[Federal Register Volume 79, Number 225 (Friday, November 21, 2014)]
[Proposed Rules]
[Pages 69682-69708]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26922]



[[Page 69681]]

Vol. 79

Friday,

No. 225

November 21, 2014

Part III





 Federal Communications Commission





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47 CFR Part 64





 Rates for Interstate Inmate Calling Services; Second Further Notice of 
Proposed Rulemaking; Proposed Rule

  Federal Register / Vol. 79 , No. 225 / Friday, November 21, 2014 / 
Proposed Rules  

[[Page 69682]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 64

[WCB: WC Docket No. 12-375; FCC 14-158]


Rates for Interstate Inmate Calling Services; Second Further 
Notice of Proposed Rulemaking

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, the Commission seeks comment on additional 
measures it could take to ensure that interstate and intrastate inmate 
calling services are provided consistent with the statute and the 
public interest and the Commission's authority to implement these 
measures. The Commission believes that additional action on inmate 
calling service will help maintain familial contacts stressed by 
confinement while still ensuring the critical security needs of 
correction facilities of various sizes.

DATES: Comments are due on or before January 5, 2015. Reply comments 
are due on or before January 20, 2015.

ADDRESSES: You may submit comments, identified by WC Docket 12-375, by 
any of the following methods:
    [ssquf] Federal Communications Commission's Web site: http://fjallfoss.fcc.gov/ecfs2/. Follow the instructions for submitting 
comments.
    [ssquf] 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 Engledow, Pricing Policy 
Division, Wireline Competition Bureau, 202-418-1520 or 
[email protected].

SUPPLEMENTARY INFORMATION: 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 (ECFS). See Electronic 
Filing of Documents in Rulemaking Proceedings, 63 FR 24121 (1998).
    [ssquf] Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
    [ssquf] 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.
    [ssquf] 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.
    [ssquf] 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.
    [ssquf] 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).
    This is a summary of the Commission's Second Further Notice of 
Proposed Rulemaking released on October 23, 2014. This document does 
not contain information collection(s) subject to the Paperwork 
Reduction Act of 1995 (PRA), Public Law 104-13. 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. A full text of this 
document is available at the following Internet address: http://www.fcc.gov/document/fcc-continues-push-rein-high-cost-inmate-calling-0. The complete text may be purchased from Best Copy and Printing, 
Inc., 445 12th Street SW., Room CY-B402, Washington, DC 20554. Public 
and agency comments are due January 5, 2015.

I. Introduction

    1. In 2013, nearly ten years after Martha Wright, a grandmother 
from Washington, DC, petitioned the Federal Communications Commission 
(Commission or FCC) for relief from exorbitant long-distance calling 
rates from correctional facilities, the Commission took long overdue 
steps to provide relief to the millions of Americans paying unjust and 
unreasonable interstate inmate phone rates. These exorbitantly high 
rates discouraged phone calls and, at times, made it nearly impossible 
for inmates to maintain contact with their families, friends and 
communities, to society's detriment.
    2. Reforming inmate calling service (ICS) benefits society by 
making it easier for inmates to stay connected to their families and 
friends. An April 2014 report from the Department of Justice found 
that, of the 400,000 prisoners released over a five-year period, two-
thirds were rearrested within three years, and three-quarters were 
rearrested within five years. As a nation, we need to take all actions 
possible to reduce these recidivism rates. Studies have shown that 
family contact during incarceration is associated with lower recidivism 
rates. Lower recidivism means fewer crimes, decreases the need for 
additional correctional facilities, and reduces the overall costs to 
society. Reform also helps families and the estimated 2.7 million 
children of incarcerated parents in our nation, an especially 
vulnerable part of our society. In addition to coping with the anxiety 
associated with a parent who is not present on a daily basis, these 
young people are often suffering severe economic and personal hardships 
and are often doing poorly in school, all of which are exacerbated by 
the inability to maintain contact with their incarcerated parent due to 
unaffordable inmate calling rates.
    3. While the Commission prefers to promote competition to ensure 
rates are just and reasonable, it remains clear that in the inmate 
calling service market, as currently structured, competition is failing 
to do so. Evidence in the record indicates that, as of 2013, interstate 
ICS rates with comparable security features and protections varied from 
as low as $0.046 per minute to as high as $0.89 per minute, plus a per 
call charge as high as $3.95. Even worse, rates are as high as $2.26 
per minute for a call placed by a deaf or hard of hearing prisoner. 
Excessive rates are primarily caused by the widespread use of site

[[Page 69683]]

