling
Service. An Authorized Fee may not include a markup, unless the markup is specifically
authorized by a federal, state, or local statute, rule, or regulation.
***
(n) Mandatory Tax or Mandatory Fee means a fee that a Provider is required to collect directly from
consumers, and remit to federal, state, or local governments. A Mandatory Tax or Fee that is
passed through to a consumer for, or in connection with, interstate or international Inmate Calling
Services may not include a markup, unless the markup is specifically authorized by a federal,
state, or local statute, rule, or regulation;
***
(t) Site Commission means any form of monetary payment, in-kind payment, gift, exchange of
services or goods, fee, technology allowance, or product that a Provider of Inmate Calling
Services or affiliate of a Provider of Inmate Calling Services may pay, give, donate, or otherwise
provide to an entity that operates a correctional institution, an entity with which the Provider of
Inmate Calling Services enters into an agreement to provide Inmate Calling Services, a
governmental agency that oversees a correctional facility, the city, county, or state where a
facility is located, or an agent of any such facility.
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(u) Jurisdictionally Mixed Charge means any charge Consumers may be assessed for use of Inmate
Calling Services that are not included in the per-minute charges assessed for individual calls and
that are assessed for, or in connection with, uses of Inmate Calling Service to make such calls that
have interstate or international components and intrastate components that are unable to be
segregated at the time the charge is incurred.
3. Section 64.6010 is removed and reserved and now reads as follows:
§ 64.6010 [Reserved]
4. Section 64.6020(a) is revised to read as follows:
§ 64.6020 Ancillary Service Charge.
(a) No Provider of interstate or international Inmate Calling Services shall charge an Ancillary Service
Charge other than those permitted charges listed in § 64.6000(a).
5. Section 64.6030 is revised to read as follows:
§ 64.6030 Inmate Calling Services interim rate cap.
No provider shall charge a rate for interstate Collect Calling in excess of $0.25 per minute, or a rate for
interstate Debit Calling, Prepaid Calling, or Prepaid Collect Calling in excess of $0.21 per minute. These
interim rate caps shall remain in effect until permanent rate caps are adopted and take effect.
6. Section 64.6050 is revised to read as follows:
§ 64.6050 Billing-related call blocking.
No Provider shall prohibit or prevent completion of an interstate or international Collect Calling call or
decline to establish or otherwise degrade interstate or international Collect Calling solely for the reason
that it lacks a billing relationship with the called party’s communications service provider, unless the
Provider offers Debit Calling, Prepaid Calling, or Prepaid Collect Calling for interstate and international
calls.
7. Section 64.6060 is revised to remove and reserve section (a)(4) as follows:
§ 64.6060 Annual reporting and certification requirement.
(a) * * *
(4) [Reserved]
8. Section 64.6070 is revised to read as follows:
§ 64.6070 Taxes and fees.
No Provider shall charge any taxes or fees to users of Inmate Calling Services for, or in connection with,
interstate or international calls, other than those permitted under § 64.6020, and those defined as
Mandatory Taxes, Mandatory Fees, or Authorized Fees.
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9. Section 64.6080 is revised to read as follows:
§ 64.6080 Per-Call or Per-Connection Charges.
No Provider shall impose a Per-Call or Per-Connection Charge on a Consumer for any interstate or
international calls.
10. Section 64.6090 is revised to read as follows:
§ 64.6090 Flat-Rate Calling.
No Provider shall offer Flat-Rate Calling for interstate or international Inmate Calling Services.
11. Section 64.6100 is revised to read as follows:
§ 64.6100 Minimum and maximum Prepaid Calling account balances.
(a) No Provider shall institute a minimum balance requirement for a Consumer to use Debit or
Prepaid Calling for interstate or international calls.
(b) No Provider shall prohibit a consumer from depositing at least $50 per transaction to fund a Debit
or Prepaid Calling account that can be used for interstate or international calls.

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APPENDIX B
Proposed Rules
For the reasons set forth above, the Federal Communications Commission proposes to amend Part 64,
subpart FF of Title 47 of the Code of Federal Regulations as follows:
PART 64—MISCELLANEOUS RULES RELATING TO COMMON CARRIERS
1. The authority citation for part 64 continues to read as follows:
AUTHORITY: 47 U.S.C. 151, 152, 154, 201, 202, 217, 218, 220, 222, 225, 226, 227, 227b, 228, 251(a),
251(e), 254(k), 262, 276, 403(b)(2)(B), (c), 616, 620, 1401-1473, unless otherwise noted; Pub. L. 115141, Div. P, sec. 503, 132 Stat. 348, 1091.
2. Section 64.6010 is revised to read as follows:
§ 64.6010 Interstate and International Inmate Calling Services rate caps.
(a) No Provider shall charge, in any Jail it serves, a per-minute rate for interstate Debit Calling, Prepaid
Calling, or Prepaid Collect Calling in excess of $0.16.
(b) No Provider shall charge, in any Prison it serves, a per-minute rate for interstate Debit Calling,
Prepaid Calling, or Prepaid Collect Calling in excess of $0.14.
(c) No Provider shall charge, in any Prison or Jail it serves, a per-minute rate for International Calls in
excess of the applicable interstate rate set forth in paragraphs (a) and (b) plus the amount that the provider
must pay its underlying international service provider for that call on a per-minute basis.

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APPENDIX C
Supplemental Final Regulatory Flexibility Analysis
1. As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 1 an Initial
Regulatory Flexibility Analysis (IRFA) was incorporated in the 2014 ICS Notice. 2 The Commission
sought written public comment on the proposals in that Notice, including comment on the IRFA. 3 The
Commission did not receive comments directed toward the IRFA. Thereafter, the Commission issued a
Final Regulatory Flexibility Analysis (FRFA) conforming to the RFA.4 This Supplemental FRFA
supplements that FRFA to reflect the actions taken in the Report and Order on Remand (Remand Order)
and conforms to the RFA. 5
A.

Need for, and Objectives of, the Order on Remand

2.
The Remand Order adopts rules segregating ancillary service charges provided in
connection with inmate calling services into interstate and intrastate components in response to a remand
from the United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit). It also
amends the Commission’s rule regarding mandatory pass-through taxes and fees in light of a second
remand from the D.C. Circuit. Finally, it revises certain of the Commission’s other inmate calling
services rules to comport with the D.C. Circuit’s decisions in those cases, and reinstates the
Commission’s rule providing an ancillary service charge cap for single call services.
B.

Summary of Significant Issues Raised by Public Comments in Response to the IRFA

3.
The Commission did not receive comments specifically addressing the rules and policies
proposed in the IRFA.
C.
4.
proceeding.
D.

Response to Comments by the Chief Counsel for Advocacy of the Small Business
Administration
The Chief Counsel did not file any comments in response to the proposed rules in this
Description and Estimate of the Number of Small Entities to Which Rules Will
Apply

5.
The RFA directs agencies to provide a description of, and, where feasible, an estimate of,
the number of small entities that may be affected by the rules adopted herein. 6 The RFA generally
defines the term “small entity” as having the same meaning as the terms “small business,” “small
organization,” and “small governmental jurisdiction.” 7 In addition, the term “small business” has the
same meaning as the term “small business concern” under the Small Business Act. 8 A “small business
1

See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601-602, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996).
2

Rates for Interstate Inmate Calling Services, WC Docket No. 12-375, Second Further Notice of Proposed
Rulemaking, 29 FCC Rcd at 13170 (2014) (2014 ICS Notice).

3

See id. at 13235, Appx., para. 2.

4

Rates for Inmate Calling Services, WC Docket No. 12-375, Second Report and Order and Third Further Notice of
Proposed Rulemaking, 30 FCC Rcd 12763, 12944-49 (2015) (2015 ICS Order or Notice).
5

See 5 U.S.C. § 604.

6

5 U.S.C. § 604(a)(3).

7

5 U.S.C. § 601(6).

8

5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern in the Small Business Act,
15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an

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concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field of
operation; and (3) satisfies any additional criteria established by the Small Business Administration
(SBA). 9
6.
Small Businesses. Nationwide, there are a total of approximately 27.9 million small
businesses, according to the SBA. 10
7.
Wired Telecommunications Carriers. The SBA has developed a small business size
standard for Wired Telecommunications Carriers, which consists of all such companies having 1,500 or
fewer employees. 11 According to Census Bureau data for 2007, there were 3,188 firms in this category,
total, that operated for the entire year. 12 Of this total, 3,144 firms had employment of 999 or fewer
employees, and 44 firms had employment of 1,000 employees or more. 13 Thus, under this size standard,
the majority of firms can be considered small.
8.
Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a
size standard for small businesses specifically applicable to local exchange services. The closest
applicable size standard under SBA rules is for Wired Telecommunications Carriers. Under that size
standard, such a business is small if it has 1,500 or fewer employees. 14 According to Commission data,
1,307 carriers reported that they were incumbent local exchange service providers. 15 Of these 1,307
carriers, an estimated 1,006 have 1,500 or fewer employees and 301 have more than 1,500 employees. 16
Consequently, the Commission estimates that most providers of local exchange service are small entities
that may be affected by the Commission’s action.
9.
Incumbent Local Exchange Carriers (incumbent LECs). Neither the Commission nor the
SBA has developed a size standard for small businesses specifically applicable to incumbent local
exchange services. The closest applicable size standard under SBA rules is for Wired
Telecommunications Carriers. Under that size standard, such a business is small if it has 1,500 or fewer
employees. 17 According to Commission data, 1,307 carriers reported that they were incumbent local
exchange service providers. 18 Of these 1,307 carriers, an estimated 1,006 have 1,500 or fewer employees
and 301 have more than 1,500 employees. 19 Consequently, the Commission estimates that most providers
of incumbent local exchange service are small businesses that may be affected by the Commission’s

agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity
for public comment, establishes one or more definitions of such term which are appropriate to the activities of the
agency and publishes such definition(s) in the Federal Register.”
9

15 U.S.C. § 632.

10

See SBA, Office of Advocacy, “Frequently Asked Questions,” available at
http://www.sba.gov/sites/default/files/FAQ_Sept_2012.pdf (last visited June 22, 2020).

11

13 CFR § 121.201, NAICS Code 517110.

12

U.S. Census Bureau, 2007 Economic Census, Subject Series: Information, Table 5, “Establishment and Firm
Size: Employment Size of Firms for the United States: 2007 NAICS Code 517110” (issued Nov. 2010).
13

See id.

14

13 CFR § 121.201, NAICS Code 517110.

15

See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry
Analysis and Technology Division at Table 5.4 (Sept. 2010) (Trends in Telephone Service).

16

See id.

17

See 13 CFR § 121.201, NAICS Code 517110.

18

See Trends in Telephone Service at Table 5.3.

19

See id.

