[Federal Register Volume 78, Number 14 (Tuesday, January 22, 2013)]
[Proposed Rules]
[Pages 4369-4376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-01154]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WC Docket No. 12-375; FCC 12-167]


Rates for Interstate Inmate Calling Services

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) seeks comment on the inmate calling services industry and 
how to ensure just and reasonable rates for inmate calling services.

DATES: Comments are due on or before March 25, 2013. Reply comments are 
due on or before April 22, 2013.

ADDRESSES: You may submit comments, identified by WC Docket No. 12-375, 
by any of the following methods:
     Federal Communications Commission's Web Site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
     People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: [email protected] or phone: (202) 418-
0530 or TTY: (202) 418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the SUPPLEMENTARY 
INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT: Lynne Hewitt Engledow, Wireline 
Competition Bureau, Pricing Policy Division, (202) 418-1520 or (202) 
418-0484 (TTY), or via email at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking in WC Docket No. 12-375, FCC 12-167, adopted on 
December 24, 2012, and released on December 28, 2012. The full text of 
this document is available for public inspection during regular 
business hours in the Commission's Reference Center, 445 12th Street 
SW., Room CY-A257, Washington, DC 20554. The full text of this document 
may be downloaded at the following Internet address: http://www.fcc.gov/document/rates-interstate-inmate-calling-services. The 
complete text may be purchased from Best Copy and Printing, Inc., 445 
12th Street SW., Room CY-B402, Washington, DC 20554. To request 
alternate formats for persons with disabilities (e.g. Braille, large 
print, electronic files, audio format, etc.) or reasonable 
accommodations for filing comments (e.g. accessible format documents, 
sign language interpreters, CARTS, etc.), send an email to 
[email protected] or call the Commission's Consumer and Governmental 
Affairs Bureau at (202) 418-0530 (voice) or (202) 418-0432 (TTY).

I. Introduction

    1. In this item we grant two longstanding petitions for rulemaking 
filed in the docket that seek to ``secure the `just and reasonable' 
interstate rates for prisoners required by Section 201(b) of the 
Communications Act'' by initiating this Notice of Proposed Rulemaking 
(NPRM or Notice) to

[[Page 4370]]

consider changes to our rules governing rates for interstate 
interexchange inmate calling services (ICS). In the first petition for 
rulemaking, filed in 2003, (First Wright Petition), Petitioners 
requested that the Commission ``prohibit exclusive inmate calling 
service agreements and collect call-only restrictions at privately-
administered prisons and require such facilities to permit multiple 
long distance carriers to interconnect with prison telephone systems. * 
* *'' In the second petition for rulemaking, filed in 2007, 
(Alternative Wright Petition), Petitioners proposed that the Commission 
require debit calling, prohibit per-call charges and establish rate 
caps for all interstate, interexchange inmate calling services. The 
Commission received significant comment on the two Petitions for 
Rulemaking. Recently, there has been substantial renewed interest and 
comment in this docket highlighting both the wide disparity among 
interstate interexchange ICS rate levels and significant public 
interest concerns. We believe it is appropriate to seek comment to 
refresh the record and consider whether changes to our rules are 
necessary to ensure just and reasonable ICS rates for interstate, long 
distance calling at publicly- and privately-administered correctional 
facilities.