commission payments--fees paid by ICS providers to correctional 
facilities or departments of corrections to win the exclusive right to 
provide inmate calling service at a facility. These site commission 
payments, which have recently been as high as 96% of gross revenues, 
inflate rates and fees, as ICS providers must increase rates in order 
to pay the site commissions. This forces inmates and their friends and 
families, who use ICS and are forced to absorb the site commissions in 
the rates they pay, to subsidize everything from inmate welfare 
programs, to salaries and benefits of correctional facilities, states' 
general revenue funds, and personnel training. The ICS market has been 
characterized by some as subject to ``reverse competition,'' forcing 
providers to compete not on price or service quality but on the size of 
site commission payments--a dynamic that drives rates ever higher to 
cover greater and greater site commission payments.
    4. The 2013 Inmate Calling Report and Order and FNPRM tackled these 
issues for the first time and took important initial steps for reform. 
The Order adopted a cost-based approach with interim interstate rate 
caps and a Mandatory Data Collection to allow the Commission to 
evaluate ICS costs, including ancillary charge costs, in order to 
develop reforms such as permanent rate caps and to address the use of 
ancillary charges not reasonably related to the cost of providing 
service. With regard to site commission payments, the Order reaffirmed 
the Commission's previous holding that site commission payments are an 
apportionment of profit. The Order also determined that site commission 
payments and other provider expenditures not reasonably related to the 
provision of interstate ICS are not recoverable through ICS rates.
    5. Although the rate caps adopted in the Order were interim in 
nature pending results of the Mandatory Data Collection, the reforms 
have already had a significant impact on contact between inmates and 
their families. Evidence indicates that as interstate rates have 
declined, there has been a corresponding increase in call volumes. For 
example, one provider indicates that, as a result of the Commissions' 
reforms, its interstate ICS rates declined 39 percent and interstate 
call volumes increased 20 to 30 percent. Praeses reports that it 
tracked interstate ICS call volume for its clients and that in 
comparing a four-month period prior to the Inmate Calling Report and 
Order and FNPRM with another period one year later, post-adoption, 
``call volume increased nearly seventy percent.'' But interstate rates 
are only part of the ICS market. Although the Order set a framework for 
states to follow, few have done so. Many intrastate rates remain high, 
with some having even increased following the Order. There are 
indications that ancillary fees have also increased in number, price, 
or both, leading to further expense for ICS consumers in a manner that 
is often unrelated to the cost of providing ICS. These developments 
underscore the critical need for the Commission to move expeditiously 
to adopt comprehensive, permanent reforms.
    6. The Commission was unable to adopt comprehensive reform in the 
Inmate Calling Report and Order and FNPRM due to the limited data in 
the record and administrative notice limited only to interstate ICS. 
Because we seek comment on a comprehensive solution--rather than just 
reforming interstate rates--we seek comment on moving to a market-based 
approach to encourage competition in order to reduce rates to just and 
reasonable levels and to ensure fair but not excessive ICS 
compensation. This approach was not feasible when the Commission 
previously addressed interstate rates because new intrastate rates and 
fees could circumvent such efforts. We therefore initiate this Second 
Further Notice of Proposed Rulemaking (Second Further Notice) to 
develop a record to adopt comprehensive, permanent ICS reforms as 
expeditiously as possible. In this item, we seek comment on adopting a 
simplified, market-based approach focused on aligning the interests of 
ICS providers and facilities to deliver high quality ICS with advanced 
security features at the lowest prices for end users. We seek comment 
on whether such an approach will significantly limit competitive 
distortions in the ICS marketplace. We seek comment on the Commission's 
legal authority regarding site commissions and ask whether such 
payments should be prohibited. We seek comment on whether facilities 
incur costs in the provision of ICS and, if so, how facilities should 
recover these costs, as well as appropriate transition periods to 
enable facilities time to adjust. We seek comment on proposals in the 
record to establish permanent rate caps for all intrastate and 
interstate calls, limit ancillary charges, and adopt other measures to 
ensure that ICS rates are just, reasonable, fair, and accessible to all 
Americans. We believe that this market-based approach is only possible 
through a comprehensive reform effort dealing with all of the major 
portions of the ICS market, unlike when the Commission addressed only 
interstate ICS in the Inmate Calling Report and Order and FNPRM. We 
seek comment on alternative ways to promote competition in the ICS 
market. We seek comment on whether eliminating site commissions and 
capping rates and fees, on both interstate and intrastate ICS, better 
aligns the interests of both ICS providers and correctional 
institutions with the interests of consumers, allowing market forces to 
drive rates to competitive levels.

II. Background

    7. In 2003, Mrs. Wright and her fellow petitioners (Wright 
Petitioners or Petitioners), who included current and former inmates at 
Corrections Corporations of America-run confinement facilities, filed a 
petition with the Commission seeking to initiate a rulemaking to 
address high long-distance ICS rates. The petition sought to prohibit 
exclusive ICS contracts and collect-call-only restrictions in 
correctional facilities. In 2007, the same petitioners filed an 
alternative rulemaking petition, asking the Commission to address high 
ICS rates by requiring a debit-calling option in correctional 
facilities, prohibiting per-call charges, and establishing rate caps 
for interstate, interexchange ICS. The Commission sought and received 
comment on both petitions.
    8. In December 2012, the Commission adopted a notice of proposed 
rulemaking seeking comment on, among other things, the proposals in the 
Wright petitions. The 2012 ICS NPRM sought comment on the two petitions 
and proposed ways 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.'' The 2012 ICS NPRM sought comment on other issues affecting the 
ICS market, including possible rate caps for interstate ICS; ancillary 
charges; data in the record; collect, debit, and prepaid ICS calling 
options; site commissions; issues regarding disability access; and the 
Commission's statutory authority to regulate ICS.
    9. On August 9, 2013, the Commission adopted the Inmate Calling 
Report and Order and FNPRM, finding that interstate ICS rates were not 
just and reasonable as required by section 201 of the Act, and did not 
ensure fair, and not excessive, compensation for ICS providers as 
required by section 276 of the Act. In response, the Commission adopted 
reforms to ensure interstate rates were just, reasonable, and fair as 
required by Sections 201 and 276 and

[[Page 69684]]