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action.
10.
The Commission has included small incumbent LECs in this present RFA analysis. As
noted above, a “small business” under the RFA is one that, inter alia, meets the pertinent small business
size standard (e.g., a telephone communications business having 1,500 or fewer employees), and “is not
dominant in its field of operation.” 20 The SBA’s Office of Advocacy contends that, for RFA purposes,
small incumbent LECs are not dominant in their field of operation because any such dominance is not
“national” in scope. 21 The Commission has therefore included small incumbent LECs in this RFA
analysis, although it emphasizes that this RFA action has no effect on Commission analyses and
determinations in other, non-RFA contexts.
11.
Competitive Local Exchange Carriers (competitive LECs), Competitive Access Providers
(CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission
nor the SBA has developed a small business size standard specifically for these service providers. The
appropriate size standard under SBA rules is for the category Wired Telecommunications Carriers. Under
that size standard, such a business is small if it has 1,500 or fewer employees. 22 According to
Commission data, 1,442 carriers reported that they were engaged in the provision of either competitive
local exchange services or competitive access provider services.23 Of these 1,442 carriers, an estimated
1,256 have 1,500 or fewer employees and 186 have more than 1,500 employees. 24 In addition, 17 carriers
have reported that they are Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or
fewer employees. 25 In addition, 72 carriers have reported that they are Other Local Service Providers. 26
Of the 72, 70 have 1,500 or fewer employees and two have more than 1,500 employees. 27 Consequently,
the Commission estimates that most providers of competitive local exchange service, competitive access
providers, Shared-Tenant Service Providers, and Other Local Service Providers are small entities that
may be affected by the Commission’s action.
12.
Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a
size standard for small businesses specifically applicable to interexchange services. The closest applicable
size standard under SBA rules is for Wired Telecommunications Carriers. Under that size standard, such a
business is small if it has 1,500 or fewer employees. 28 According to Commission data, 359 companies
reported that their primary telecommunications service activity was the provision of interexchange
services. 29 Of these 359 companies, an estimated 317 have 1,500 or fewer employees and 42 have more
than 1,500 employees. 30 Consequently, the Commission estimates that the majority of interexchange
20

5 U.S.C. § 601(3).

21

See Letter from Jere W. Glover, Chief Counsel to Advocacy, SBA, to William E. Kennard, Chairman, FCC (filed
May 27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA
incorporates into its own definition of “small business.” See 15 U.S.C. § 632(a); see also 5 U.S.C. § 601(2). SBA
regulations interpret “small business concern” to include the concept of dominance on a national basis. See 13 CFR
§ 121.102(b).
22

See 13 CFR § 121.101, NAICS Code 517110.

23

See Trends in Telephone Service at Table 5.3.

24

See id.

25

See id.

26

See id.

27

See id.

28

See 13 CFR § 121.101, NAICS Code 517110.

29

See Trends in Telephone Service at Table 5.3.

30

See id.

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service providers are small entities that may be affected by the Commission’s action.
13.
Local Resellers. The SBA has developed a small business size standard for the category
of Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or
fewer employees. 31 According to Commission data, 213 carriers have reported that they are engaged in
the provision of local resale services. 32 Of these, an estimated 211 have 1,500 or fewer employees and
two have more than 1,500 employees. 33 Consequently, the Commission estimates that the majority of
local resellers are small entities that may be affected by the Commission’s action.
14.
Toll Resellers. The SBA has developed a small business size standard for the category of
Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer
employees. 34 According to Commission data, 881 carriers have reported that they are engaged in the
provision of toll resale services. 35 Of these, an estimated 857 have 1,500 or fewer employees and 24 have
more than 1,500 employees. 36 Consequently, the Commission estimates that the majority of toll resellers
are small entities that may be affected by the Commission’s action.
15.
Other Toll Carriers. Neither the Commission nor the SBA has developed a size standard
for small businesses specifically applicable to Other Toll Carriers. This category includes toll carriers that
do not fall within the categories of interexchange carriers, operator service providers, prepaid calling card
providers, satellite service carriers, or toll resellers. The closest applicable size standard under SBA rules
is for Wired Telecommunications Carriers. Under that size standard, such a business is small if it has
1,500 or fewer employees. 37 According to Commission data, 284 companies reported that their primary
telecommunications service activity was the provision of other toll carriage.38 Of these, an estimated 279
have 1,500 or fewer employees and five have more than 1,500 employees. 39 Consequently, the
Commission estimates that most Other Toll Carriers are small entities that may be affected by the
Commission’s action.
16.
Payphone Service Providers (PSPs). Neither the Commission nor the SBA has
developed a small business size standard specifically for payphone services providers, a group that
includes inmate calling services providers. The appropriate size standard under SBA rules is for the
category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has
1,500 or fewer employees. 40 According to Commission data, 41 535 carriers have reported that they are
engaged in the provision of payphone services. Of these, an estimated 531 have 1,500 or fewer
employees and four have more than 1,5000 employees. 42 Consequently, the Commission estimates that
the majority of payphone service providers are small entities that may be affected by the Commission’s
action.
31

See 13 CFR § 121.101, NAICS Code 517911.

32

See Trends in Telephone Service at Table 5.3.

33

See id.

34

See 13 CFR § 121.101, NAICS Code 517911.

35

See Trends in Telephone Service at Table 5.3.

36

See id.

37

See 13 CFR § 121.101, NAICS Code 517110.

38

See Trends in Telephone Service at Table 5.3.

39

See id.

40

See 13 CFR § 121.101, NAICS Code 517110

41

See Trends in Telephone Service at Table 5.3.

42

See id.

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E.

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Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements for Small Entities.

17.
Recordkeeping, Reporting, and Certification. The Order on Remand requires inmate
calling services providers to properly identify whether ancillary services associated with inmate calling
services are interstate, intrastate, or jurisdictionally mixed. To the extent those ancillary services are
interstate or jurisdictionally mixed, the provider must comply with fee caps or limits previously adopted
by the Commission. The Remand Order also requires inmate calling services providers to not mark up
mandatory taxes or fees passed on to consumers of interstate or international inmate calling services, and
places an ancillary service charge cap on single call services. 43
F.

Steps Taken to Minimize the Significant Economic Impact on Small Entities, and
Significant Alternatives Considered

18.
The RFA requires an agency to describe any significant, specifically small business,
alternatives that it has considered in reaching its proposed approach, which may include the following
four alternatives (among others): “(1) the establishment of differing compliance or reporting requirements
or timetables that take into account the resources available to small entities; (2) the clarification,
consolidation, or simplification of compliance and reporting requirements under the rules for such small
entities; (3) the use of performance rather than design standards; and (4) an exemption from coverage of
the rule, or any part thereof, for such small entities.” 44
19.
The FRFA that the Commission previously issued in connection with the 2015 ICS Order
addressed in full the steps taken to minimize the economic impact or small entities and the significant
alternatives considered. 45
Report to Congress:
20.
The Commission will send a copy of the Remand Order, including this Supplemental
FRFA, in a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness
Act of 1996. 46 In addition, the Commission will send a copy of the Remand Order, including this
Supplemental FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy
of the Remand Order and Supplemental FRFA (or summaries thereof) will also be published in the
Federal Register. 47

43

See supra Part III.

44

5 U.S.C. § 603(c)(1)-(c)(4).

45

2015 ICS Order, 30 FCC Rcd at 12948-49.

46

5 U.S.C. § 801(a)(1)(A).

47

See id. § 604(b).

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APPENDIX D
Initial Regulatory Flexibility Analysis
1.
As required by the Regulatory Flexibility Act of 1980, as amended (RFA), 1 the
Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the possible significant
economic impact on small entities by the policies and rules proposed in this Fourth Further Notice of
Proposed Rulemaking (Further Notice). The Commission requests written public comments on this
IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for
comments provided on the first page of this Further Notice. The Commission will send a copy of the
Further Notice, including this IRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA). 2 In addition, the Further Notice and the IRFA (or summaries thereof) will be
published in the Federal Register. 3
A.

Need for, and Objectives of, the Proposed Rules

2.
In this Further Notice, the Commission seeks comment on its proposal to address the
broken inmate calling services marketplace. The Commission proposes to reduce rate caps from the
current interim rate caps to $0.14 per minute for all interstate inmate calling services calls from prisons
and to $0.16 per minute for all interstate inmate calling services from jails. This rate cap reduction is
designed to ensure that inmate calling services providers will have the opportunity to recover their
costs—including their indirect costs—of providing interstate inmate calling services. Additionally, the
proposed interstate rate caps include an allowance for the recovery of correctional facility costs that are
legitimately related to the provision of inmate calling services. The Commission anticipates that its
actions will have long-term and meaningful impacts on incarcerated individuals and their families while
promoting competition in the inmate calling services marketplace.
3.
The Commission also proposes to cap inmate calling services rates for international calls
on a facility basis. Our proposal to adopt a rate cap formula that permits a provider to charge an
international inmate calling services rate up to the sum of the provider’s per-minute interstate rate cap for
the inmate’s facility plus the amount that the provider must pay its underlying international service
provider for that call on a per minute basis has the benefits of simplicity and ease of administration. It
would allow inmate calling services providers to recover the additional costs they incur to resell
international calling services, yet should result in substantial reductions in international calling rates for
inmates and their families.
B.

Legal Basis

4.
The legal basis for any action that may be taken pursuant to the Fourth Further Notice is
contained in sections 1, 2, 4(i)-(j), 201(b), 218, 220, 276, and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. §§ 151, 152, 154(i)-(j), 201(b), 218, 220, 276, and 403.
C.

Description and Estimate of the Number of Small Entities to Which the Proposed
Rules Will Apply

5.
The RFA directs agencies to provide a description of, and where feasible, an estimate of
the number of small entities that may be affected by the proposed rule revisions, if adopted. The RFA
generally defines the term “small entity” as having the same meaning as the terms “small business,”
1

See 5 U.S.C. § 603. The RFA, see 5 U.S.C. §§ 601-612, has been amended by the Small Business Regulatory
Enforcement Fairness Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857 (1996)

2

See 5 U.S.C. § 603(a).

3

Id.

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“small organization,” and “small governmental jurisdiction.” 4 In addition, the term “small business” has
the same meaning as the term “small-business concern” under the Small Business Act. 5 A “smallbusiness concern” is one which: (1) is independently owned and operated; (2) is not dominant in its field
of operation; and (3) satisfies any additional criteria established by the SBA. 6
6.
Small Businesses, Small Organizations, Small Governmental Jurisdictions. Our actions,
over time, may affect small entities that are not easily categorized at present. We therefore describe here,
at the outset, three broad groups of small entities that could be directly affected herein. 7 First, while there
are industry specific size standards for small businesses that are used in the regulatory flexibility analysis,
according to data from the SBA’s Office of Advocacy, in general a small business is an independent
business having fewer than 500 employees. 8 These types of small businesses represent 99.9% of all
businesses in the United States, which translates to 30.7 million businesses. 9
7.
Next, the type of small entity described as a “small organization” is generally “any notfor-profit enterprise which is independently owned and operated and is not dominant in its field.” 10 The
Internal Revenue Service (IRS) uses a revenue benchmark of $50,000 or less to delineate its annual
electronic filing requirements for small exempt organizations.11 Nationwide, for tax year 2018, there
were approximately 571,709 small exempt organizations in the U.S. reporting revenues of $50,000 or less
according to the registration and tax data for exempt organizations available from the IRS. 12
8.
Finally, the small entity described as a “small governmental jurisdiction” is defined
generally as “governments of cities, counties, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.” 13 U.S. Census Bureau data from the 2017 Census
4

See 5 U.S.C. § 601(6).