II. Background

A. Description of Inmate Calling Services

    2. Inmate calling services are typically limited to collect or 
debit-based calling from payphones. Collect calls from a correctional 
facility usually incur a two-part charge; a per-call set up charge and 
a per-minute charge. Debit calling (charges are deducted from an 
inmate's account), typically incurs a per-minute charge only. Based on 
the record, the per-call charge can vary significantly from $0.50 to 
$3.95 and per-minute charges can vary significantly from $0.05 to 
$0.89. Some commenters state that ICS rates vary based on such factors 
as facility size, call volume and the jurisdiction of the call. Local 
and intrastate ICS rates are generally set by the states. The 
Commission does not currently regulate interstate ICS rates. ICS rates 
in federal prisons are set by the Federal Bureau of Prisons.
    3. Public Policy Considerations. Petitioners and some commenters 
argue that ICS rate reform is a public policy imperative because high 
ICS rates limit the ability of most inmates to maintain contact with 
their families. Commenters point to studies showing that regular 
contact with family reduces inmate recidivism. Commenters note that 
regular telephone contact with loved ones also benefits those receiving 
the calls, including inmates' children, as inmates may be assigned to 
correctional facilities far from their homes thus limiting in-person 
visits. Commenters contend that regular telephone contact between 
inmates and their loved ones at high rates places a heavy burden on 
inmates' families because families typically bear the burden of paying 
for the calls. In addition, they assert that the lack of regular 
telephone contact between inmates and their loved ones is a hardship on 
families because neither the inmates nor their families can afford the 
high rates.
    4. We note that the Government Accountability Office (GAO) has 
twice recognized the conclusions of Federal Bureau of Prison officials 
that contact with family ``aids an inmate's success when returning to 
the community'' and thus lowers recidivism. Moreover, the GAO recently 
found that ``crowded visiting rooms make it more difficult for inmates 
to visit with their families'' and that ``[t]he infrastructure of the 
facility may not support the increase in visitors as a result of the 
growth in the prison population.'' As such, we believe that regular 
telephone contact between inmates and their families is an important 
public policy matter, and that we should consider the impact that 
interstate ICS rates have.
    5. Unique Characteristics of ICS. The Commission has recognized 
that ICS differs from traditional payphone services in a number of 
respects. First, although barriers to entry are low for payphone 
providers in most locations, a correctional facility typically grants 
an exclusive contract to a single ICS provider for a particular 
facility, essentially creating a monopoly at that facility. As such, 
competition exists for ICS contracts but once an ICS provider wins a 
contract it becomes the sole ICS provider in that facility. Unlike non-
incarcerated customers who have access to alternative calling platforms 
on public payphones, inmates only have access to payphones operated by 
a single provider for all available services at that payphone. These 
contracts additionally often include a site commission or location fee 
paid to the correctional facility. The Commission has previously found 
that ``[t]o have a realistic chance of winning a contract, the bidder 
must include an amount to cover commissions paid to the inmate 
facility.'' Five years ago Petitioners estimated that ``commissions add 
an average of 43 percent * * * to all other costs before commissions.''
    6. Security considerations also differentiate ICS from public 
payphone services. For instance, correctional facilities typically use 
an automated voice-processing system to screen and process inmate 
collect calls rather than a pre-subscribed operator service provider. 
ICS providers also employ blocking mechanisms to prevent inmates from 
making direct-dialed (that is calls made without using the automated 
voice-processing system) calls, access code calls, 800/900 number 
calls, or calls to restricted individuals, such as judges or witnesses. 
Correctional facilities also require that payphones be monitored for 
frequent calls to the same number. Moreover, correctional facilities 
often require periodic voice overlays that identify the call as being 
placed from a correctional facility, as well as listening and recording 
capabilities for all calls. Commenters note that the costs of these 
security features, hardware and software costs, and training for 
staffers make ICS more costly to provide than public payphone service.
    7. The record to date indicates a wide disparity in ICS rates 
between states. These rates reflect the higher security and network 
costs that are inherent in ICS; the disparity thus may reflect whether 
the rates in question include site commissions. For instance, 
correctional facilities located in states that do not require 
commissions from ICS providers often charge lower ICS rates. For 
example, New York state prohibited site commissions in state prisons 
and interstate per-minute rates in such prisons are as low as $0.048. 
In contrast, in Colorado, a state that has site commissions, interstate 
per-minute rates can be as high as $0.89. However, in Montana, another 
state with site commissions, the interstate per-minute rate is $0.12. 
Such record evidence raises questions about whether ICS rates 
accurately reflect the costs of providing ICS and whether site 
commission payments are a reasonable cost of providing ICS that 
therefore should be recovered in the ICS rates inmates are charged.
    8. We seek comment on the Commission's legal authority in Section 
III.E below to address the issues raised by the Petitioners. While we 
believe that we have jurisdiction to address interstate ICS calls we 
believe those calls may be a relatively small subset of all inmate 
telephone calls. However, several commenters argue that interstate 
calls are often the most expensive and therefore Commission action, 
such as establishing an interstate rate benchmark, would nevertheless 
be effective in helping lower the cost of

[[Page 4371]]

contact between inmates and their families. In the interest of 
developing a complete and current record, this Notice seeks comment on 
the reasonableness of current ICS rates and what steps the Commission 
can and should take to ensure reasonable ICS rates going forward.

B. Inmate Calling Order on Remand and NPRM

    9. On February 12, 2002, the Commission adopted an order addressing 
whether section 276 of the Communications Act of 1934, as amended, 
(Act) requires the Commission either to preempt state rate caps on 
local collect calls or permits ICS providers to collect an additional 
per-call surcharge above state rate caps on local collect calls. In the 
Inmate Calling Order on Remand and NPRM, the Commission concluded that 
section 276 does not require either preemption or an additional 
surcharge and also concluded that it was unnecessary to impose 
nonstructural safeguards on the Bell Operating Companies' provision of 
ICS services. In making these determinations, the Commission recognized 
the unique nature of ICS, and concluded that the ``fair compensation'' 
requirement of section 276 did not necessarily mean that payphones with 
higher costs should receive greater compensation than other payphones.
    10. In the NPRM portion of the Inmate Calling Order on Remand and 
NPRM, the Commission asked ``whether the current regulatory regime 
applicable to the provision of inmate calling services is responsive to 
the needs of correctional facilities, ICS providers, and inmates, and, 
if not, whether and how we might address those unmet needs.'' 
Specifically, the Commission sought detailed comments on ICS rates, 
commissions paid to the confinement facilities, cost and revenue data, 
information from states on how they handle inmate calling, alternatives 
to the current system, and information on call disconnections. The NPRM 
also proposed methods to lower ICS rates, including allowing the use of 
debit cards or commissary accounts.