focused on reforming interstate site commission payments, rates, and 
ancillary charges. The Commission concluded that, in the absence of 
competitive pressures, the default of cost-based regulation should 
apply to the ICS market. As discussed in the Order, this approach is 
consistent with Commission practice that ``typically focuses on the 
costs of providing the underlying service when ensuring that rates for 
service are just and reasonable under section 201(b).'' In addition, 
the Commission noted that ``the cost of providing payphone service 
generally has been a key point of reference when [it] evaluates rules 
implementing the fair compensation requirements of section 
276(b)(1)(A).''
    10. The Commission reaffirmed previous findings that site 
commission payments were not costs but ``profit.'' As a result, the 
Commission determined that site commission payments ``were not part of 
the cost of providing ICS and therefore not compensable in interstate 
ICS rates'' The Commission's previous request for ``updated data from 
all interested parties and the public, but especially from ICS 
providers . . . to aid . . . in developing a clearer understanding of 
the ICS market,'' went largely unheeded. Therefore, the Commission 
analyzed the limited data submitted by ICS providers, in addition to 
publicly-available data, to establish interim per-minute interstate ICS 
safe harbor caps of $0.12 and $0.14 and hard rate caps of $0.21 for 
debit and prepaid calls and $0.25 for collect calls to ensure that all 
rates were reduced, and provided guidance about the waiver process for 
ICS providers that could show good cause. The Commission also required 
that ancillary charges be cost based. Finally, the Commission chose not 
to address intrastate ICS, noting instead that it had ``structured [its 
reforms] in a manner to encourage . . . states to undertake reform.'' 
It noted, however, that in the absence of state reform of intrastate 
ICS, unreasonably high rates would likely continue, which would require 
the Commission to ``take action to reform unfair intrastate ICS 
rates.''
    11. The changes to interstate rates adopted by the Commission were 
significant but interim. To enable the Commission to adopt permanent 
ICS reform, the Commission adopted a Mandatory Data Collection for ICS 
providers to report costs and an Annual Reporting and Certification 
Requirement of ICS rates. In the FNPRM the Commission sought specific 
comment on multiple aspects of permanent ICS reform regardless of 
jurisdiction or call type.
    12. Prior to the effective date of the Order, the DC Circuit stayed 
three rules adopted by the Commission pending resolution of the appeal, 
including the rule requiring rates to be based on costs, the rule 
adopting an interim safe harbor, and the rule requiring ICS providers 
to file annual reports and certifications. The court allowed other 
aspects of the Order to take effect, including the interim interstate 
rate caps.
    13. Since the adoption of the Order, the Commission has continued 
to monitor the effect of its reforms on the ICS industry and pursue 
additional reform, including holding a workshop entitled ``Further 
Reform of Inmate Calling Services'' on July 9, 2014. The workshop 
evaluated options for additional ICS reforms, discussed the effects of 
the Order, the role ancillary charges play in the ICS market, the 
provision of ICS at different types of facilities, and communications 
technologies beyond traditional payphone calling being deployed in 
correctional facilities.
    14. On June 11, 2014, the Commission received approval for its 
Mandatory Data Collection from the Office of Management and Budget, 
and, after publication in the Federal Register, announced in a Public 
Notice that data responses were due on July 12, 2014, a date which was 
subsequently extended until August 18, 2014. In response, the 
Commission received significant cost and operational data, including 
ancillary charge cost data, from the following ICS providers: ATN, 
CenturyLink, Combined Public Communications, Correct Solutions, Custom 
Teleconnect, Encartele, GTL, Lattice, ICSolutions, NCIC, Pay Tel 
Communications, Protocall, Securus, and Telmate. Collectively, these 
providers represent the vast majority, well over 85 percent, of the ICS 
market. In this Second Further Notice, we seek comment on these data, 
including some reporting and cost allocation inconsistencies among the 
providers. We seek comment on these issues and generally on the data 
received as we propose to move forward and adopt permanent interstate 
and intrastate ICS reform.
    15. Proposals for Reform in the Record. Since the Order, we have 
received several proposals in the record urging comprehensive ICS 
reform. On September 15, 2014, GTL, Securus, and Telmate, who claim to 
be ``the primary providers of inmate calling services . . . in the 
United States and representing 85% of the industry revenue in 2013,'' 
jointly filed a proposal to comprehensively reform all aspects of ICS. 
First, the Joint Provider Reform Proposal urges the adoption of rate 
caps of $0.20 per minute for debit and prepaid interstate and 
intrastate ICS, and $0.24 per minute for all interstate and intrastate 
collect ICS, effective 90 days after adoption of a final order. The 
Joint Provider Reform Proposal supports ``reductions in site commission 
payments'' but does not specify exactly what such reductions would 
entail. The Proposal suggests the prohibition of ``in-kind payments, 
exchanges, technology allowances, administrative, fees,'' or anything 
``not directly related to, or integrated with, the provision of ICS.'' 
These three ICS providers contend that the Commission does not have 
authority over ``ancillary fees for transactions other than the 
provision of ICS'' but propose to eliminate some ancillary fees, limit 
allowable ancillary fees to those specified in the document, and cap 
other ancillary fees. Finally, these three ICS providers ``commit to 
continue to comply with their existing obligations'' under the 
Americans with Disabilities Act and other statutes for inmates with 
disabilities, and suggest that the Commission require officers of ICS 
providers to certify compliance with all adopted rules under penalty of 
perjury. GTL, a signatory of the Proposal, later characterized the 
Proposal as ``part of a new framework that is designed to respond to 
market forces'' and noted that ``[t]he proposed rates and fees are 
caps, which can vary by contract based on the correctional facility 
needs and the bidding process.''
    16. In addition to the Joint Provider Reform Proposal, several 
individual ICS providers also submitted proposals for reform. 
CenturyLink asserts that it could ``support a unified cap approximately 
at the current interstate cap levels,'' which would apply ``for both 
interstate and intrastate calls, with an additional allowance for 
collect calling.'' CenturyLink supports a prohibition on ``all or all 
but a very narrow class of ancillary fees.'' CenturyLink also asserts 
that the Commission should ``allow reasonable commissions or 
administrative fees,'' exempt from regulation high-cost facilities such 
as secure mental health facilities, and grandfather existing contracts. 
Pay Tel also submitted a proposal for reform, which it characterizes as 
a ``comprehensive solution to ICS reform that attempts to be fair to 
all affected parties, including inmates and their families, facilities, 
and vendors.'' Pay Tel's Proposal suggests ``postalized'' per-minute 
rate caps, at a rate to be determined, for both intrastate and 
interstate calls, separated between

[[Page 69685]]

prisons and jails, with no per-call charges allowed. Specific ancillary 
fees would be allowed, with some ``premium calling options'' for jails, 
and all other ancillary fees prohibited. Pay Tel proposes that all 
facilities would be required to comply with existing obligations and 
laws regarding people with disabilities.
    17. The Wright Petitioners, along with several public interest 
groups, urge the Commission to adopt a $0.07 per minute rate cap for 
all interstate debit, prepaid, and collect calls, with no per-minute 
rate, and no other ancillary fees or taxes allowed. Prisoners' Legal 
Service of MA (PLS) contends that the interim safe harbors and caps 
that the Commission implemented in the Order are conservative and 
``exceed cost data that any party submitted in the record.'' PLS 
opposes extending the interim safe harbor rates and caps, and instead 
proposes that the Commission adopt a flat all-distance rate of $0.07 
per minute, regardless of the size of the facility or the call volume 
generated from the facility. To justify this rate, PLS points to the 
fact that ICS providers are charging as low as $0.04 and $0.05 per 
minute absent commissions in some states.
    18. A few states have undertaken ICS reform since the Commission's 
Order. The Alabama Public Service Commission (Alabama PSC) recently 
adopted comprehensive ICS reforms that include intrastate rate caps as 
well as restrictions on the number and rates of ancillary charges it 
authorized. The Minnesota Department of Corrections initiated a pilot 
program in a limited number of correctional facilities in which a flat 
rate of $0.07 per minute is charged for all local and long-distance 
debit calls, bringing the cost of a 15-minute call to $1.05, plus 
applicable tax. New Jersey recently lowered ICS rates to $0.15 a minute 
for all interstate and intrastate calls from state prison facilities. 
We applaud these efforts and seek comment below on what more the 
Commission and states can do to enact comprehensive ICS reform.

III. Discussion

    19. In this Second Further Notice, we take the following steps to 
reform and modernize interstate and intrastate ICS regulations while 
ensuring adequate security measures for correctional facilities. First, 
we seek comment on eliminating all site commission payments on both 
interstate and intrastate ICS to fulfill the Commission's statutory 
obligations to promote competition and ensure just and reasonable rates 
and fair compensation. We also seek comment on whether facilities incur 
costs in the provision of ICS and, if so, how facilities should recover 
these costs, as well as appropriate transition periods for reform to 
allow correctional facilities time to adjust. We seek comment on 
adopting intrastate and interstate rate caps. We seek comment on 
reforming ancillary fees including adopting ancillary fee rate caps, 
and prohibiting certain ancillary charges. We also seek comment on 
alternative ways to promote competition in the ICS market. We seek 
comment on whether we should periodically review the ongoing impact of 
ICS rate reforms. Finally, we seek further comment on issues related to 
enforcement, disability access, advanced communications in the 
correctional setting, and the cost/benefit analysis of all of the 
proposals herein.