5

See 5 U.S.C. § 601(3) (incorporating by reference the definition of “small-business concern” in the Small Business
Act, 15 U.S.C. § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a small business applies “unless an
agency, after consultation with the Office of Advocacy of the Small Business Administration and after opportunity
for public comment, establishes one or more definitions of such term which are appropriate to the activities of the
agency and publishes such definition(s) in the Federal Register.”

6

See 15 U.S.C. § 632.

7

See 5 U.S.C. § 601(3)-(6).

8

See SBA, Office of Advocacy, “What’s New With Small Business,” https://cdn.advocacy.sba.gov/wp-content/
uploads/2019/09/23172859/Whats-New-With-Small-Business-2019.pdf (June 2020).
9

Id.

10

5 U.S.C. § 601(4).

11

The IRS benchmark is similar to the population of less than 50,000 benchmark in 5 U.S.C § 601(5) that is used to
define a small governmental jurisdiction. Therefore, the IRS benchmark has been used to estimate the number small
organizations in this small entity description. See Annual Electronic Filing Requirement for Small Exempt
Organizations—Form 990-N (e-Postcard), "Who must file,"https://www.irs.gov/charities-non-profits/annualelectronic-filing-requirement-for-small-exempt-organizations-form-990-n-e-postcard. We note that the IRS data
does not provide information on whether a small exempt organization is independently owned and operated or
dominant in its field.
12

See Exempt Organizations Business Master File Extract (EO BMF), "CSV Files by Region,"
https://www.irs.gov/charities-non-profits/exempt-organizations-business-master-file-extract-eo-bmf. The IRS
Exempt Organization Business Master File (EO BMF) Extract provides information on all registered taxexempt/non-profit organizations. The data utilized for purposes of this description was extracted from the IRS EO
BMF data for Region 1-Northeast Area (76,886), Region 2-Mid-Atlantic and Great Lakes Areas (221,121), and
Region 3-Gulf Coast and Pacific Coast Areas (273,702) which includes the continental U.S., Alaska, and Hawaii.
This data does not include information for Puerto Rico.
13

5 U.S.C. § 601(5).

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of Governments 14 indicate that there were 90,075 local governmental jurisdictions consisting of general
purpose governments and special purpose governments in the United States. 15 Of this number there were
36,931 general purpose governments (county 16, municipal and town or township 17) with populations of
less than 50,000 and 12,040 special purpose governments - independent school districts 18 with enrollment
populations of less than 50,000. 19 Accordingly, based on the 2017 U.S. Census of Governments data, we
estimate that at least 48,971 entities fall into the category of “small governmental jurisdictions.” 20
9.
Wired Telecommunications Carriers. The U.S. Census Bureau defines this industry as
“establishments primarily engaged in operating and/or providing access to transmission facilities and
infrastructure that they own and/or lease for the transmission of voice, data, text, sound, and video using
wired communications networks. Transmission facilities may be based on a single technology or a
combination of technologies. Establishments in this industry use the wired telecommunications network
facilities that they operate to provide a variety of services, such as wired telephony services, including
VoIP services, wired (cable) audio and video programming distribution, and wired broadband internet
services. By exception, establishments providing satellite television distribution services using facilities
and infrastructure that they operate are included in this industry.” 21 The SBA has developed a small
business size standard for Wired Telecommunications Carriers, which consists of all such companies

14

See 13 U.S.C. § 161. The Census of Governments survey is conducted every five (5) years compiling data for
years ending with “2” and “7”. See also Census of Governments, https://www.census.gov/programssurveys/cog/about.html.
15

See U.S. Census Bureau, 2017 Census of Governments – Organization Table 2. Local Governments by Type and
State: 2017 [CG1700ORG02]. https://www.census.gov/data/tables/2017/econ/gus/2017-governments.html. Local
governmental jurisdictions are made up of general purpose governments (county, municipal and town or township)
and special purpose governments (special districts and independent school districts). See also Table 2.
CG1700ORG02 Table Notes_Local Governments by Type and State_2017.
16

See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 5. County Governments by
Population-Size Group and State: 2017 [CG1700ORG05]. https://www.census.gov/data/tables/2017/econ/gus/2017governments.html. There were 2,105 county governments with populations less than 50,000. This category does not
include subcounty (municipal and township) governments.
17

See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 6. Subcounty General-Purpose
Governments by Population-Size Group and State: 2017 [CG1700ORG06].
https://www.census.gov/data/tables/2017/econ/gus/2017-governments.html. There were 18,729 municipal and
16,097 town and township governments with populations less than 50,000.
18

See U.S. Census Bureau, 2017 Census of Governments - Organization, Table 10. Elementary and Secondary
School Systems by Enrollment-Size Group and State: 2017 [CG1700ORG10].
https://www.census.gov/data/tables/2017/econ/gus/2017-governments.html. There were 12,040 independent school
districts with enrollment populations less than 50,000. See also Table 4. Special-Purpose Local Governments by
State Census Years 1942 to 2017 [CG1700ORG04], CG1700ORG04 Table Notes_Special Purpose Local
Governments by State_Census Years 1942 to 2017.
19

While the special purpose governments category also includes local special district governments, the 2017 Census
of Governments data does not provide data aggregated based on population size for the special purpose governments
category. Therefore, only data from independent school districts is included in the special purpose governments
category.

20
This total is derived from the sum of the number of general purpose governments (county, municipal and town or
township) with populations of less than 50,000 (36,931) and the number of special purpose governments independent school districts with enrollment populations of less than 50,000 (12,040), from the 2017 Census of
Governments - Organizations Tables 5, 6, and 10.
21

See U.S. Census Bureau, 2017 NAICS Definition, NAICS Code 517311 “Wired Telecommunications Carriers,”,
https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=517311&search=2017.

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having 1,500 or fewer employees. 22 U.S. Census Bureau data for 2012 show that there were 3,117 firms
that operated that year. 23 Of this total, 3,083 operated with fewer than 1,000 employees. 24 Thus, under
this size standard, the majority of firms in this industry can be considered small.
10.
Local Exchange Carriers (LECs). Neither the Commission nor the SBA has developed a
size standard for small businesses specifically applicable to local exchange services. The closest
applicable NAICS Code category is Wired Telecommunications Carriers.25 Under the applicable SBA
size standard, such a business is small if it has 1,500 or fewer employees. 26 U.S. Census Bureau data for
2012 show that there were 3,117 firms that operated for the entire year. 27 Of that total, 3,083 operated
with fewer than 1,000 employees. 28 Thus under this category and the associated size standard, the
Commission estimates that the majority of local exchange carriers are small entities.
11.
Incumbent Local Exchange Carriers (Incumbent LECs). Neither the Commission nor the
SBA has developed a small business size standard specifically for incumbent local exchange services.
The closest applicable NAICS Code category is Wired Telecommunications Carriers.29 Under the
applicable SBA size standard, such a business is small if it has 1,500 or fewer employees.30 U.S. Census
Bureau data for 2012 indicate that 3,117 firms operated the entire year. 31 Of this total, 3,083 operated
with fewer than 1,000 employees. 32 Consequently, the Commission estimates that most providers of
incumbent local exchange service are small businesses that may be affected by our actions. According to
Commission data, one thousand three hundred and seven (1,307) Incumbent Local Exchange Carriers
reported that they were incumbent local exchange service providers.33 Of this total, an estimated 1,006
22

See 13 CFR § 120.201, NAICS Code 517311 (previously 517110).

23

See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012.
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.
24

Id. The largest category provided by the census data is “1000 employees or more” and a more precise estimate for
firms with fewer than 1,500 employees is not provided.
25

See U.S. Census Bureau, 2017 NAICS Definition, NAICS Code 517311 “Wired Telecommunications Carriers,” ,
https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=517311&search=2017.

26

See 13 CFR § 120.201, NAICS Code 517311 (previously 517110).

27

See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012 NAICS Code 517110,
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.
28
Id. The largest category provided by the census data is “1000 employees or more” and a more precise estimate for
firms with fewer than 1,500 employees is not provided.
29

See, U.S. Census Bureau, 2017 NAICS Definition, NAICS Code 517311 “Wired Telecommunications Carriers,”
https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=517311&search=2017.

30

See 13 CFR § 120.201, NAICS Code 517311 (previously 517110).

31

See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012, NAICS Code 517110.
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.
32

Id. The largest category provided by the census data is “1000 employees or more” and a more precise estimate for
firms with fewer than 1,500 employees is not provided.
33
See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry
Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service).

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have 1,500 or fewer employees. 34 Thus, using the SBA’s size standard the majority of incumbent LECs
can be considered small entities.
12.
We have included small incumbent LECs in this present RFA analysis. As noted above,
a “small business” under the RFA is one that, inter alia, meets the pertinent small business size standard
(e.g., a telephone communications business having 1,500 or fewer employees), and “is not dominant in its
field” of operation. 35 The SBA’s Office of Advocacy contents that, for RFA purposes, small incumbent
LECs are not dominant in their field of operation because any such dominance is not “national” in
scope. 36
13.
Competitive Local Exchange Carriers (Competitive LECs), Competitive Access Providers
(CAPs), Shared-Tenant Service Providers, and Other Local Service Providers. Neither the Commission
nor the SBA has developed a small business size standard specifically for these service providers. The
appropriate NAICS Code category is Wired Telecommunications Carriers, as defined above. Under that
size standard, such a business is small if it has 1,500 or fewer employees. 37 U.S. Census data for 2012
indicate that 3,117 firms operated during that year. Of that number, 3,083 operated with fewer than 1,000
employees. 38 Based on this data, the Commission concludes that the majority of Competitive LECS,
CAPs, Shared-Tenant Service Providers, and Other Local Service Providers, are small entities.
According to Commission data, 1,442 carriers reported that they were engaged in the provision of either
competitive local exchange services or competitive access provider services. Of these 1,442 carriers, an
estimated 1,256 have 1,500 or fewer employees. In addition, 17 carriers have reported that they are
Shared-Tenant Service Providers, and all 17 are estimated to have 1,500 or fewer employees. Also, 72
carriers have reported that they are Other Local Service Providers. Of this total, 70 have 1,500 or fewer
employees. Consequently, based on internally researched FCC data, the Commission estimates that most
providers of competitive local exchange service, competitive access providers, Shared-Tenant Service
Providers, and Other Local Service Providers are small entities.
14.
Interexchange Carriers (IXCs). Neither the Commission nor the SBA has developed a
small business size standard specifically for Interexchange Carriers. The closest applicable NAICS Code
category is Wired Telecommunications Carriers.39 The applicable size standard under SBA rules is that
such a business is small if it has 1,500 or fewer employees. 40 U.S. Census Bureau data for 2012 indicate
that 3,117 firms operated for the entire year. 41 Of that number, 3,083 operated with fewer than 1,000
34

Id.