C. Two Petitions for Rulemaking

1. First Wright Petition
    11. In 2000, current and former inmates of Corrections Corporation 
of America (CCA) confinement facilities, and the individuals that 
receive their telephone calls, filed a class-action lawsuit against CCA 
seeking relief from exclusive dealing arrangements CCA had with ICS 
providers. The plaintiffs alleged that the exclusive dealing resulted 
in restricted telephone service choices for inmates and caused rates 
for those services to substantially increase, in violation of various 
constitutional and statutory provisions, including section 201(b) of 
the Act. On August 22, 2001, the United States District Court for the 
District of Columbia dismissed the lawsuit. Pursuant to the doctrine of 
primary jurisdiction, the court directed the parties to file the 
appropriate pleadings with the Commission to resolve the issues the 
plaintiffs raised.
    12. On November 3, 2003, Petitioners filed the First Wright 
Petition with the Commission pursuant to the court's directive. 
Petitioners requested that the Commission address high ICS rates by 
prohibiting exclusive ICS contracts and collect-call-only restrictions 
at privately-administered prisons, and requiring such facilities to 
permit multiple long-distance carriers to interconnect with prison 
telephone systems. The Commission sought and received comment on the 
First Wright Petition.
2. Alternative Wright Petition
    13. On March 1, 2007, Petitioners filed an alternative rulemaking 
petition proposing that the Commission address high ICS rates by 
requiring debit calling, prohibiting per-call charges and establishing 
rate caps for all interstate, interexchange ICS. The Commission sought 
and received comment on the Alternative Wright Petition. On August 15, 
2008, a group of ICS providers filed the Inmate Calling Services 
Interstate Call Cost Study (ICS Provider Proposal), which included cost 
information to support their proposed rate methodology and rate levels 
for ICS.
    14. As described fully below, in this Notice, we seek updated 
information on the ICS market and request answers to questions raised 
by the Petitioners. We specifically request comment from state 
departments of corrections and state officials responsible for prison 
telecommunications decision making. After the ICS Provider Proposal was 
filed, a consensus appeared to be forming about how best to address 
inmate calling; we hope to revive those discussions and consensus 
building through our action today.
    15. Since the Inmate Calling Order on Remand and NPRM was released 
in 2002, the Commission has received numerous comments regarding ICS 
reform. Responses to the NPRM and subsequent requests for comment on 
the First Wright Petition and the Alternative Wright Petition have 
provided an extensive record on ICS reform. We believe it is 
appropriate at this time to open a new docket exclusive to ICS reform 
in light of the lengthy record, as well as the fact that the ICS record 
is part of the general payphone docket (CC Docket No. 96-128) which 
relates to competition among payphone providers and the deployment of 
payphone services. As such, comments and reply comments on this Notice 
must be filed in WC Docket No. 12-375. We incorporate comments, reply 
comments and ex parte filings from CC Docket No. 96-128 into WC Docket 
No. 12-375.

III. Ensuring ICS Rates Are Just and Reasonable

    16. There are multiple proposals to address ICS rates in the 
record. We seek to balance the goal of ensuring reasonable ICS rates 
for end users with the security concerns and expense inherent to ICS 
within the statutory guidelines of sections 201(b) and 276 of the Act. 
Ensuring just and reasonable ICS rates may be accomplished through 
incentives or regulations, or a combination of both; we seek comment on 
these proposals below.

A. Rate Caps in the ICS Market

    17. In the Alternative Wright Petition, Petitioners requested that 
the Commission set rate caps for interstate long distance ICS. 
Specifically, Petitioners requested that the Commission ``establish a 
benchmark rate for domestic interstate interexchange inmate debit 
calling service of $0.20 per minute and a benchmark rate for domestic 
interstate interexchange inmate collect calling service of $0.25 per 
minute, with no set-up or other per-call charge.'' The Petitioners used 
15 and 20 minute call durations to calculate the rate caps and based 
their proposed rate caps on then current Federal Bureau of Prison and 
several individual states' ICS rates. We seek comment on the elements 
of the rate cap proposal and whether the criteria used to develop the 
proposed caps are appropriate.
    18. Per-Call Charge. Each time an inmate places a payphone call 
there are typically two elements that make up its cost--a per-call set 
up charge and a per-minute charge. We first seek comment on the per-
call charge. Petitioners propose eliminating the call set up or per-
call charge, which can be as much as $3.95, and allowing only per-
minute charges. We seek comment on this proposal. What costs are 
associated with the per-call charge? Would the elimination of the per-
call charge help ensure just and reasonable ICS rates? Would a 
prohibition on per-call charges result in below-cost service?