A. Payments to Correctional Facilities

    20. The record, including data from the 2014 ICS Workshop and the 
Mandatory Data Collection, makes clear that the Order's interim rate 
caps have significantly lowered the expense of interstate ICS calls to 
end users. On the positive side, the interim interstate rate caps have 
resulted in increased call volumes, evidence that unreasonable rates 
were discouraging communications and that reasonable rates foster 
communications between inmates and their families and friends. Yet 
failures in the ICS market continue. Interstate reform in some cases 
has been met by increased intrastate ICS rates and has not discouraged 
other practices that also increase the costs of ICS to consumers, such 
as excessive ancillary charges and an increase in the use of single 
call services. The pressure to pay site commissions that exceed the 
direct and reasonable costs incurred by the correctional facility in 
connection with the provision of ICS continues to disrupt and even 
invert the competitive dynamics of the industry. These and other market 
failures demonstrate that the interstate-only reforms adopted in the 
Order, while an important first step, did not completely address the 
problems in the ICS marketplace. This highlights the need for more-
comprehensive reform of the ICS industry to address both interstate and 
intrastate ICS.
1. Restrictions on Payments to Correctional Facilities
    21. In this section, we seek comment on prohibiting site 
commissions as a category, including all payments, whether in-kind 
payments, exchanges, allowances, or other fees. The record is clear 
that site commissions are the primary reason ICS rates are unjust and 
unreasonable and ICS compensation is unfair, and that such payments 
have continued to increase since our Order. Moreover, where states have 
eliminated site commissions, rates have fallen dramatically. We 
therefore predict that prohibiting such payments will enable the market 
to perform properly and encourage selection of ICS providers based on 
price, technology and services rather than on the highest site 
commission payment. Although we seek comment on prohibiting site 
commissions as a category, we seek comment on whether correctional 
institutions incur any costs in the provision of ICS and, if so, how to 
enable the facilities to recover such costs. We also seek comment on 
how best to proceed if a state has already prohibited site commission 
payments.
    22. As part of its reform of unreasonable and unjust interstate ICS 
rates in the Inmate Calling Report and Order and FNPRM, the Commission 
addressed site commissions and concluded that they were an 
apportionment of profits between service providers and correctional 
facilities and were not, in and of themselves, a cost of ICS. The 
payment of site commissions distorts the ICS marketplace by creating 
``reverse competition'' in which the financial interests of the entity 
making the buying decision (the correctional institution) are aligned 
with the seller (the ICS provider) and not the consumer (the 
incarcerated person or a member of his or her family).
    23. This ``reverse competition'' is reflected in data in the 
record. Aggregated data from the Mandatory Data Collection from 14 ICS 
providers show that over $460 million in site commission payments were 
paid to facilities in 2013. This means that ICS users and their 
families, friends and lawyers spent over $460 million to pay for 
programs ranging from inmate welfare to roads to correctional 
facilities' staff salaries to the state or county's general budget. 
These are pass-through payments from the provider to the facility, 
absent which, rates would be lower. Moreover, the magnitude of payments 
is significantly higher than previous estimates in the record. For 
example, using publicly available data in 2012, the Human Rights 
Defense Center (HRDC) estimated ICS providers paid over $123 million in 
site commissions to correctional facilities. To put the number in 
context, however, the record and data from the Mandatory Data 
Collection suggest that these payments represented just 0.3 percent of 
prison facilities total budgets in 2012. Similarly, one ICS provider 
estimated

[[Page 69686]]

that site commission payments represented 0.4 percent of total prison/
jail operating budgets in 2013. What appears to be of limited relative 
importance to the combined budgets of correctional facilities has 
potentially life-altering impacts on prisoners and their families.
    24. Despite their limited overall budget impact, site commission 
payments are the chief criterion many correctional institutions use to 
select the ICS provider for their facilities and are thus the main 
cause of the dysfunction of the ICS marketplace. The demand for site 
commission payments generates pressure on ICS providers to raise rates 
and assess additional ancillary charges, which are typically not 
subject to site commissions. The existing contract proposal process 
(RFP, or request for proposal) often focuses the competition between 
bidding ICS providers on who can pay higher site commissions to 
correctional institutions instead of creating incentives for ICS 
providers to provide the lowest rates to consumers.
    25. The Alabama PSC articulated an alternative perspective on the 
cause of increased site commissions, stating that ``the proliferation 
of excessive ancillary fees, not call rates, is the most significant 
contributor toward escalating site commission offerings.'' It further 
asserted that ``to effectively constrain excessive site commissions, it 
is essential to first address the excessive revenue sources [from 
ancillary fees].'' In this Second Further Notice we seek comment on 
proposals to address both site commissions and ancillary fees. We also 
seek comment on the Alabama PSC's perspective on the cause of increases 
in site commissions.
    26. At the time the Commission adopted the Inmate Calling Report 
and Order and FNPRM, the highest commission amount in the record was 88 
percent. Since the Order, despite the Commission's decision to not 
permit site commission payments to be included in interstate rates, the 
record indicates that site commissions have continued to increase, with 
recent contracts including site commission payments as high as 96 
percent of gross revenues. Moreover, there is evidence that site 
commission payments on intrastate ICS revenue, which were not addressed 
by the Order, have increased. Absent further action, we are concerned 
that the market will continue to fail to promote competition and ensure 
rates are just, reasonable and ensure fair compensation consistent with 
the dictates of the Communications Act. Indeed, several commenters urge 
the Commission to adopt an approach that ``will lead to lower, market-
based rates.'' Securus has suggested that if the Commission does 
anything short of completely banning site commission payments, it will 
allow gaming.
    27. We seek comment on prohibiting all site commission payments for 
interstate and intrastate ICS to enable market-based dynamics to ensure 
just and reasonable ICS rates and fair ICS compensation. Eliminating 
the competition-distorting role site commissions play in the 
marketplace should enable correctional institutions to prioritize lower 
rates and higher service quality as decisional criteria in their RFPs, 
thereby giving ICS providers an incentive to offer the lowest end-user 
rates. Indeed, when states such as Missouri, New York and New Mexico 
eliminated site commission payments, ICS rates decreased significantly. 
We therefore seek comment on such an approach and on whether it will 
foster a competitive market that will ensure just and reasonable rates 
and fair compensation for ICS while minimizing regulatory burdens on 
ICS providers and the Commission. We also seek comment below on whether 
the Commission should undertake periodic review to verify this.
    28. We seek comment on a two-year transition away from site 
commissions to avoid flash cuts and permit correctional institutions 
time to adjust. In addition, we seek comment on whether correctional 
facilities incur costs for provisioning ICS. We request data that 
demonstrate the costs that facilities bear that are directly related to 
the provision of ICS. We seek comment on the magnitude of these costs 
and how to enable facilities to recover such demonstrated costs in a 
manner that does not disrupt a market-based approach to lowering rates 
for end users of ICS.
2. Legal Authority
    29. We seek comment on the Commission's legal authority to restrict 
the payment of site commissions in the ICS context pursuant to sections 
276 and 201(b) of the Act. We begin with a review of the authority 
accorded the Commission under section 276. In relevant part, section 
276(b)(1) states:

    In order to promote competition among payphone service providers 
and promote the widespread deployment of payphone services to the 
benefit of the general public, within 9 months after the date of 
enactment of the Telecommunications Act of 1996, the Commission 
shall take all actions necessary (including any reconsideration) to 
prescribe regulations that--
    (A) establish a per call compensation plan to ensure that all 
payphone service providers are fairly compensated for each and every 
completed intrastate and interstate call using their payphone. . . .