35

5 U.S.C. § 601(4).

36

See Letter from Jere W. Glover, Chief Counsel to Advocacy, SBA, to William E. Kennard, Chairman, FCC (May
27, 1999). The Small Business Act contains a definition of “small business concern,” which the RFA incorporates
into its own definition of “small business.” See 15 U.S.C. § 601(4). SBA regulations interpret “small business
concern” to include the concept of dominance on a national basis. See 13 CFR § 121.102(b).

37

13 CFR § 121.201 (NAICS Code 517311).

38

See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012, NAICS Code 517110.
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.
39

See, U.S. Census Bureau, 2017 NAICS Definition, NAICS Code 517311 “Wired Telecommunications Carriers,”
https://www.census.gov/cgi-bin/sssd/naics/naicsrch?code=517311&search=2017.

40

See 13 CFR § 120.201, NAICS Code 517311 (previously 517110).

41

See U.S. Census Bureau, 2012 Economic Census of the United States, Table No. EC1251SSSZ5, Information:
Subject Series - Estab & Firm Size: Employment Size of Firms: 2012 (517110 Wired Telecommunications Carriers).
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.

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employees. 42 According to Commission data, 359 companies reported that their primary
telecommunications service activity was the provision of interexchange services. 43 Of this total, an
estimated 317 have 1,500 or fewer employees. 44 Consequently, the Commission estimates that the
majority of interexchange service providers are small entities.
15.
Local Resellers. The SBA has developed a small business size standard for the category
of Telecommunications Resellers. The Telecommunications Resellers industry comprises establishments
engaged in purchasing access and network capacity from owners and operators of telecommunications
networks and reselling wired and wireless telecommunications services (except satellite) to businesses
and households. Establishments in this industry resell telecommunications; they do not operate
transmission facilities and infrastructure. Mobile virtual network operators (MVNOs) are included in this
industry. 45 Under that size standard, such a business is small if it has 1,500 or fewer employees. 46 Census
data for 2012 show that 1,341 firms provided resale services during that year. Of that number, all
operated with fewer than 1,000 employees. Thus, under this category and the associated small business
size standard, the majority of these resellers can be considered small entities.
16.
Toll Resellers. The SBA has developed a small business size standard for the category of
Telecommunications Resellers. Under that size standard, such a business is small if it has 1,500 or fewer
employees. 47 According to Commission data, 881 carriers have reported that they are engaged in the
provisions of toll resale services. 48 Of this total, an estimated 857 have 1,500 or fewer employees and 24
have more than 1,500 employees. 49 Consequently, the Commission estimates that the majority of toll
resellers are small entities that may be affected by our action.
17.
Other Toll Carriers. Neither the Commission nor the SBA has developed a size standard
for small businesses specifically applicable to Other Toll Carriers. This category includes toll carriers
that do not fall within the categories of interexchange carriers, operator service providers, prepaid calling
card providers, satellite service carriers, or toll resellers. The closest applicable NAICS code is for Wired
Telecommunications Carriers. 50 The applicable size standard under SBA rules is that such a business is
small if it has 1,500 or fewer employees. 51 According to Commission data, 284 companies reported that
their primary telecommunications service activity was the provision of other toll carriage. 52 Of this total,
an estimated 279 have 1,500 or fewer employees and five have more than 1,500 employees. 53

42

Id. The largest category provided by the census data is “1000 employees or more” and a more precise estimate for
firms with fewer than 1,500 employees is not provided.
43

See Trends in Telephone Service, Federal Communications Commission, Wireline Competition Bureau, Industry
Analysis and Technology Division at Table 5.3 (Sept. 2010) (Trends in Telephone Service).
https://apps.fcc.gov/edocs_public/attachmatch/DOC-301823A1.pdf.
44

Id.

45

U.S. Census Bureau, 2012 NAICS Definition, https://www.census.gov/cgibin/sssd/naics/naicsrch?input=517911&search=2012+NAICS+Search&search=2012 (last visited June 17, 2020).
46

13 CFR § 121.201 (NAICS Code 517911).

47

See 13 CFR § 121.201, NAICS Code 517911 (previously 517310).

48

See Trends in Telephone Service at Table 5.3.

49

See id.

50

See 13 CFR § 121.201, NAICS Code 517311 (previously 517110).

51

See 13 CFR § 121.201, NAICS Code 517311 (previously 517110).

52

See Trends in Telephone Service at Table 5.3.

53

See id.

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Consequently, the Commission estimates that most Other Toll Carriers are small entities that may be
affected by our action.
18.
Payphone Service Providers (PSPs). Neither the Commission nor the SBA has
developed a small business size standard specifically for payphone services providers, a group that
includes inmate calling services providers. The appropriate size standard under SBA rules is for the
category Wired Telecommunications Carriers. Under that size standard, such a business is small if it has
1,500 or fewer employees. 54 According to Commission data, 55 535 carriers have reported that they are
engaged in the provision of payphone services. Of this total, an estimated 531 have 1,500 or fewer
employees and four have more than 1,500 employees. 56 Consequently, the Commission estimates that the
majority of payphone service providers are small entities that may be affected by our action.
19.
All Other Telecommunications. The “All Other Telecommunications” category is
comprised of establishments primarily engaged in providing specialized telecommunications services,
such as satellite tracking, communications telemetry, and radar station operation. 57 This industry also
includes establishments primarily engaged in providing satellite terminal stations and associated facilities
connected with one or more terrestrial systems and capable of transmitting telecommunications to, and
receiving telecommunications from, satellite systems.58 Establishments providing Internet services or
voice over Internet protocol (VoIP) services via client-supplied telecommunications connections are also
included in this industry. 59 The SBA has developed a small business size standard for All Other
Telecommunications, which consists of all such firms with annual receipts of $35 million or less. 60 For
this category, U.S. Census Bureau data for 2012 show that there were 1,442 firms that operated for the
entire year. 61 Of those firms, a total of 1,400 had annual receipts less than $25 million and 15 firms had
annual receipts of $25 million to $49, 999,999. 62 Thus, the Commission estimates that the majority of
“All Other Telecommunications” firms potentially affected by our action can be considered small.
D.

Description of Projected Reporting, Recordkeeping, and Other Compliance
Requirements for Small Entities

20.
Whereas the current interim rate caps differentiated between prepaid and debit calls and
collect calls, the Commission proposes to adopt identical interstate rate caps for prepaid, debit, and collect
calls. 63 These proposed rates differentiate between facility types, proposing a rate cap for jails that is
$0.02 per minute higher than the rate cap we propose for prisons. 64 The Commission also proposes to
adopt, for the first time, rate caps for international inmate calling services calls. The Commission
54

See 13 CFR § 121.201, NAICS code 517311 (previously 517110).

55

See Trends in Telephone Service at Table 5.3.

56

See id.

57

See U.S. Census Bureau, 2017 NAICS Definitions, NAICS Code “517919 All Other Telecommunications”,
https://www.census.gov/cgi-bin/sssd/naics/naicsrch?input=517919&search=2017+NAICS+Search&search=2017.

58
59
60

Id.
Id.
See 13 CFR § 121.201, NAICS code 517919.

61

U.S. Census Bureau, 2012 Economic Census of the United States, Table EC1251SSSZ4, Information: Subject
Series - Estab and Firm Size: Receipts Size of Firms for the United States: 2012, NAICS code 517919,
https://data.census.gov/cedsci/table?q=EC1251&hidePreview=true&table=EC1251SSSZ5&tid=ECNSIZE2012.EC1
251SSSZ5&lastDisplayedRow=28#.
62

Id.

63

Fourth Further Notice, Part IV.A.

64

Id.

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recognizes that these proposed changes to the rate cap structure will likely require providers to make
adjustments to their billing systems. The Commission proposes a 90-day transition period to alleviate any
burden on providers associated with this change and to allow providers sufficient time to make the
necessary changes. 65
E.

Steps Taken to Minimize the Significant Economic Impact on Small Entities and
Significant Alternatives Considered

21.
The RFA requires an agency to describe any significant alternatives that it has considered
in reaching its proposed approach, which may include the following four alternatives (among others):
(1) the establishment of differing compliance or reporting requirements or timetables that take into
account the resources available to small entities; (2) the clarification, consolidation, or simplification of
compliance and reporting requirements under the rules for such small entities; (3) the use of performance
rather than design standards; and (4) an exemption from coverage of the rule, or any part thereof, for such
small entities. 66 We expect to consider all of these factors when we receive substantive comment from
the public and potentially affected entities.
22.
The Commission’s proposed rate caps differentiate between prisons and jails to account
for differences in costs incurred by inmate calling services providers servicing these different facility
types. 67 The Commission believes the proposed rate caps will ensure that inmate calling services
providers serving jails, which may be smaller, higher-cost facilities, and larger prisons, which often
benefit from economies of scale, can both recover their legitimate inmate calling services-related costs.
To further ease the burdens on providers serving smaller jails, the Commission proposes to adopt higher
allowances for correctional facility costs for inmate calling services providers serving smaller jails if the
record supports such allowances. 68 The Commission’s proposed rate caps also include $0.02 allowance
for costs correctional facilities incur that are directly related to the provision of inmate calling services
and that represent a legitimate cost for which providers of inmate calling services may have to
compensate facilities. The Commission recognizes that for contracts covering only smaller jails, the
facility costs at these particular facilities may exceed $0.02 per minute, and seeks comment on whether
the rate caps should adopt higher allowances for correctional facility costs for such contracts.69
23.
The Commission recognizes that it cannot foreclose the possibility that in certain limited
instances, the proposed rate caps may not be sufficient for certain providers to recover their legitimate
costs for providing inmate calling services. To minimize the burden on providers, the Commission
proposes a waiver process that allows providers to seek relief from its rules at the facility or contract level
if they can demonstrate that they are unable to recover their legitimate inmate calling services-related
costs at that facility or for that contract. If the provider demonstrates that its higher costs at the facility or
contract level are legitimately related to the provision of inmate calling services, the Commission
proposes to raise each applicable rate cap to a level that enables the provider to recover the costs of
providing inmate calling services at that facility. We seek comment on this proposed waiver process, and
on whether the same waiver process should be employed with respect to the proposed international rate
caps.
24.
Given the significant reduction in interstate inmate calling services rates proposed by the
Commission, some providers may need to re-negotiate their existing contracts with correctional facilities.
To provide inmate calling services providers adequate time to make necessary adjustments to their
65

Id.

66

5 U.S.C. § 603(c)(1)-(4).

67

Fourth Further Notice, Part IV.A.

68

Fourth Further Notice, Part IV.A.3.

69

Id.