[[Page 4372]]

    19. Petitioners note that inmates often incur multiple per-call 
charges when calls are dropped after a pause in conversation. We seek 
data on the average number of dropped calls that inmates experience. We 
request that commenters suggest ways to prevent multiple per-call 
charges for a single conversation that is disconnected by security 
triggers and subsequently allowed to continue while maintaining 
appropriate security measures. For example, if the per-call charge is 
maintained, Petitioners suggest that if a disconnected call is 
reinitiated within two minutes, it should not incur another per-call 
charge. Should the Commission require such a measure? What other steps 
could be taken to prevent inmates from being charged multiple per-call 
charges for what amounts to one conversation? What are the costs 
associated with call security and are they incurred on a fixed or per-
call basis?
    20. Per-Minute Rate Caps. Would the per-minute rate cap approach 
proposed by the Petitioners ensure just and reasonable rates? Are the 
proposed rate caps just and reasonable consistent with sections 201 and 
276 of the Act? If not, would different rate caps be appropriate? What 
factors should the Commission consider in determining an appropriate 
per-minute rate cap? Commenters advocating an alternative per-minute 
rate cap should provide specific, detailed cost information and other 
relevant data to support their proposed per-minute rate caps. Should 
the domestic interstate interexchange ICS per-minute rate cap proposed 
above apply to both publicly- and privately-administered correctional 
facilities?
    21. Some commenters argue that the proposed per-minute rate caps 
are arbitrary and capricious because they would preclude providers from 
recovering their legitimate costs of providing service. Others argue 
that the Alternative Wright Petition proposal is confiscatory or may 
otherwise put ICS providers out of business. We seek evidence in 
support of or disproving such arguments. Commenters also argue that the 
adoption of per-minute rate caps would chill innovation and ultimately 
result in reductions in service levels because the proposed caps will 
not adequately compensate the providers, thus making ICS a less 
attractive service to offer. Others note that new providers are 
entering the ICS market. Commenters supporting such assertions are 
asked to provide specific, detailed information about the ICS market to 
support their positions and describe how market trends influence ICS 
rates.
    22. In the Alternative Wright Petition, Petitioners argue that 
several benefits would accrue from setting per-minute rate caps, such 
as administrative ease and the absence of jurisdictional challenges. We 
seek comment on this argument. Can commenters identify any other 
benefits to introducing per-minute rate caps? What are the perceived 
problems or challenges associated with introducing per-minute rate 
caps? For example, parties argue that differences between correctional 
facilities including size, location, security levels, facility age and 
staffing levels will not allow a one size fits all solution, such as 
per-minute rate caps. Is this accurate? How can the Commission 
establish a solution that addresses the many variations among 
confinement facilities?
    23. If the Commission decides to implement rate caps in the ICS 
market how should we? What additional data, if any, does the Commission 
require to set rates? Would a rate cap approach require the Commission 
to conduct rate cases, as some commenters suggest? We seek comment on 
the best ways to determine just and reasonable caps for ICS rates.
    24. Marginal Location Methodology. In 2008, ICS providers submitted 
the ICS Provider Proposal for ICS rates. The ICS Provider Proposal uses 
the ``marginal location'' methodology, previously adopted by the 
Commission to calculate public payphone rates, to calculate proposed 
ICS rates. The ICS providers believe the ``marginal location'' 
methodology provides a ``basis for rates that represent `fair 
compensation' as set forth in'' section 276(b)(1)(A) of the 
Communications Act. The ICS Provider Proposal advocates a two-part rate 
structure that includes both a fixed per-call charge and a per-minute 
rate, arguing that per-call charges must be maintained to cover such 
expenses as equipment costs and monthly line charges. The ICS providers 
determined that the methodology and data yield a requisite fixed per-
call charge of $1.56 with a per-minute rate of $0.06 for debit calls, 
and a fixed per-call charge of $2.49 with a per-minute rate of $0.07 
for collect calls, applicable to all ICS providers. In response, 
Petitioners point out that the ICS Provider Proposal ``largely supports 
Petitioners' requested benchmark rates.'' Petitioners calculate that 
the ICS Provider Proposal two-part rate structure equals rate caps of 
$0.16 per minute for a 15-minute debit call and $0.24 per minute for a 
15-minute collect call.
    25. We seek comment on whether the ICS Provider Proposal 
methodology would result in a just and reasonable rate. We also 
encourage commenting parties that disagree with the ICS Provider 
Proposal or proposed methodology to provide alternative methodologies 
supported by sufficiently-detailed data. We seek comment on whether the 
ICS Provider Proposal has provided sufficient cost, demand, and revenue 
detail to allow the Commission to determine whether the proposed rates 
are just and reasonable.
    26. We also seek comment on whether the underlying cost and demand 
factors for public payphones and ICS are similar enough to justify 
using a cost methodology designed for public payphones to set ICS 
rates. In particular, we seek comment on the extent to which ICS rates 
and call volumes vary among prisons across the country, and how the 
rates and call volumes compare with the variation that occurs with 
public payphones. We seek comment on whether an additional 
justification exists for adopting this cost methodology.
    27. Impact of Rate Reductions on Call Volumes. We seek comment on 
whether call volumes have increased where rates have been lowered, and 
the resulting impact on ICS providers' revenues. We note that the 2011 
GAO Report found that only approximately 25 percent of inmates in the 
Federal Bureau of Prisons use their entire monthly allotted minutes for 
calls and that if rates were lowered it would encourage greater 
communications with families, which the Bureau of Prisons ``has stated 
facilitates the reintegration of inmates into society upon release from 
prison.'' Do other correctional facilities find that incarcerated 
individuals are not using all their allotted time to make calls? How 
much time is allotted, and what is the percentage of individuals who 
use all their time?
    28. Tiered Pricing. A recent ex parte filing by Petitioners 
attached a transcript from a New Mexico Public Service Commission 
hearing that described the possible use of a tiered, by monthly volume 
of minutes, pricing structure in the state. Do commenters believe a 
per-minute rate set by usage volume is a viable option? Would tiered 
pricing address concerns over a one size fits all reform approach such 
as rate caps? What factors should the Commission consider in 
establishing pricing tiers? What are potential problems with tiered 
pricing?
    29. Market Forces. Petitioners note that telecommunications costs 
in general, and long distance costs in particular, are decreasing and 
therefore, they believe, ICS rates should follow the market and 
decrease as well. Some participants in this proceeding note that