    30. As discussed herein, the Commission has previously concluded 
that site commission payments are a significant cause of ever 
increasing rates. This fact was recently underscored by the Joint 
Provider Reform Proposal, which stated that the rate caps they propose 
``are feasible for the parties only if implemented in conjunction with 
corresponding reductions in site commission payments.'' We seek comment 
on the assertion that absent reform, achieving the statutory mandate of 
just and reasonable ICS rates and fair ICS compensation would be 
difficult, if not impossible, to achieve. At the same time, we are 
mindful that ICS providers should receive ``fair'' but not excessive 
compensation, and seek comment on implementation and transition below 
to ensure that this occurs. We therefore seek comment on whether the 
payment of site commissions would be an appropriate object of 
regulation under this statutory provision. Would a prohibition on site 
commission payments ensure ``fair compensation'' as that term is used 
in section 276? While the Commission has previously found the phrase 
``fairly compensated'' to be ambiguous, and acknowledged that a range 
of compensation rates could be considered fair, it has treated the 
concept of fairness as encompassing both the compensation received by 
ICS providers and the cost of the call paid by the end user. As the 
record continues to show that the payment of site commissions causes 
ICS rates to be set at excessive levels, could the Commission under 
section 276 find that site commissions result in unfair compensation 
and therefore should be prohibited or otherwise restricted?
    31. We seek comment on our prediction that a prohibition on the 
payment of site commissions would foster a more competitive marketplace 
for the provision of ICS. If site commissions hinder and distort 
competition among ICS providers, hinder the widespread deployment of 
payphone services, or both, would that support the Commission's 
exercise of section 276 authority ``to prescribe regulations'' to 
ensure that ICS providers are ``fairly compensated''? If so, would the 
statutory duty to ensure fair compensation encompass an outright ban on 
the payment of site commissions by ICS providers? We note, for example, 
that if a correctional institution were to self-provision ICS and seek 
to charge rates that include an amount that would be deemed a site

[[Page 69687]]

commission as part of its profits, above and beyond a normal return, 
such conduct could be directly addressed by Commission regulation of 
ICS rates to limit rates to a level that ensures fair compensation, but 
no more. Does this approach support the view that Commission regulation 
directly targeting site commissions likewise can be justified to the 
extent providers ensure that ICS rates provide no more than fair 
compensation?
    32. If, as the record currently shows, the payment of site 
commissions leads to ICS rates that are set at unreasonably high, even 
exorbitant, levels, then, as has occurred in states that have 
eliminated site commissions, we predict that a prohibition on making 
these payments would lead to significantly lower ICS rates. We seek 
comment on the reasonableness of this presumption and whether there are 
criteria other than site commissions that might discourage correctional 
institutions from prioritizing lower rates and better service quality 
in their RFPs. If the elimination of site commissions does lead to 
lower rates, we seek comment on whether lower ICS rates would lead to 
greater ICS usage. How should we interpret the word ``deployment'' in 
this context? For instance, is ``deployment'' limited to installation 
of new physical infrastructure that would enable the provision of ICS, 
or can ``deployment'' reasonably be construed to include new incentives 
or opportunities for end users to access existing payphone services? 
Similarly, can ``payphone service''--which section 276 defines to 
include ``any ancillary services''--reasonably be construed to include 
new features that might be offered to accommodate greater demand? We 
seek comment on this analysis.
    33. We seek comment on any other relevant language in section 276 
that may bear upon our authority to prohibit site commissions. For 
instance, what is the relevance of section 276(b)(1)(A)'s requirement 
that regulations adopted by the Commission ensure that payphone service 
providers are compensated ``per call'' and for ``each and every 
completed intrastate and interstate call''? More generally, are there 
alternative interpretations or theories for implementing section 276 
that counsel for or against particular approaches to addressing site 
commission payments?
    34. We seek comment on the proposal that site commission payments 
undermine the achievement of section 276's goals in the ICS context, 
even though the Commission previously has permitted location rents in 
the context of public payphones. For example, as to public payphones, 
the Commission found that ``[p]ayphones in many locations are likely to 
face a sufficient level of competition from payphones at nearby 
locations to ensure that prices are at the competitive level,'' and 
thus ``[a]s a result, we believe that payphones at such locations are 
unlikely to need additional scrutiny.'' The Commission recognized, by 
contrast, that there could be ``locations where . . . no `off premises' 
payphone serves as an adequate substitute for an `on premises' 
payphone.'' As the Commission observed:

    In such locations, the location provider can contract 
exclusively with one PSP [payphone service provider] to establish 
that PSP as the monopoly provider of payphone service. Absent any 
regulation, this could allow the PSP to charge supra-competitive 
prices. The location provider would share in the resulting 
``location rents'' through commissions paid by the PSPs. To the 
extent that market forces cannot ensure competitive prices at such 
locations, continued regulation may be necessary.