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contracts, and to mitigate any other burdens that may result from implementing the proposed interstate
and international rate caps, the Commission proposes to allow a 90-day transition period for the proposed
rate caps to take effect. 70 The Commission seeks comment on the length of this transition period and
whether it will afford inmate calling services providers and correctional facilities sufficient time to
implement the proposed rate caps.
25.
The Commission expects to consider the economic impact on small entities, as identified
in comments filed in response to the Further Notice and this IRFA, in reaching its final conclusions and
promulgating rules in this proceeding. Specifically, the Commission will conduct a cost-benefit analysis
as part of this proceeding and consider the public benefits of any such requirements it might adopt to
ensure that they outweigh any impact on small business.

70

F.

Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

26.

None.

Fourth Further Notice, Part IV.A.

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APPENDIX E
Analysis of Responses to the Second Mandatory Data Collection
In response to the Second Mandatory Data Collection, 1 13 providers of inmate calling services
submitted data to the Commission (see Table 1). 2 The collected data included information on numerous
characteristics of the providers’ contracts, such as:
•
•
•
•
•
•
•
•

Whether the contract was for a prison or a jail;
The average daily inmate population (average daily population) of all the facilities covered by the
contract;
The total number of calls made annually under the contract, broken out by paid and unpaid, with
paid calls further broken out by debit, prepaid, and collect;
Total call minutes; call minutes broken out by paid and unpaid; interstate, intrastate, and
international; and prepaid, debit, and collect calls;
Inmate calling services revenues, broken out by prepaid, debit, and collect;
Automated payment revenues and paper bill or statement revenues, earned under the contract
(live operator revenues were not collected);
Site commissions paid to facility operators under the contract; and
Each provider’s inmate calling services costs in total, exclusive of site commissions.

Inmate calling services costs are for inmate calling services only, and thus do not include costs
for lines of business such as video visitation services, or fees passed through to callers, such as credit card
processing fees. While providers generally reported at least some inmate calling services costs at the
level of the contract, and more rarely at the level of the facility, each did this differently. In this
Appendix, we define costs reported at the level of the contract or facility respectively as the direct costs of
the contract or facility.

1

Rates for Inmate Calling Services, WC Docket No. 12-375, Second Report and Order and Third Further Notice of
Proposed Rulemaking, 30 FCC Rcd 12763, 12862, para. 98 (2015); ; see Wireline Competition Bureau Reminds
Providers of Inmate Calling Services of the March 1, 2019 Deadline for Data Collection Responses, WC Docket
No. 12-375, Public Notice, 34 FCC Rcd 515 (WCB 2019).
2

The 13th provider, Talton, is excluded from Table 1 for the reasons discussed further below.

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Table 1 – Selected Statistics of Responding Providers
Provider

# of
Contracts

ADP

ADP
(% of Total)

Paid Minutes
(millions)

Paid Minutes
(% of Total)

Per-Paid Minute
Cost

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

{[

]}

Industry

2,935

2,246,940

100.0

7,821

100.0

0.089

Note: Average daily population was reported for only 2,846 out of 2,935 contracts.

Dropped observations. We removed one contract reported by {[
]} that had a per-minute cost
of $7.48 as this is most likely a data error. If the per-minute cost of providing this contract was $7.48,
then that implies an implausible error in bidding on the part of the contracting provider. In 2018, 379,155
total minutes were reported as delivered on this contract, while only 6,137 were reported as paid minutes,
which in and of itself is implausible. These paid minutes earned revenues of $184, for an average perminute price of $0.03, implying the contract incurred an annual loss of $2,824,705. 1
We also excluded two contracts that are not comparable to the average correctional facility
because they are managed by Immigration and Customs Enforcement (ICE) and the Federal Bureau of
Prisons (BOP). 2 The ICE contract was the only contract held by Talton, so dropping this contract
eliminated Talton from our dataset thus resulting in Table 1 showing only 12 providers. Before dropping
the BOP contract, we allocated a share of GTL’s overhead to the BOP contract as described below. This
resulted in a final dataset of 2,935 contracts, accounting for 2.2 million incarcerated individuals and 7.8
billion paid minutes.
Adjustments to the underlying data. Unless otherwise noted, we accepted the filers’ data and
related information “as provided” (i.e., without any modifications). We applied three processes to
ultimately geocode 3,784 or 88% of the 4,319 filed facilities. Geocoding is a process of associating
longitude and latitude coordinates to a facility’s address to conduct geographic analyses. We first used
1

Staff discussed this particular contract with the reporting provider and such provider conceded that it was likely an
error but because it related to a contract from an inmate calling services provider it had previously acquired, it had
no basis to determine what the actual costs associated with that contract were. As a result, we do not include the
contract in our analysis.

2

See Description and Justification for Talton Communication, Inc.’s Mandatory Data Collection Report, WC
Docket No. 12-375, at 1 (filed Mar. 1, 2019) (stating that Talton “does not bill or collect revenues nor do we incur
the cost of service”); see also Global Tel*Link, FCC Form 2301(a) – Inmate Calling Services Annual Report, WC
Docket No. 12-375, Tab I.a Narrative (3), Row 102 (filed Apr. 1, 2020) (Confidential version) (GTL Annual Report)
({[
]}).

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ArcMap software version 10.8 to geocode 3,321 or 77% of the 4,319 filed facilities. 3 We then took a
random sample of 170, or 17%, of the 998 addresses we were unable to geocode, and where possible,
corrected them manually. We were able to geocode 164 of these 170 addresses. Finally, we developed a
Python script to clean up the remaining addresses—which we then manually checked—and were able to
geocode 299 additional facilities this way. In instances of contracts with multiple facilities, we were
unable to geocode the relevant facilities where a filer only provided a single address. 4 In some instances a
mailing address was reported. 5 If this was different from the facility’s physical address and the address
correction process did not detect this error, then the mailing address was used.
Unit of analysis. Our analysis was typically conducted at the contract level. This approach is
consistent with our view that the contract is the primary unit of supply for inmate calling services. That
is, providers bid on contracts, rather than facilities (though in many instances the contract is for a single
facility). This approach is also consistent with how the data were submitted. The Commission requested
information to be submitted for each correctional facility where a provider offers inmate calling services,
and some key variables—for example, the quantity of calls and minutes of use—were reported by facility.
However, even though over 90% of contracts were reported as representing a single facility, most filers
do not maintain all of the data we requested by facility in the ordinary course of their business. As a
result, in some instances, contracts were reported that covered multiple facilities without any breakout of
those facilities. In other cases, some facility-level data was not reported. Examples of the latter include
average daily inmate population and credit card processing costs. In any event, because we required
providers to cross-reference their contracts with the facilities they covered, we were able to group
facilities by contract, which facilitated our ability to conduct our analysis at the contract level.
Cost allocation. General and administrative costs are, by definition, not directly attributable to
any contract. In this Appendix, the difference between a filer’s total costs and its direct costs (i.e., the
costs it reported at the level of the contract or facility) is termed “overheads.” Each filer applied its own
accounting practices in reporting overheads. For example, GTL reported bad debt as its only direct cost,
all the way down to the facility. All of its other costs thus appear as if they were overheads. By contrast,
one provider allocated all of its costs using the number of phones that it had installed down to the level of
the contract, implying it had no overheads. Other firms allocated some costs using a fully distributed cost
key, such as shares of minutes; others used revenue shares which typically have no relation to why costs
are incurred.
To provide a common basis of comparison, and to allow a focus on per-minute rates, we allocated
overheads among each provider’s contracts in proportion to the contracts’ shares of the provider’s total
minutes. We used total minutes at both the contract level and the provider level, rather than paid minutes,
because all minutes cost something to provide, regardless of whether they generate any revenue.
Once all costs were allocated, the per-minute cost of a contract was calculated by dividing the
total cost of each contract by its quantity of paid minutes. Paid minutes were used because those are the
minutes that providers rely on to recover their costs. See Table 2.

3

We used the geocoding database ArcGIS StreetMap Premium North America (2020 Release 1).

4

See, e.g., Revised Description and Justification for Global Tel*Link Corporation’s Mandatory Data Collection
Report, WC Docket No. 12-375, at para. 21 (filed May 19, 2020) (Redacted for Public Inspection) (GTL Revised
Description and Justification).

5

Id.

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Table 2 – Contract Per-Minute Costs by Facility Type Using an All-Minute Cost Allocation Key
Metric (2018 Data Only)
Mean
Standard Deviation
Mean + One Standard Deviation
# of Outliers (Mean + 1 Std. Dev.)
Mean + Two Standard Deviations
# of Outliers (Mean + 2 Std. Dev.)

Prisons
$0.091
$0.040
$0.131 (= $0.091 + $0.040)
9/131 contracts; 6.9%
$0.171 (= $0.091 + $0.040 x 2)
1/131 contracts; 0.8%

Jails
$0.084
$0.062
$0.146 (= $0.084 + $0.062)
193/2,804 contracts; 6.9%
$0.208 (= $0.084 + $0.062 x 2)
50/2,804 contracts; 1.8%

Choosing among cost allocation keys. After looking at six possible cost allocation keys that the
data would allow us to implement—call minutes, average daily population, calls, revenues, contracts, and
facilities—we found call minutes to provide the best allocator.
The primary aim of a cost allocation key is to find a reasonable way of attributing costs, in this
case to contracts, that either cannot be directly attributed, such as true overheads, or that, while
conceptually could be attributed to a specific contract, cannot be attributed based on how providers’
accounts are kept. Such a key must be likely to reflect cost causation and result in rates that demand can
bear. 6 On this basis, we are able to narrow our focus to a call minute key or call key. We chose call
minutes over calls on the basis that a call minute key is the natural choice given the ubiquity of call
minute pricing.
Tables 3 and 4 provide information about the distribution of contract costs per minute under each
of the six possible keys. The average daily population, contract, and facility cost allocation keys result in
many contracts with implausible contract-level per-minute costs. For example, the average daily
population cost allocation key shows an average prison contract cost per paid minute of nearly $0.58 and
a jail contract per paid minute cost of nearly $7. By contrast, average call revenue per paid minute
including automated payment and paper bill/statement revenues is $0.148 for prison contracts, and $0.360
for jail contracts. (Ideally live operator service revenues would also be accounted for, but we do not have
this data.) The average daily population cost allocation key shows 10% of prison contracts have costs in
excess of $0.319 per paid minute. Yet, 99% of prison contracts have an average paid minute rate (the
sum of inmate calling services, automated payment, and paper bill or statement revenues divided by all
paid minutes) of less than $0.319. 7 Given that such contracts are surely mutually beneficial to both the
provider and the correctional facility, they must generate enough revenues to cover costs. Just as
implausibly, four jail contracts would have per-minute costs in excess of $240 (see Table 4), and three
would have per-minute costs in excess of $480 (not shown in Table 4). Again, by contrast, when using
the call minute key, no prison contracts have per-minute costs above $0.226, and the highest jail perminute cost is $1.460.
The average daily population key is additionally problematic because average daily population
data are often inaccurate,8 and—in the case of 89 contracts—simply missing from the providers’
6
See, e.g., David Heald, Contrasting Approaches to the ‘Problem’ of Cross Subsidy, 7 Management Accounting
Research 53, at 55, 56-57, 68 (1996), https://pdfs.semanticscholar.org/
885e/67a7e7df2e76fb89abd1b817bdb722c651d1.pdf.
7

The equivalent number for jail contracts is 37% have costs above $0.333 (the 90th percentile per paid minute cost
for jail contracts with an average daily population cost allocation key), which looks more reasonable, but there is no
reason to think allocating costs by average daily population should work for prisons, but not jails.