[[Page 4373]]

``rates in the largest majority of correctional facilities are moving 
in a downward trend.'' Is this accurate? Can commenters provide 
concrete examples of decreases in ICS rates?
    30. Collect Calling v. Debit Calling. The Alternative Wright 
Petition suggests two different rate caps: one for collect calling and 
one for debit calling. A collect call is a call in which the called 
person pays for the call and a debit call deducts the cost of the call 
from a prepaid account. Petitioners argue that collect calling is more 
expensive because its costs include billing costs and uncollectibles, 
while debit calling is less expensive because it reduces staff 
responsibilities and uncollectibles. Do commenters agree that there 
should be different per-minute rate caps for collect and debit calling? 
What are the benefits of debit calling? For example, do commenters 
believe that debit calling will exert downward pressure on collect 
calling rates?
    31. Some commenters have expressed concern about the expense and 
difficulty of implementing debit calling. Specifically, they cite 
difficulty in blocking restricted telephone numbers, the expense of 
purchasing new equipment and the challenges of establishing new 
processes and procedures and verifying calling party identities. 
Parties have also expressed safety concerns related to debit calling. 
Some prisons already allow for debit calling. For example, the Federal 
Bureau of Prisons allows debit calling in some of its facilities and 
the state of Iowa offers debit calling only. What safety concerns are 
raised by debit calling service, and how have those concerns been 
addressed where debit calling already is permitted? Commenters also 
note the increased administrative workload and cost associated with 
debit calling caused by such tasks as issuing PINs to each inmate in 
facilities with high turnover. Have commenters experienced such 
challenges, and how have they been overcome? What are the other pros or 
cons of debit calling? We seek comment on ICS providers' overall 
experiences with offering debit calling.
    32. How many correctional facilities currently offer debit calling? 
Has debit calling become more common? What are the current ratios of 
debit to collect calling in correctional facilities? Should the 
Commission mandate debit calling in privately- and publicly-
administered correctional facilities? One commenter says it offers 
debit calling to all of the facilities it serves, but it is not 
practical to mandate debit calling because not all correctional 
facilities want the service. What are other challenges to mandating 
debit calling?
    33. Prepaid Calling. Commenters suggest prepaid calling as an 
alternative to collect and debit calling. Prepaid calling allows 
inmates or their family members to prepay for minutes, usually at a 
discount. This is different from debit calls, in which money is 
deducted from an account, but the minutes are not purchased in advance. 
Commenters argue that the benefits of this approach may include 
administrative ease for the providers, increased safety, controlled 
costs for call recipients, and eliminating the need to block calls 
because of a call recipients' credit standing. However, Petitioners 
note that there are outstanding questions with prepaid calling such as: 
how to handle monthly fees; how to load an inmate's account; and 
minimum required account balance. If these issues can be sufficiently 
addressed, is prepaid calling a viable ICS option? Do any ICS providers 
currently offer prepaid calling? What are some other concerns or 
considerations with prepaid calling?
    34. Intrastate-Interstate Parity. Another alternative would be to 
adopt an intrastate-interstate parity principle that would require that 
rates for interstate, long-distance calls not exceed rates for 
intrastate, long-distance calls. Rates for intrastate, long-distance 
calls are typically set by state public utility commissions, and those 
commissions may set rates that take into account the varying cost of 
providing inmate calling services within each state given the security 
and other features required by state law. To the extent that interstate 
rates for inmate calling services are significantly higher than 
intrastate rates, how would a requirement that ICS providers set 
interstate rates at a level no higher than intrastate, long-distance 
rates affect the justness and reasonableness of those rates? How many 
states set rates specifically for ICS? What is the rate structure for 
ICS calls in those states, and what are the rates for intrastate, long-
distance calls? How do states that set specific ICS rates ensure that 
ICS providers are ``fairly compensated?'' How do intrastate, long-
distance rates differ between states that establish general rate caps 
and those that set specific caps for ICS? If the Commission adopts a 
parity principle, should there be any exceptions to that principle?