    35. We seek comment on whether market conditions for ICS differ 
sufficiently from those the Commission previously found in the case of 
public payphones as to warrant different treatment under section 276. 
Are ICS providers inherently ``monopoly providers of payphone service'' 
and therefore able ``to charge supra-competitive prices?'' Do inmates 
have access to competing alternatives? One way to mitigate this problem 
would be to require correctional institutions to enter into service 
contracts with multiple ICS providers instead of awarding a monopoly to 
a single provider, as the Wright Petitioners initially suggested. 
However, the record suggests that requiring multiple providers at 
correctional institutions, and thereby enabling competition, could 
present significant practical challenges and potentially could increase 
costs and therefore drive up rates. Further, it is unclear whether 
allowing multiple providers at correctional institutions would 
substantially lower ICS costs to consumers if facilities were still 
able to receive site commission payments. We seek comment on these 
views, and whether action on site commissions thus can be reconciled 
with Commission precedent under section 276 for public payphones, or if 
action to prohibit or restrict site commissions for ICS locations would 
require the Commission to change course in any respect.
    36. We also seek comment on any other sources of Commission 
authority to regulate site commissions. For example, section 201(b) of 
the Act requires all charges and practices ``for and in connection 
with'' an interstate common carrier service to be ``just and 
reasonable.'' We seek comment on whether section 201(b), independent of 
any authority under section 276, gives us jurisdiction to prohibit the 
payment of site commissions for interstate ICS. Is the payment of site 
commissions a ``practice'' under section 201(b)? Conversely, could it 
be viewed as a ``rate,'' or component of a ``rate,'' under section 
201(b)? Under either alternative, is the payment of site commissions 
``for and in connection with'' interstate ICS? To what extent would a 
prohibition of site commissions under section 201(b) differ from a 
prohibition under section 276? Are there circumstances under which 
section 201(b) would support the regulation of site commissions in 
connection with intrastate, as well as interstate, ICS? For example, 
would declining to prohibit or restrict site commissions in connection 
with intrastate ICS undermine the Commission's ability to ensure lawful 
interstate ICS rates? Do other statutory provisions inform how the 
Commission can or should approach the issue of site commissions in the 
ICS context? The possible reforms that we seek comment on would apply 
to site commissions on both interstate and intrastate ICS traffic. In 
what ways would the Commission's legal basis for its actions differ 
based on the jurisdiction of the traffic under particular legal 
theories? In addition to regulating ICS providers' payment of site 
commissions, does section 276 or other Commission authority enable us 
to regulate the conduct of correctional institutions or other third 
parties if they seek to induce ICS providers to make such payments? If 
so, what is that authority?
3. Possible Reforms to Site Commissions
    37. We seek comment on prohibiting site commission payments for all 
ICS as part of comprehensive reform and whether transitioning away from 
site commission payments is essential to achieving the statutory 
requirements of just and reasonable ICS rates and fair ICS 
compensation. We seek comment on a definition of site commission 
payments that are subject to any prohibition or restriction to include 
``payments in money or services from ICS providers to correctional 
facilities or associated government agencies, regardless of the 
terminology the parties to the agreement use to describe them.'' We 
seek comment on interpreting this language to include any products or 
any other thing of value such as, for example, so-called ``contract 
administration'' fees. This is consistent with the approach in the 
Order where

[[Page 69688]]

the Commission noted that it would treat in-kind payments as site 
commissions.
    38. The Joint Provider Reform Proposal supports the elimination of 
site commissions and proposes a similar definition of impermissible 
site commission payments to include a comprehensive range of ``in-kind 
payments, exchanges, technology allowances, administrative fees, or the 
like.'' It proposes that ``the Commission define as impermissible: Any 
payment, service, or product offered to, or solicited by an agency (or 
its agent) that is not directly related to, or integrated with, the 
provision of communications service in a correctional facility.'' We 
seek comment on these definitions and on any other ways to define ICS 
provider payments to correctional institutions that would be subject to 
any regulation discussed herein. We also seek comment on whether we 
should prohibit gifts or charitable contributions from ICS providers to 
correctional facilities to ensure they are not used to undermine a 
potential site commission prohibition. In an analogous context, the 
Commission included in its E-rate program rules a prohibition on gifts 
by service providers to schools or libraries to ensure that such gifts 
do not ``circumvent competitive bidding and other E-rate program 
rules.'' Additionally, we seek comment on whether any certification 
required of ICS providers should include a certification of compliance 
with any prohibition on site commissions and gifts the Commission may 
impose.
    39. Costs Incurred by Correctional Facilities. Although we seek 
comment on eliminating site commissions as a category, the Commission 
acknowledged in the Order that some portion of payments to correctional 
facilities ``may, in certain circumstances, reimburse correctional 
facilities for . . . costs,'' such as security costs, that the 
Commission would likely consider reasonably and directly related to the 
provision of ICS. Consistent with the Order, we seek comment on whether 
correctional institutions incur any costs in the provision of ICS and, 
if so, how to quantify them and how the facilities should recover such 
costs. We seek comment on the idea that any recovery by facilities for 
costs reasonably and directly related to making ICS available be built 
into any per-minute ICS rate caps set by the Commission.
    40. We seek comment on any filings in the record attempting to 
demonstrate ``legitimate costs incurred by correctional facilities . . 
. related to the provision of inmate calling services.'' The Joint 
Provider Reform Proposal states that ``[t]he parties recognize . . . 
that correctional facilities may incur administrative and security 
costs to provide inmates with access to ICS,'' referencing them as 
``admin-support payments.'' Yet, the participating providers ``have not 
reached agreement as to what amount or what percentage (if any) should 
be required, or how such admin-support payments can accurately be 
measured.'' Some parties suggest that costs to facilities may include 
monitoring calls, submitting trouble tickets on equipment, handling 
billing disputes that inmates may have with the provider, and 
infrastructure and security costs. Praeses asserts that ``correctional 
facilities incur real costs to enable inmate calling'' and lists a 
number of functions they assert are related to such costs. However, 
other parties question whether the facilities incur any additional 
costs for the provision of ICS. Also, Securus notes that correctional 
facilities benefit significantly from having ICS in terms of reduced 
recidivism, solving and preventing crimes and inmate control and 
satisfaction suggesting that any costs are far outweighed by the 
benefits. Should the Commission be concerned that prohibiting or 
restricting site commission payments or prohibiting rates that include 
recovery of site commissions will lead correctional facilities to stop 
allowing inmates access to ICS altogether, or else to restrict inmates' 
access to ICS? We seek comment on whether correctional institutions in 
states that have prohibited site commissions bear any costs and, if so, 
whether such costs are recovered through ICS rates or are recovered 
through the general budget of the correctional institution.
    41. We note that because the Mandatory Data Collection applied to 
ICS providers, not correctional institutions, the costs submitted by 
the providers do not include any costs that may be incurred by 
facilities. We seek comment on the actual costs, if any, incurred by 
correctional facilities in providing ICS, the amounts associated with 
these costs, and the appropriate vehicle for enabling facilities to 
recover such costs. Is an allocation of a guard's time for walking a 
prisoner to an ICS facility necessary and appropriate to include in ICS 
costs? Do facilities monitor calls for security purposes or is such 
monitoring done by ICS providers? If facilities monitor calls, should 
such costs be considered a cost recoverable through ICS rates? The 
Allegany County, NY Sheriff asserted that his facility ``does 
experience real costs in administering these services,'' but did not 
quantify or otherwise provide a context for understanding the relative 
magnitude of these costs as compared to the county's correctional 
budget.
    42. The record is mixed on whether, and if so, how much facilities 
spend on ICS. For example, GTL provides research that suggests 
significant variations in how facilities apportion costs. For example, 
one department of correction that GTL serves allocates 42 full time 
employees to the provision of security for ICS, whereas a second, 
similarly sized, department of correction allocates only 0.5 full time 
employees to the provision of security for ICS. GTL estimates prisons' 
ICS-related costs at $0.005 per minute of use and jails' costs at 
$0.016 per minute of use, or 3.4 percent of total ICS revenue at 
prisons and 7.6 percent in jails. In contrast, CenturyLink asserts that 
to ``monitor just ten percent of the calls placed by inmates at either 
a prison or a jail would cost the facility 5.28 cents per minute 
applied to all calls placed by inmates at the facility.'' We seek 
comment on these estimated costs, particularly on why they vary so 
significantly, and the underlying assumptions, i.e., staffing costs and 
time commitments. For example, CenturyLink provides a list of 
``administrative and security functions'' that correctional facilities 
commonly perform,'' such as ``responding to other law enforcement 
requests for records/recordings,'' validating attorney or other 
privileged numbers, ``blocking/unblocking numbers blocked for security 
issues,'' and ``administration of debit purchase.'' We seek comment on 
this list of functions and whether, in commenters' experiences, it 
accurately represents costs that correctional facilities incur in the 
provision of ICS. Other comments contend that ICS facilities do not 
incur costs in the provision of ICS. For example, is it appropriate for 
any portion of a salary of a full-time guard to be considered a cost of 
ICS?
    43. To the extent the record indicates that facilities incur costs 
related to the provision of ICS, we seek comment on allowing cost 
recovery through a per-minute rate cap included in any rate cap adopted 
by the Commission, or some other approach. The per-minute approach 
presumes that facilities' costs vary with usage. We seek comment on the 
variable or fixed nature of correctional institutions' costs. GTL 
estimates prisons' ICS-related costs at $0.005 per minute of use and 
jails' costs at $0.016 per minute of use. We seek comment on whether a 
per-minute amount between $0.005 and $0.016 or at