8

Multiple providers reported that they do not know the average daily population of the facilities they serve but were
able to provide estimates at the contract-level. See, e.g., GTL Revised Description and Justification at 10 (“GTL’s
response to the Data Collection provides data on a contract-by-contract basis”); Description and
Justification for Securus Technologies, Inc.’s Mandatory Data Collection Report, WC Docket No. 12-375, at 2 (filed
Mar. 1, 2019) (Redacted for Public Inspection) (“In the ordinary course of business, Securus does not track ADP at

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responses. A cost allocation key based on the number of facilities is also problematic as facility data were
not reported for many contracts with multiple facilities.
The cost allocations based on contracts and facilities are even more unrealistic, with both
displaying a mean contract per-minute cost in excess of $40 (see Table 3).
Table 3 – The Distribution of Contract Per-Minute Costs
by Facility Type Using Various Cost Allocators
Allocation Facility
Key
Type
Jail
Minutes
Prison
Jail
ADP
Prison
Jail
Calls
Prison
Jail
Revenue
Prison
Jail
Contracts
Prison
Jail
Facilities
Prison

Mean

Std. Dev.

0.084
0.091
6.974
0.577
0.107
0.100
0.135
0.100
42.658
3.869
41.284
3.786

0.062
0.040
236.854
4.184
0.097
0.091
0.121
0.170
1,005.685
37.995
1,002.770
37.116

1st

10th

25th

0.009
0.028
0.000
0.000
0.009
0.009
0.007
0.013
0.006
0.003
0.006
0.003

0.027
0.041
0.022
0.030
0.025
0.026
0.027
0.032
0.034
0.008
0.034
0.012

0.055
0.051
0.044
0.043
0.052
0.047
0.059
0.040
0.090
0.019
0.085
0.022

Percentiles
50th 75th
0.073
0.121
0.075
0.072
0.090
0.089
0.107
0.063
0.280
0.055
0.237
0.060

0.118
0.122
0.132
0.145
0.132
0.120
0.172
0.114
1.190
0.232
1.034
0.227

90th

99th

0.137
0.127
0.333
0.319
0.197
0.172
0.266
0.206
4.906
0.915
4.446
0.894

0.262
0.166
10.495
12.806
0.448
0.440
0.522
0.257
221.786
26.031
158.262
25.429

the facility level. Securus only tracks ADP at the contract/customer level.”); Description and Justification for
CenturyLink Public Communications, Inc.’s Mandatory Data Collection Report, WC Docket No. 12-375, at 3 (filed
Mar. 1, 2019) (Redacted for Public Inspection) (explaining that CenturyLink “provides inmate calling services
through procurements conducted by states and local correctional authorities. It does not develop, and does not have,
cost data specific to individual correctional facilities.” This is true more broadly, including for ADP, which
CenturyLink only reported at the level of the contract.).

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Table 4 – Contract Per-Minute Costs
by Facility Type Using Various Cost Allocators
Allocation
Key
Minutes
ADP
Calls
Revenue
Contracts
Facilities

Facility
Type
Jail
Prison
Jail
Prison
Jail
Prison
Jail
Prison
Jail
Prison
Jail
Prison

Mean +
One Std.
Dev.
0.146
0.131
243.828
4.761
0.204
0.191
0.256
0.270
1,048.343
41.864
1,044.054
40.902

Total
Contracts

Contracts
Below

Contracts
Above

Contracts
Above (%)

2,804
131
2,804
131
2,804
131
2,804
131
2,804
131
2,804
131

2,610
122
2,800
129
2,558
122
2,441
130
2,794
130
2,794
130

194
9
4
2
246
9
363
1
10
1
10
1

6.9
6.9
0.1
1.5
8.8
6.9
12.9
0.8
0.4
0.8
0.4
0.8

Although a revenue cost allocation key may be used for certain accounting purposes, a revenue
key is inappropriate for regulatory purposes because revenue is not a cost driver. While costs can be
expected to increase with quantity sold, revenues do not always increase with quantity sold, and this can
lead to perverse effects. Quantity sold increases as price falls. Starting from a price where no sales are
made, revenues also increase as prices fall. However, at some point as prices fall, revenues also begin to
fall: the revenue gain from new sales made at the lower price is smaller than the revenue loss incurred due
to the lower price as applied to all purchases that would have been made at the higher price. In that
circumstance, holding other things constant, a revenue cost allocator would allocate less costs to a
contract with a greater sales volume, contrary to cost causation. This also means a revenue key can
reinforce monopoly prices. The exercise of market power can result in higher revenues than would be
earned in a competitive market. In that circumstance, holding other things constant, a revenue allocation
key would allocate more costs to monopolized services than competitive ones. 9
This leaves call minutes and calls as potential cost allocation keys. A call minute cost allocation
key is the natural choice for setting per-minute inmate calling services rates. It is common in inmate
calling services supply to charge per-minute rates, and not per call rates, even if sometimes the first
minute has a different rate from subsequent rates.
Subcontracts. Some inmate calling services providers subcontract some or all of their contracts
to a second provider. 10 This raises the question of how to deal with overhead costs in the case of
subcontractors. We take an approach that may double count some overhead costs, as we cannot identify
what fraction of the subcontractors’ overhead costs are captured in what they charge the prime contractor.
The reporting of costs for shared contracts varies by provider. Where the prime contractor only
reported the cost of supplying the broadband connection on its contracts, while the subcontractor reported
9

See, e.g., Heald, supra note 414 at 68.

10

In 2018, of CenturyLink’s {[ ]} inmate calling services contracts, we have data on {[ ]} which were
subcontracted (CenturyLink has {[
]} subcontracts with {[
]} but {[
]} did not report data for these
contracts), and a third contract has no reported subcontractor; additionally, {[
]}
employed a subcontractor for all of its {[ ]} contracts).

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the costs of servicing the facilities (installation, maintenance, etc.), we aggregated their costs. Because
the reported costs represent the provision of different services, we do not believe these contracts have
costs that were double counted. Other providers operating as prime contractors reported all costs
(including subcontractors’ costs). Where their associated subcontractor did not file reports on the
subcontracts, we used the costs as reported by the prime contractor. However, where the associated
subcontractors reported their costs, we removed their direct costs to avoid counting them twice.
The subcontracting filers were also the main inmate calling services suppliers on other contracts,
raising the question of how to avoid double counting the allocation we made for overhead costs for their
subcontracts. Leaning toward overstating costs, overhead on each shared contract was assigned using the
methodology described above (i.e., a shared contract is allocated the overhead of both providers that
report the contract). Afterwards, the two observations were aggregated into one and placed under the
name of the firm that is the primary contract holder.
Inclusion of the overhead costs reported by the subcontractors overstates the cost recovering rate
if, as is likely, they charge a markup over their direct costs. The markup would be part of the prime
contractor’s reported expenses, and to avoid double counting, we would need to remove the markup from
our calculations. We cannot determine the amount of this markup, however. One approach would be to
assume the markup matched our overhead cost allocation. In that case, the overhead costs of a
subcontractor that are allocated to a subcontract would not be counted as they would be captured in the
prime contractor’s costs. However, if the markup exceeded this amount, we would still be double
counting costs, while if the markup was less than this amount, then we would be understating costs.
Table 5, when compared with Table 3, shows the impact of assuming that the markup matches our
overhead cost calculation on the distribution of per-minute costs to be small.

Table 5 – Contract Per-Minute Costs by Facility Type Using Various Cost Allocators
Adjusted to Avoid Double Counting of Subcontractor Overheads
Allocation Facility
Key
Type
Jail
Minutes
Prison
Jail
ADP
Prison
Jail
Calls
Prison
Jail
Revenue
Prison
Jail
Contracts
Prison
Jail
Facilities
Prison

Mean

Std. Dev

0.084
0.090
6.977
0.579
0.106
0.100
0.134
0.099
42.672
3.898
41.297
3.813

0.062
0.041
236.896
4.200
0.097
0.091
0.122
0.171
1,005.864
38.140
1,002.949
37.259

1st

10th

25th

0.009
0.023
0.000
0.000
0.009
0.009
0.007
0.013
0.006
0.003
0.006
0.003

0.027
0.039
0.022
0.029
0.025
0.026
0.027
0.029
0.034
0.007
0.034
0.011

0.055
0.050
0.044
0.041
0.052
0.047
0.058
0.037
0.088
0.019
0.082
0.022

Percentiles
50th 75th
0.073
0.121
0.075
0.068
0.089
0.088
0.107
0.053
0.279
0.053
0.236
0.058

0.118
0.122
0.132
0.145
0.132
0.120
0.171
0.114
1.187
0.232
1.033
0.227

90th

99th

0.136
0.127
0.333
0.330
0.196
0.173
0.266
0.206
4.906
0.922
4.446
0.897

0.262
0.166
10.495
12.806
0.448
0.440
0.522
0.257
221.786
26.031
158.262
25.429

If we were to remove all subcontractor overhead costs allocated to CenturyLink’s contracts, the
average per-minute cost of CenturyLink’s contracts would decrease from {[
]}.
Ancillary Revenues and Cost Recovery. Inmate calling services revenues do not include ancillary
revenues. However, in many instances, ancillary revenues contribute toward cost recovery. We
distinguish two sources of ancillary revenues. The first are those earned from passthrough fees, that is
fees that are required to no more than match the costs the provider pays to a third party. Examples are
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credit card processing revenues and third-party transaction revenues. The costs that are passed through to
inmates in this manner are not included in inmate calling service costs. Thus, they net out of any costrecovery estimation, and here we consider them no further.
The second are revenues earned on three ancillary services: automated payments, paper billing
and statements, and live agent services. The costs of these services are included in the providers’ inmate
calling costs. Thus, matching revenues with costs requires that the revenues from these sources also be
included. However, it is likely the data we collected do not fully match relevant ancillary revenues with
reported inmate calling services costs because we did not collect data on live agent service revenues and
because we do not know how providers allocated costs of shared services and revenues to inmate calling
services. As an example, consider a payment account which must be used to purchase inmate calling
services, as well as commissary services, tablet access, and similar. If usage fees are charged to set up or
to deposit money, then the provider may not have reported these in their ancillary revenues, considering
them not to solely be attributable to inmate calling services. However, they may have allocated some or
all the costs of the payment system in inmate calling services.
Table 6 shows for each provider, and for all providers, inmate calling revenues, automated
payment revenues, paper billing and account revenues, the sum of these three revenues, inmate calling
costs, and the difference between those summed revenues and inmate calling costs.
Table 6 – Inmate Calling Services Revenues and Costs
by Provider and for Industry (in $ millions)
Provider

ICS
Revenues

ATN
CenturyLink

APF
Revenues

PBF
Revenues

Total
Revenues

Total Costs

{[

Difference
]}

{[

]}

Correct

{[

]}

CPC

{[

]}

Crown
GTL

{[

]}

{[

]}

ICSolutions

{[

]}

Legacy

{[

]}

NCIC

{[

]}

Pay Tel

{[

]}

Prodigy

{[

Securus

{[

Industry

1,096,391

]}
]}
116,124

410

1,212,926

697,321

515,605

Table 7 shows for each provider, and for all providers, split by prisons and jails, the contract
mean of total per paid minute revenues (that is, the mean for each contract of the sum of inmate calling
revenues, automated payment revenues, paper billing and account revenues divided by paid minutes), the
contract mean of per paid minute costs, the contract mean of per paid minute direct costs. At least three
of the direct cost per minute entries are misleading: Legacy and NCIC report zero direct costs, while GTL
only reports bad debt as a direct cost, the result being GTL’s direct costs per minute are {[
]}. In
actuality, these three providers almost certainly have substantially larger direct costs and hence
substantially larger direct costs per minute.