B. Additional Proposals in the Record

    35. There are multiple other proposals in the record that do not 
directly address per-call and per-minute ICS rates. We seek comment on 
any other proposals parties contend address the concerns raised in this 
proceeding, including any proposals in the record that are not 
addressed below.
    36. Competition in the ICS Market. The First Wright Petition 
requested that the Commission mandate the opening of the ICS market to 
competition and prohibit collect call only restrictions in privately-
administered correctional facilities. ICS contracts are typically 
exclusive; competition appears to exist in winning an ICS contract but 
once an ICS provider wins a contract it becomes the sole provider. How 
do exclusive contracts influence ICS rates? How would competitive ICS 
services be provided? The First Wright Petition also argued that the 
collect calling-only limitations imposed by many confinement facilities 
increase costs to both ICS providers and inmates that are not 
outweighed by corresponding benefits and that such limitations should 
therefore be prohibited. To the extent ICS is still limited to collect 
calling in some correctional facilities, we seek comment on the 
rationale behind this restriction.
    37. Site Commissions. ICS contracts frequently include a site 
commission or location rent which is paid to the facility and in some 
instances may go to fund inmate services at the facility. What types of 
inmate services or other services do site commissions fund? How do site 
commissions in ICS contracts vary by facility? Petitioners argue that 
ICS rates are inflated to cover commissions, which can be as much as 65 
percent of gross revenues, causing the rates to be unreasonable in 
violation of section 201(b). Is this accurate? We seek updated data on 
how much these site commissions are and how much they add to per-call 
costs. The FCC has previously found that ``under most contracts, the 
commission is the single largest component affecting the rates for 
inmate calling service'' and ``because the bidder who charges the 
highest rates can afford to offer the confinement facilities the 
largest location commissions, the competitive bidding process may 
result in higher rates.'' Do commenters believe this is still accurate? 
The Commission has also found that ``location rents are not a cost of 
payphones, but should be treated as profit.'' Do commenters agree with 
that conclusion?
    38. Some site commissions are mandated by state statute, while 
several states have reduced or eliminated commissions in ICS contracts. 
If a state has reduced or eliminated site commissions, how has any 
resulting rate transition been handled? How has the lowering or 
elimination of site commissions impacted rates? Is this evidence that 
site commissions are not

[[Page 4374]]

necessary, or is it evidence that the market is working and the 
Commission need not intervene? Must the Commission address site 
commissions and the effect they have on ICS rates in order to ensure 
just and reasonable ICS rates?
    39. Offer No-Cost Calling. In the Alternative Wright Petition, 
Petitioners include a suggestion they contend will advance the 
Commission's universal service goals and provide all inmates valuable 
contact with the outside world. Specifically, Petitioners suggest that 
ICS providers provide a certain amount of no-cost calling per inmate 
per month in each of the facilities they serve in exchange for the 
right to charge a higher per-minute rate. Petitioners suggest 
implementing rate caps of $0.22 per minute for debit calling and $0.275 
per minute for collect calling if ICS providers offer 20 minutes of 
free calling per inmate per month. Can or should the Commission mandate 
a certain amount of free calling per inmate per month, or should this 
be offered at the providers' discretion? What legal questions are 
raised by this proposal? What other considerations are raised by this 
proposal?
    40. Billing-Related Call Blocking. Petitioners also express concern 
over billing-related call blocking in correctional facilities. 
Specifically, Petitioners note that ICS providers are increasingly 
unable or unwilling to enter into agreements with LECs to provide for 
ICS providers' billing the LECs' customers receiving collect calls from 
inmates. As a result, ICS providers cannot bill for an increasing 
percentage of inmate calls and thus ``block inmate collect calls to 
numbers served by LECs with which the service providers have no billing 
arrangements.'' Petitioners argue that in facilities where collect 
calling is the only option, this practice may ultimately prevent 
inmates from being able to make any telephone calls. Commenters note 
that many ICS providers have solutions to ``ensure that inmates can 
contact customers served by these CLECs that refuse to bill for collect 
calls.'' Does this practice continue? Petitioners argue that debit 
calling, which requires pre-payment, may prevent the need to block 
calls when the ICS provider does not have a billing arrangement with 
the terminating LEC. Is this accurate? Do commenters have experience 
with billing-related call blocking? Can commenters provide data on the 
average number of calls that are blocked per month and the reason for 
the blocking? Are there ways, other than mandating debit calling, to 
deter or prevent billing-related call blocking?
    41. Non-Geographic Numbers. ICS providers have argued that lowering 
interstate calling rates may create an incentive for call recipients to 
obtain telephone numbers from other states, perhaps from wireless or 
VoIP providers, to take advantage of the lowered interstate rates. 
Petitioners counter that the opposite is currently happening; call 
recipients are obtaining telephone numbers, from wireless or VoIP 
providers, that are local to the prison to take advantage of lower 
local calling rates. Have commenters experienced either of these 
practices? Do these practices raise any security concerns and if so 
what are those concerns?
    42. Disabilities Access. There is evidence in the record to 
indicate that inmates with hearing disabilities may not have access to 
ICS at reasonable rates using TTYs. The record suggests that because 
the average length of a telephone conversation using a TTY is 
approximately four times longer than a voice telephone conversation, 
deaf and hard of hearing inmates who use TTYs have to pay more than 
their hearing counterparts. The record also suggests that TTY users 
have had to pay additional fees for connecting to a TTY relay operator. 
We seek comment on the types of ICS access that individuals who are 
deaf or hard of hearing experience during their incarceration. Where 
such access to ICS is provided, are the rates the same as those 
available to those without a disability? If the rates differ, what is 
that difference and what are the explanations for such difference? We 
note that section 276(b)(1)(A) specifically exempts 
``telecommunications relay service calls for hearing disabled 
individuals'' from the Commission-established ``per call compensation 
plan'' ensuring that ICS providers are ``fairly compensated.'' How 
should the Commission take this exemption into account in examining 
rates?
    43. Updated Data. We seek updated data from all interested parties 
and the public, but especially from ICS providers. Commenters note that 
the record regarding nationwide interstate ICS rates is limited to an 
``analysis of prison phone contracts nationwide'' that was conducted by 
Prison Legal News in April 2011. As such, we seek comment on the 
accuracy and reliability of the study. In addition, from independent 
research we have found more-current state rates, which continue to 
demonstrate a range of prices for ICS calls among states. For example, 
for a 15-minute interstate call, we found the following rates: $6.65 in 
California; $2.04 in Montana; $6.45 in Texas; and $16.55 in Idaho. We 
encourage commenters to submit the most up-to-date information 
available regarding interstate ICS rates to aid us in developing a 
clearer understanding of the ICS market. This includes per-call and 
per-minute rates, information on commissions and what percentage of a 
rate they comprise, the number of disconnected calls, the average 
length of calls, and how calls break out by type, i.e., collect, 
prepaid and debit.
    44. We also seek comment on whether the Alternative Wright Petition 
and ICS Provider Proposal are grounded in sufficiently-reliable data. 
For example, the ICS Provider Proposal contains data for less than 30 
correctional facilities, none of which impose site commissions. Is this 
too small a sample, or a non-representative sample, on which to base a 
nationwide solution? ICS providers argue that in calculating their 
proposed rate caps the Petitioners relied on data from facilities with 
low cost calling. We therefore invite parties to comment on whether the 
data supporting the First Wright Petition, the Alternative Wright 
Petition and the ICS Provider Proposal is representative of 
correctional facilities across the country.
    45. Existing Contracts. Petitioners suggest that if the Commission 
implements a rate cap it should also mandate a one-year fresh look, 
transition period for existing ICS contracts. Petitioners envision that 
this transition period would allow for any necessary review and 
termination or renegotiation of existing ICS contracts in order to 
introduce rate caps which would be effective by the end of the 
transition period. Commenters argue that the Commission cannot insert 
itself into the procurement decisions of correctional agencies, and 
that any new ICS-related rules should not be applied to existing 
contracts but only to contracts entered into after the adoption of new 
rules.
    46. Would it be appropriate to mandate a fresh look period or 
should any new ICS rules apply only to contracts entered into after the 
adoption of new rules? With renegotiated contracts, how long should the 
transition period last? What are typical ICS contract terms? Do such 
contracts usually have change of law provisions that would be triggered 
by a Commission order? How does the length of existing contracts affect 
the implementation of any of the proposals discussed above? If 
commenters provide alternative proposals not discussed above, they 
should include information on how the contractual process will function 
with each specific proposal. After implementing a new ICS regime,