[[Page 69689]]

some other per minute amount would ensure that correctional facilities 
recover their costs. Would allowing cost recovery based on a per-minute 
amount give correctional facilities an incentive to increase ICS usage? 
What would be the policy advantages or disadvantages of such an 
approach? Would correctional facilities be likely to select ICS 
providers with lower rates and fees, so as to increase usage and, 
depending on the elasticity of demand, thereby increase cost recovery 
to the facilities? We seek comment on whether any such cap should be 
reevaluated and adjusted as minutes of use (MOU) change.
    44. We seek comment on using a per-minute approach over one that 
would set such payments at a capped percentage of ICS revenues. This 
approach would promote simplicity and deter possible improper 
incentives tied to a percentage of revenues approach, as occurs today. 
If, however, we used a percentage-based approach, we seek comment on 
the appropriate level of any recovery percentage. GTL estimates 
prisons' ICS-related costs at 3.4 percent of total ICS revenue and 
jails' costs at 7.6 percent. We seek comment on whether a percent of 
gross revenues between 3.4 percent and 7.6 percent or some other 
percent amount would ensure correctional facilities recover their 
costs. Would basing cost recovery on a percentage of ICS revenues 
encourage gaming and provide no or less incentive to facilities to 
lower ICS rates? For example, would basing cost recovery amounts on a 
percentage of revenues give ICS providers incentives to maintain rates 
at the highest allowable level in order to maximize site commission 
revenues? Will correctional facilities structure their RFPs so as to 
require such an outcome? We seek comment below on a transition period 
to achieve any cost recovery level. Praeses suggests that the 
Commission should consider developing ``a safe harbor payment level in 
addition to a payment cap--in much the same way that the Commission 
regulated interstate ICS rates in the ICS Report and Order in light of 
the varying ICS costs borne by ICS providers with respect to the 
different types of correctional facilities served.'' We seek comment on 
these and any other alternative regulations that could govern the 
relationship between any restriction on site commissions and ICS rate 
regulations.
    45. To ensure our reforms produce just and reasonable rates and 
fair compensation, we seek comment on whether state statutes or 
regulations that require any site commission payment, as we sought 
comment on defining here, are inconsistent with the possible regulation 
herein and would therefore be preempted, pursuant to section 276(c) as 
discussed below. What criteria should the Commission use to determine 
which state actions are consistent? For example, should state actions 
to eliminate or restrict site commissions be considered consistent with 
any reforms that the Commission adopts? Should such an approach also 
preempt state statutes that only mandate how site commissions are to be 
used, but not require them in the first instance? Or would such 
statutes simply be rendered moot to the extent that correctional 
institutions elect not to seek, or ICS providers elect not to pay, site 
commissions in those states?
    46. We also seek comment on possible state roles to address the 
issues discussed above. Are there circumstances where states might be 
better positioned to engage in oversight? Would states be limited to 
oversight in the context of intrastate ICS or could they also play some 
role in the context of interstate ICS? If so, what might that role be? 
Finally, we seek comment on setting interstate and intrastate ICS rates 
at levels that do not include the recovery of site commission payments 
instead of prohibiting site commission payments directly. If the 
Commission determines that it does not have authority over site 
commission payments, does such an approach still allow for just and 
reasonable ICS rates as well as fair compensation? Would such an 
approach help satisfy the goals, provided in section 276 of the Act, of 
promoting competition and widespread deployment of payphone services?

B. Interstate and Intrastate ICS Rate Reform

    47. A goal of ICS reform is to move to a market-based solution to 
reduce rates. While we continue to see the benefits of a the approach 
adopted in the Order last year, now that we are seeking comment on 
comprehensively reforming all aspects of ICS (including intrastate 
rates and site commissions) this allows the Commission to ask about a 
more market-based approach to promoting competition and just and 
reasonable rates and to ensure fair compensation. Given the high rates, 
excessive compensation and market failure we see today, we seek comment 
on adopting permanent rate caps to ensure that ICS rates are just and 
reasonable. These rate caps will serve as a backstop to the market-
based solution described above. We seek comment on how to set those 
rate caps. Specifically, we seek comment below on the data submitted by 
ICS providers pursuant to the Mandatory Data Collection. We also seek 
comment on the proposals for rate reform filed in the record. In 
addition, we seek comment on prohibiting per-connection or per-call 
charges. Should any such expenses be collected through a per-minute 
rate? We seek comment on the best ways to address flat-rate charges for 
ICS.
    48. We seek comment on adopting permanent rate caps for interstate 
and intrastate debit/prepaid and collect ICS calls. In the Order, the 
Commission adopted a requirement that rates be cost-based. At that 
time, because reform was limited to interstate rates, market forces 
alone would not bring all rates down to just and reasonable levels 
because intrastate rates, ancillary charges and site commission 
payments on intrastate rates would still thwart market forces. While we 
continue to see the benefits of a cost-based approach as adopted in the 
Order last year, the Commission prefers to allow market forces to 
ensure that rates are just and reasonable. Now that we seek comment on 
comprehensively reforming all aspects of ICS, including intrastate 
rates, will the elimination of site commissions facilitate the market 
moving to just and reasonable rates? We also seek comment on adopting 
permanent rate caps to ensure that ICS rates are just and reasonable 
and ICS compensation is fair, particularly while we transition away 
from site commissions. We ask about the advantages and disadvantages of 
this approach as compared to setting safe harbors or simply requiring 
cost-based rates. We seek comment above on a possible cost recovery 
amount for correctional facilities and seek comment on including an 
amount for correctional facility cost recovery in any rate caps 
ultimately adopted by the Commission.
    49. Data Analysis. We seek comment on the data filed by the 14 ICS 
providers in response to the Mandatory Data Collection. The data filed 
by ICS providers include cost, site commission and ancillary services 
data, which are informative and useful, and we take this opportunity to 
remind all ICS providers of the filing requirement. These data include 
the cost of the full spectrum of safety and security features, 
including verification, monitoring and other advanced security 
capabilities that ensure that correctional facilities have the security 
necessary for the provision of ICS. We generally seek comment on the 
data and invite parties to analyze the data and submit any analysis 
consistent with the terms of the Protective Order. We also invite 
parties to submit concerns or alternative proposals for the Commission 
to consider as it evaluates further reforms. Throughout this section