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Table 7 – Inmate Calling Services per Minute Revenues and Costs
by Provider and for Industry by Jail and Prison ($)

Provider

Facility
Type

Contract
Mean
Revenues
Per Paid
Minute

Contract
Mean Costs
Per Paid
Minute

Contract
Mean
Direct
Costs Per
Paid
Minute
]}

ATN

Jail

{[

CenturyLink

Jail

{[

]}

Correct

Jail

{[

]}

CPC

Jail

{[

]}

Crown

Jail

{[

]}

GTL

Jail

{[

]}

ICSolutions

Jail

{[

]}

Legacy

Jail

{[

]}

NCIC

Jail

{[

]}

Pay Tel

Jail

{[

]}

Prodigy

Jail

{[

]}

Securus

Jail

{[

Industry

Jail

]}

0.360

0.084

0.024

CenturyLink
GTL

Prison
Prison

{[
{[

]}
]}

ICSolutions

Prison

{[

]}

Legacy

Prison

{[

]}

NCIC

Prison

{[

]}

Securus

Prison

{[

]}

Industry

Prison

0.148

0.091

0.010

Table 8 shows the number and percent of contracts for which various revenue estimates cover
total and direct costs. 11 We project, at the proposed rates and assuming ancillary service revenues remain
the same, 98% of contracts would recover their total costs as allocated (or 99% if the 10% discount of
GTL’s costs is applied). This is likely an underestimate since many providers’ costs may be overstated,
and the full range of ancillary fees that contribute toward recovering inmate calling service costs are not
reported.

11
The number of Legacy, NCIC and GTL contracts that cover direct costs as reported in the third last and last
columns are overstated for the reasons just given.

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Table 8 – Number and Percent of Contracts for Which
Various Revenue Estimates Cover Total and Direct Costs

Provider

Facility
Type

Total Costs
Covered by
Ancillary
Revenues

Total Costs
Covered by
Projected ICS
Revenues

Direct Costs
Covered by
Projected ICS
Revenues

Total Costs
Covered by
Projected ICS
Revenues and
Ancillary
Revenues

Direct Costs
Covered by
Projected ICS
Revenues and
Ancillary
Revenues

ATN

Jail

{[

]}

CenturyLink

Jail

{[

]}

Correct

Jail

{[

]}

CPC

Jail

{[

]}

Crown

Jail

{[

]}

GTL

Jail

{[

]}

ICSolutions

Jail

{[

]}

Legacy

Jail

{[

]}

NCIC

Jail

Pay Tel

Jail

{[

]}

Prodigy

Jail

{[

]}

Securus

Jail

{[

]}

Industry

Jail

547

CenturyLink

Prison

{[

]}

GTL

Prison

{[

]}

ICSolutions

Prison

{[

]}

Legacy

Prison

{[

]}

NCIC

Prison

{[

]}

Securus

Prison

{[

]}

Industry

Prison

0

{[

]}

(20%)

(0%)

2677

123

(95%)

(94%)

75

2768

131

(99%)

(100%)

2759

129

(98%)

(98%)

2804

131

(100%)

(100%)

Federal Communications Commission

FCC-CIRC2008-05

APPENDIX F
Sensitivity Testing: Additional Statistical Analysis of Cost Data
We analyzed inmate calling services providers’ responses to the Second Mandatory Data
Collection to determine whether certain characteristics of inmate calling services contracts could be
shown to have a meaningful association with contract costs on a per-minute basis as reported by
providers. In this analysis, we considered characteristics such as the average daily population of the
facilities covered by the contract, the type of those facilities (prison or jail), and rurality of those facilities.
If such an association exists, it might be appropriate to set rates that vary according to the variables we
identified.
We used a statistical method called Lasso to explore: (a) which variables are good predictors of
per-minute contract costs and (b) the likelihood that a given contract is in the top 5% of contracts on a
cost per minute basis (hereinafter referred to as an outlier). 1 Lasso identifies predictors of an outcome
variable—the logarithm of costs per minute, or outlier status in this case—by trading off goodness of fit
against model parsimony. Lasso retains a set of predictors that optimally balance the quality of the
prediction against the complexity of the model, as measured by the number of predictors, and is especially
useful in situations like this where many variables, and interactions among those variables, could predict
an outcome of interest. We found the main predictors of both costs per minute and outlier contracts to be
provider identity and the state where the contract’s correctional facilities were located. We also found
that whether the facility is a prison or jail is a predictor of costs per minute, although weaker than
provider identity and state. Finally, we found a wide range of other variables have less or essentially no
predictive power.
We chose the inmate calling services contract as the unit of observation for our analysis for two
reasons. First, providers bid for contracts rather than individual facilities, so the contract is the level at
which commercial decisions are made. Second, many contracts cover more than one facility but
providers did not report data on those facilities separately, which precludes any analysis at the facility
level. 2 We focused on the logarithm of costs as the dependent variable. The contract variables that we
considered in our analysis are as follows:
•
•
•
•
•
•
•
•

The identity of the inmate calling services provider;
The state(s) in which correctional facilities covered by a contract are located;
The Census division(s) and region(s) in which facilities covered by a contract are located;
The type of facility covered by the contract (prison or jail);
An indicator for joint contracts (i.e., contracts for which an inmate calling services provider
subcontracts with another inmate calling services provider);
Contract average daily population;
Contract average daily population bins (average daily population ≤ 25, average daily
population ≤ 50, average daily population ≤ 100, average daily population ≤ 250, average
daily population ≤ 500, average daily population ≤ 1000, average daily population ≤ 5000);
Rurality of the facilities covered by the contract (rural, if all the facilities covered by the

1

See generally Robert Tibshirani, Regression Shrinkage and Selection via the Lasso, 58 Journal of the Royal
Statistical Society Series B (Methodological) 267 (1996),
https://rss.onlinelibrary.wiley.com/doi/epdf/10.1111/j.2517-6161.1996.tb02080.x.

2

For example, this commonly occurred in the filings of both GTL and CenturyLink. For example, GTL’s {[

]}. Contracts where the separate facilities were not reported would distort any facility-based analysis.

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•

FCC-CIRC2008-05

contract are located in a census block designated by the Bureau of Census as rural, and urban,
if all facilities were located in a census block not designated as rural, or mixed if the contract
covered facilities designated as rural and not rural); and
Various combinations (i.e., multiplicative interactions) among the above variables.

Lasso and costs per minute. The Lasso results indicate economically significant differences in
costs per minute primarily across providers and states. The provider and state variables retained by Lasso
as predictors of cost explain approximately 71% of the variation in costs across contracts. Lasso results
also indicate less important differences in costs per minute by facility type (prison or jail), average daily
population and average daily population-related variables, and rurality. When retained as predictors by
Lasso, these variables explain approximately 1% more of the variation in costs than the state and provider
variables alone. The differences in costs measured by provider identity may reflect either systematic
differences in costs across providers, or systematic differences in the way costs are calculated and
reported by providers. The differences in cost measured by the state variables may reflect statewide
differences in costs arising from different regulatory frameworks or other state-specific factors.
One concern arising in the analysis is that a group of contracts representing a significant
fraction—about 11%—of observations contained insufficient information to ascertain the rurality of
facilities included in a contract. 3 As a result, in our baseline model that includes all contracts, we
interpret the effect of the rurality variables as differences from the contracts for which we did not have
rurality information. To ensure that this is a sound approach, we checked using a sample selection model
that the factors that may be associated with a contract not having sufficient rurality information are not
significantly correlated with costs. 4 We also ran our analysis using only the contracts that contain rurality
information and found similar Lasso results to our baseline model.
We also explored the differences in the costs reported by the top three providers by size using a
double selection Lasso model. 5 We focus on GTL, ICSolutions, and Securus because these firms’ costs
explain the bulk of industry costs. These providers supply {[
]} of all inmate calling services
contracts and cover approximately {[
]} of all inmates (see Table 1). 6 These three firms are also more
suitable for making cross-firm comparisons because they do not subcontract the provision of their inmate
calling service contracts to a third party, and because they are the largest three of the five providers that
service prisons, covering {[
]} of all prison contracts. 7 The results suggest that GTL’s costs are—all
other things equal—{[
3

See Appx. E at 67-68 (discussing the geocoding process).

4

We estimated a Heckman sample selection model where selection is for observations that contain rurality
information. The dependent variable and controls in this model were chosen to be the same as the ones in Lasso.
We found that the coefficient on the inverse Mills ratio is not significant at reasonable levels of significance (p-value
is 0.22), allaying potential concerns about sample selectivity. See generally James J. Heckman, Sample Selection
Bias as a Specification Error, 47 Econometrica 153 (1979).
5

See generally Alexandre Belloni, Victor Chernozhukov & Christian Hansen, Inference on Treatment Effects After
Selection Among High-Dimensional Controls, 81 Review of Economic Studies 608 (2014). Double selection Lasso
is a method of statistical inference that uses Lasso for the dependent variable and for the variables of interest using a
set of common controls; simple Lasso only selects predictors, without the possibility of statistical inference afforded
by double selection.
6

These shares may in fact represent a significant understatement of their industry share because they are often
subcontractors. For example, {[

]} instead for considering this part of our analysis considering factors that may impact costs.
7

Of the remaining three prison providers, {[

]}.

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FCC-CIRC2008-05

]}. These cost differences are statistically significant at confidence levels
greater than 99.99%. 8
The results of the double selection Lasso model also indicate that—all other things equal—the
costs of providing inmate calling services are approximately 18% greater in jails than in prisons; this
difference is statistically significant at confidence levels greater than 99.99%. 9
Table 1 – Inmate Calling Services Providers Ranked by Number of Contracts
Provider

{[
{[
{[
{[
{[
{[
{[
{[
{[
{[
{[
{[
Industry Total

Contracts

Prison
Contracts

2,935

131

Facilities

Average
Daily
Population*
]}
]}
]}
]}
]}
]}
]}
]}
]}
]}
]}
]}
3,692
2,246,940

Notes: * Average daily population was reported for only 2,846 contracts.