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should the Commission require a periodic rate review to ensure that the 
rates remain just and reasonable?
    47. We encourage comment on any new issues that have arisen in the 
ICS market or issues that have not been addressed above. We request 
that commenters provide evidentiary support for their comments and 
suggestions in this proceeding.

C. Cost/Benefit Analysis of Proposals

    48. Acknowledging the potential difficulty of quantifying costs and 
benefits, we seek to determine whether the proposals above will provide 
public benefits that outweigh their costs, and we seek to maximize the 
net benefits to the public from any proposals we adopt. For example, 
commenters have argued that inmate recidivism is decreased with regular 
family contact. Accordingly, we seek specific comment on the costs and 
benefits of the proposals above and any additional proposals received 
in response to this Notice. We also seek any information or analysis 
that would help us to quantify these costs or benefits. Further, we 
seek comment on any considerations regarding the manner in which the 
proposals could be implemented that would increase the number of people 
who benefit from them, or otherwise increase their net public benefit. 
We request that interested parties discuss whether, how and by how much 
they will be impacted in terms of costs and benefits of the proposals 
included herein. We recognize that the costs and benefits may vary 
based on such things as the correctional facility served and ICS 
provider. We request that parties file specific analysis and facts to 
support any claims of significant costs or benefits associated with the 
proposals herein.

D. Legal Authority

    49. We seek comment on the scope of the Commission's legal 
authority to regulate ICS. Section 276 of the Communications Act of 
1934 (Act) requires that all payphone providers, including ICS 
providers, be ``fairly compensated.'' We seek comment on our authority 
to address interstate interexchange ICS rates under section 
276(b)(1)(A), which directs the Commission to ``establish a per call 
compensation plan to ensure that all payphone service providers 
[(PSPs)] are fairly compensated for each and every completed intrastate 
and interstate call.'' We also seek comment on our authority to address 
interstate interexchange ICS rates under section 201(b) of the Act, 
which requires common carriers to provide service at ``just and 
reasonable'' rates and authorizes the Commission to ``prescribe such 
rules and regulations as may be necessary in the public interest to 
carry out the provisions of this chapter.'' Does the Commission have 
the jurisdiction to establish per-minute rate caps for privately- and 
publicly-administered facilities? We encourage commenters to discuss 
additional sources of legal authority for the Commission to address ICS 
rates.
    50. We note that only a portion of the telephone calls inmates make 
from correctional facilities are interstate, interexchange ICS. Many 
calls made from correctional facilities are intrastate local or long 
distance calls, which are regulated by the states. We therefore seek 
comment on how the Commission can encourage states to reevaluate their 
policies regarding intrastate ICS rates.
    51. We also seek comment on how and whether use of VoIP 
technologies by ICS providers impacts our analysis under section 276 of 
the Act. To what extent are providers currently utilizing VoIP 
technology to provide ICS? Would the use of VoIP technology affect the 
authority of state regulators to address intrastate ICS rates? What 
authority regarding ICS rates would control in that circumstance?
    52. We recognize the important role that states play in managing 
correctional facilities and in contracting with private correctional 
management companies. Some parties believe ICS is exclusively a state 
issue because it involves management of correctional facilities and 
therefore its regulation should be left to state correctional 
officials. How would such a conclusion be reconciled with the 
Commission's obligations under sections 201 and 276 and the fact that 
the question of the reasonableness of ICS rates was referred to the 
Commission under the doctrine of primary jurisdiction? Would the 
Commission's fulfillment of its obligations under sections 201 and 276 
potentially result in preemption of states' exercise of regulatory or 
police power authority?
    53. We also seek comment specific to the proposals discussed above. 
Does the Commission have the authority to disallow an additional call 
set up charge when inmates' calls are disconnected? Does the Commission 
have the legal authority to mandate that ICS providers offer debit 
calling? What legal authority does the Commission have to address the 
site commissions common in ICS contracts?

IV. Procedural Matters

A. Filing Instructions

    54. Pursuant to Sec. Sec.  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 (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998). Comments and reply comments 
on this NPRM must be filed in WC Docket No. 12-375.
     Electronic Filers: Direct cases and other pleadings may be 
filed electronically using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
     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.
    Filings can be sent by hand or messenger delivery, 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.
     All hand-delivered or messenger-delivered paper filings 
for the Commission's Secretary must be delivered to FCC Headquarters at 
445 12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours 
are 8:00 a.m. to 7:00 p.m. All hand deliveries must be held together 
with rubber bands or fasteners. Any envelopes and boxes must be 
disposed of before entering the building.
     Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
     U.S. Postal Service first-class, Express, and Priority 
mail must be addressed to 445 12th Street SW., Washington DC 20554.
    People with Disabilities: To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).

B. Ex Parte Requirements

    55. The proceeding this Notice initiates shall be treated as a 
``permit-

[[Page 4376]]

but-disclose'' proceeding in accordance with the Commission's ex parte 
rules. 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). 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 Sec.  1.1206(b). In proceedings governed by 
Sec.  1.49(f) or for which the Commission has made available a method 
of electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding, and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.

C. Initial Regulatory Flexibility Analysis

    56. As required by the Regulatory Flexibility Act of 1980 (RFA), 
the Commission has prepared an Initial Regulatory Flexibility Analysis 
(IRFA) for this Notice, of the possible significant economic impact on 
small entities of the policies and rules addressed in this document. 
Written public comments are requested on this IRFA. Comments must be 
identified as responses to the IRFA and must be filed by the deadlines 
for comments on the Notice provided on or before the dates indicated on 
the first page of this Notice. The Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, will send a 
copy of this Notice of Proposed Rulemaking, including the IRFA, to the 
Chief Counsel for Advocacy of the Small Business Administration (SBA).

D. Initial Paperwork Reduction Act of 1995 Analysis

    57. This document does not contain proposed information collection 
requirements subject to the Paperwork Reduction Act of 1995, Public Law 
104-13. In addition, therefore, it does not contain any proposed 
information collection burden for small business concerns with fewer 
than 25 employees, pursuant to the Small Business Paperwork Relief Act 
of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

V. Ordering Clauses

    58. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i)-(j), 201(b) and 276 of the Communications Act of 1934, as amended, 
47 USC 151, 152, 154(i)-(j), 201(b) and 276, this Notice of Proposed 
Rulemaking is adopted.
    59. It is further ordered, that the Petition of Martha Wright et 
al. for Rulemaking or, in the Alternative, Petition to Address Referral 
Issues in Pending Rulemaking is GRANTED IN PART.
    60. It is further ordered, that the Petitioners' Alternative 
Rulemaking Proposal is granted in part.
    61. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.
    62. It is further ordered, that pursuant to Sec. Sec.  1.4(b)(1) 
and 1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1) and 1.103(a), 
that the Notice of Proposed Rulemaking shall be effective on the date 
of publication of a summary thereof in the Federal Register.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2013-01154 Filed 1-18-13; 8:45 am]
BILLING CODE 6712-01-P