Lasso and outlier status. We also analyzed the drivers of the likelihood of a contract to be
included in the top 5% of costs per minute using logit Lasso. 10 The results were similar to those for cost
per minute: provider and state variables were retained by Lasso as the principal predictors of a contract’s
likelihood of being a cost outlier.

8

When the sample is restricted to the contracts with no missing rurality information, GTL’s costs are—all other
things equal—approximately {[
]}.

9

For the sample restricted to contracts with complete rurality information, this estimate is approximately 17%, also
statistically significant at confidence levels greater than 99.99%.

10
Similar to the linear Lasso employed for cost per minute, logit Lasso selects an optimal set of predictors for the
likelihood of a contract to be an outlier in the sense defined above.

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"FCC XX-XXX"

APPENDIX G
Estimating a Discount Factor to Remove Market Rents from GTL’s Reported Costs
GTL reports costs that are high relative to the industry and its nearest peers, Securus and
ICSolutions. 1 GTL reports a ratio of total costs to total paid minutes of {[
]}, more than a third
higher than that of the industry, $0.089. This ratio is more than twice the same ratio for both that of
Securus, {[
]}, and that of ICSolutions, {[
]}. 2 Similarly, the mean per paid minute cost of a
GTL contract, {[
]}, is more than a third higher than that of the industry, $0.91, more than double
that of Securus, {[
]}, and nearly triple that of ICSolutions, {[
]}. 3 GTL’s costs are nearly
three times greater than those of Securus and nearly twice those of ICS when we control for confounding
factors. 4 This is particularly surprising given the economies of scale and scope GTL should be able to
take advantage of, and given its success in the industry. 5 Certain aspects of GTL’s approach to measuring
costs may partially explain why its costs appear so high. 6 One is in how it derived its capital expenses.
GTEL Holdings, Inc. and Subsidiaries (hereafter GTLH) included a Consolidated Financial Statement for
2018 as part of GTL’s response to the Second Mandatory Data Collection. 7 Based on our analysis of the
financial information set forth in that Financial Statement, we find that a 10% reduction of GTL’s inmate
calling services costs as reported in that response is necessary to remove market rents incorporated into
these costs as explained below.
Market forces tend to result in a purchase price for an acquired firm reflecting the market’s
expectation of the present value of the expected future stream of net cash flows that the purchase would
bring. This is especially the case with two or more informed purchasers, and a rational seller. 8 To the
extent the expected net cash flows that determine the purchase price are greater than what would be
expected if the purchaser, using the purchased assets, faced effective competition, the purchaser expects
to earn market rents. In that case, since the purchase price is capitalized on the purchaser’s balance sheet,
these market rents are also capitalized. The capitalized value of these market rents is periodically
reflected as a depreciation or amortization expense in determining earnings on an income statement.
Thus, to the extent there are such market rents in GTLH’s capital base, these rents would be reflected in
the expenses GTL reported in its Second Mandatory Data Collection response, likely in part accounting
for GTL’s reported costs appearing so far above those of other providers. For ratemaking purposes,
however, any such rents should be excluded when evaluating costs, as they would not be earned in a

1

On nearest peers, see generally Appx. E.

2

See Appx. E, Table 1.

3

See Appx. E, Table 7.

4

See Appx. F at 76.

5

See supra para. 87.

6

See, e.g., supra para. 75.

7

Revised Description and Justification for Global Tel*Link Corporation’s Mandatory Data Collection Report, WC
Docket No. 12-375, at 148-72 (Consolidated Financial Statements as of and for the years Ended December 31, 2018
and 2017 and Independent Auditors’ Report) (Confidential) (filed May 19, 2020) (GTLH 2017-2018 Consolidated
Financial Statements).
8

A profit-maximizing firm seeking to acquire another firm would pay no more than its estimate of the present value
of the expected future stream of net cash flows the purchase would bring. The selling party would not be willing to
sell at a price less than what it could obtain from another purchaser. Nor would the selling party be willing to sell at
a price less its estimate of the present value of the expected future stream of net cash flows it could obtain if it
continued with the asset rather than selling it.

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FCC-CIRC2008-05

competitive market, and our rate-cap setting efforts are designed to approximate competitive market
conditions.
GTLH’s balance sheet reflects the cumulative total of the remaining unamortized value of
“goodwill” associated with GTLH’s various acquisitions at different points in time. GTLH records
goodwill at the time it acquires a new firm as the difference between the purchase price and its estimate of
the fair value of acquired tangible and identifiable intangible assets, net of assumed liabilities at the time
of acquisition. 9 Thus, goodwill should reflect these market rents—the amount over and above what one
could earn from disposing of the underlying assets separately at a fair market rate, rather than together in
a whole as part of the ongoing business.
Thus, for the purpose of developing a regulated, cost-based rate for inmate calling services, we
exclude goodwill-related expenses from GTL’s reported expenses to approximate costs in competitive
marketplace rather than the locational monopoly environment within which GTL operates. To identify
the share of GTL’s reported expenses that represents goodwill-related expenses, we multiply the share of
goodwill in GTLH’s assets, as reported in GTLH’s consolidated balance sheet, by the share of capital
expenses in GTLH’s total expenses reported in the consolidated statement of operations and consolidated
income (losses) for 2018. 10 GTL is a direct subsidiary of GTLH and, as explained in the Description and
Justification accompanying GTL’s Second Mandatory Data Collection response, GTL’s reported inmate
calling services costs are directly derived from the costs reported on the balance sheet for that
consolidated entity. 11 GTLH’s 2018 balance sheet reports goodwill, net of amortization of {[
]}. GTLH’s goodwill estimate has
been declining since January 1, 2014 as GTLH has been amortizing goodwill over a 10-year period. 12
GTLH’s income statement for 2018 shows that {[
]} of GTLH’s expenses were attributable
to capital. To identify the share of capital expenses in GTL’s reported expenses, we rely on GTLH’s
2018 statement of operating expenses in the consolidated statement of operations and consolidated
income, 13 dividing total expenses related to capital by total expenses. Total expenses excluding interest
14
are {[
]}. The sum of depreciation and amortization expenses plus interest expenses is
{[
]}. This is the amount of GTLH’s total expenses that
can be attributed to capital. Thus, the share of expenses, including interest expenses that can be attributed
to capital is {[
]}. 15
The product of these two percentages is 10.9% (= {[
]}). We find that this provides
a reasonable approximation of the market rents included in GTL’s reported inmate calling services costs.
9

GTLH 2017-2018 Consolidated Financial Statements at 9. .

10
GTLH 2017-2018 Consolidated Financial Statements at 2-3, 4-5. We rely on balance sheet information for 2018
because our analysis in the Further Notice, Part V, relies on data for 2018 in calculating proposed inmate calling
services rate caps. See also Revised Description and Justification for Global Tel*Link Corporation’s Mandatory
Data Collection Report, WC Docket No. 12-375, at para. 15 (Redacted for Public Inspection) (GTL Revised
Description and Justification).
11

Id. (“GTL relied on the audited financial statements of its parent (GTEL Holdings, Inc.) and other financial
information to determine its aggregate or ‘total’ ICS costs.”).
12

GTLH 2017-2018 Consolidated Financial Statements 12018 at 10.

13

GTLH 2017-2018 Consolidated Financial Statements at 4.

14

Id. This is the sum of four items: cost of revenues, {[
]}.

15
Staff also performed more detailed calculations to account for income tax treatment of capital expenses and other
items on GTLH’s financial statements but these other calculations do not yield materially different estimates.

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This estimate is stable over time: the same methodology yields discount factors of 10.9% in 2014; 11.3%
in 2015; 11.1% in 2016; and 10.9% in 2017. 16 Although these discount factors are closer to 11% than
10% for each year from 2014 through 2018, in order to be conservative, we use a discount factor of 10%.
We find that this is an appropriate cost disallowance to remove the impact of market rents on the expenses
that GTL reports in its Second Mandatory Data Collection response.
We also considered alternate methods, such as estimating the amount of market rents in
proportion to historical market valuations, or in proportion to an estimate of GTL’s total intangibles, or by
some combination of such approaches. However, these other methods require data, such as market
valuation and total intangibles, that are either unavailable, unhelpful because of the timing issues, or not
well-suited to ratemaking purposes.

16

GTL Revised Description and Justification at 26-29 (Consolidated Financial Statements as of and for the years
Ended December 31, 2015 and 2014, and Independent Auditors’ Report);; id. at 54-57 (Consolidated Financial
Statements as of and for the Years Ended December 31, 2016 and 2015, and Independent Auditors Report); id. at 81
(Consolidated Financial Statements as of and for the Years Ended December 31, 2017 and 2016, and Independent
Auditors Report).

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APPENDIX H
Analysis of Site Commission Payments
We propose to incorporate a $0.02 allowance for recovery of correctional facility costs directly
related to the provision of inmate calling services. Although the Commission has no direct information
on the level of costs incurred by the correctional facilities related to the provision of inmate calling
services, we can estimate these costs by comparing the relative per-minute costs for contracts with and
without site commissions, as shown in Table 1.
Table 1 – Site Commissions and Per-Minute Costs
Facility
Type

Jails

Prisons

All Facilities

Site Commission

Mean

SD

Mean + SD

No Commission Paid

0.094

0.085

Commission Paid

0.080

All Jails

0.082

No Commission Paid

Number of Contracts
Below

Above

Total

0.179

277

10

287

0.056

0.137

2,323

194

2,517

0.060

0.142

2,619

185

2,804

0.087

0.033

0.120

39

2

41

Commission Paid

0.083

0.035

0.118

83

7

90

All Prisons

0.084

0.034

0.118

122

9

131

No Commission Paid

0.093

0.081

0.174

318

10

328

Commission Paid

0.080

0.056

0.136

2402

205

2,607

All Facilities

0.082

0.059

0.141

2,741

194

2,935

It is reasonable that the higher per-minute costs for contracts without site commissions reflect, at
least in part, give-and-take negotiations in which inmate calling services providers agree to incur
additional inmate calling services-related costs in exchange for not having to pay site commissions. The
lowest third of Table 1 shows a $0.013 difference in mean costs per minute reported by providers between
contracts without site commissions ($0.093) and contracts with site commissions ($0.080). We round
upwards to allow for individual contracts for which this matters more than the average contract, and
thereby reach our $0.02 per minute allowance for correctional facility costs. Site commissions appear
less critical for prisons than jails, with prison contracts without commissions earning on average only
$0.004 more than per paid minute costs, while for jails this difference is $0.014. However, again to
ensure we do not harm unusual prison contracts, we apply the same $0.02 markup for both prisons and
jails.
The interstate rate caps for prisons and jails we propose include the $0.02 per minute allowance
for reasonable facility costs. Accordingly, our proposed rate caps would allow inmate calling services
providers to recover their direct costs of providing interstate inmate calling services to each correctional
facility it serves. The rate caps we propose would also allow providers to reimburse correctional
authorities for the costs they reasonably incur in making their facilities available for inmate calling
services, while making reasonable contributions to providers’ indirect costs.

82

 

 

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