[[Page 69690]]

we use 2012 and 2013 actual data filed by the responding ICS providers.
    50. While the data are useful to the Commission's evaluation of 
further ICS reforms, we seek comment on some apparent inconsistencies 
and anomalies. For example, differing cost allocations by providers 
were particularly notable and could affect the consistency and 
reliability of the data as reported. The Wright Petitioners noted 
several anomalies based on their analysis of the data, including the 
fact that ``[t]he average cost per minute of use is substantially less 
than the interim Interstate ICS hard rate caps adopted in August 2013; 
[t]he ICS providers inconsistently allocated their costs among the four 
cost categories (Telecom, Equipment, Security, Other); [t]he ICS 
providers used different methodologies to allocate costs to facilities 
and payment methods.'' We seek comment on these apparent 
inconsistencies and how the data may be analyzed to make an allowance 
for such variances.
    51. A large proportion of costs reported by ICS providers are 
common costs, which is consistent with the fact that ICS providers 
typically use centralized calling platforms to process calls from the 
different facilities they serve. The Commission's Mandatory Data 
Collection did not dictate a particular methodology for allocating 
common costs--and, indeed, doing so could have greatly increased the 
administrative burden of providing the data. As a result, the providers 
took varied and often inconsistent approaches to allocating common 
costs among types of facilities and types of services. Given the 
preponderance of common costs in ICS providers' data submissions, 
analysis of the data is particularly sensitive to such varied and 
inconsistent common cost allocation methodologies.
    52. We note that, as a whole, ICS providers allocated common costs 
among types of facilities and types of services differently as compared 
to the volumes of traffic those facilities and services experienced. 
Specifically, ICS providers that served both jails and prisons 
generally allocated a higher proportion of their common costs to jails 
than would otherwise be warranted given the minutes of use from those 
jails. Although the exact allocation varied by provider, on average 
about two thirds of common costs were allocated to jails, whereas only 
about half the reported total traffic volume originated from jails. The 
data evidence similar discrepancies between the allocation of common 
costs to types of service and the volume of traffic for those services. 
For example, ICS providers as a whole allocated about 16 percent of 
their common costs to collect calls, whereas collect calls represented 
only about eight percent of total traffic. It is not readily apparent 
why common costs (as opposed to direct costs) would not follow usage 
more closely. And the results of the data from these allocations show 
costs for jails that are higher than proposals for comprehensive reform 
that the providers themselves submitted, which raises concerns about 
the accuracy of their methodology and whether alternative allocation 
methods would more accurately represent costs.
    53. One possible approach to addressing apparent inconsistencies in 
the providers' common cost allocation methodologies would be to use 
minutes of use for each provider as an alternative basis on which to 
allocate providers' common costs. Given the high proportion of common 
costs reported by the industry and the centralized nature of its 
networks, using minutes of use to allocate common costs would seem 
likely to reflect the providers' operational realities. We seek comment 
on whether employing a usage-based allocation of common costs would 
more closely reflect cost causation and provide more consistent and 
reliable data. We further seek comment on how these data should inform 
the rate cap levels for interstate and intrastate debit/prepaid and 
collect calls. The following table shows the costs per minute for jails 
and prisons when using three different methods to allocate common 
costs: As submitted by ICS providers, as reallocated using total 
minutes of use, and as reallocated using the providers' cost 
allocations between jails and prisons prior to reallocating those costs 
by minutes of use for each type of and facility.

                                                                        Table One
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      Common costs as  allocated by     Common costs allocated by MOU       Common costs allocated by
                                                                providers                        (in cents)                 facility type  (in cents)
                   Facility type                   -----------------------------------------------------------------------------------------------------
                                                     Average debit/  Average collect   Average debit/  Average collect   Average debit/  Average collect
                                                      prepaid cost         cost         prepaid cost         cost         prepaid cost         cost
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jails.............................................             15.8             48.7             14.8             21.9             18.1             26.3
Prisons...........................................             10.0             13.7             14.0             17.2              9.9             14.3
All...............................................             13.3             28.3             14.5             19.2              N/A              N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

    54. We seek comment on the two reallocation methodologies in Table 
One, both of which use minutes of use in different ways as a means of 
reallocating common costs in manner tied more closely to usage. We 
initially examine and seek comment on the reallocation based on total 
minutes of use. This method uses the ratio of total industry minutes of 
use for jails to total minutes of use for all facilities to reallocate 
all common costs among facility and service types. Minutes of use for 
jails represent about 53 percent of all minutes of use, resulting in an 
allocation of about 53 percent of common costs to jails instead of the 
average of approximately 68 percent allocated to jails in the data as 
reported by providers. The results of this reallocation methodology are 
more consistent with provider proposals in the record, both from 2008 
and more recently. For purposes of comparison, the 2008 ICS provider 
proposal reported costs of $0.164 per minute for debit calls and $0.236 
per minute for collect calls, whereas the providers' data reported 
costs of $0.133 per minute for debit and prepaid and $0.283 per minute 
for collect. Similarly, the Joint Provider Reform Proposal recommends a 
single per-minute rate cap of $0.20 for debit and prepaid and $0.24 for 
collect calling. CenturyLink's proposal advocates unified rate caps at 
the current interstate caps ($0.21 for debit and prepaid and $0.25 for 
collect). We seek comment on these apparent allocational discrepancies.
    55. This alternative methodology would standardize common cost 
allocations among the five providers that serve a mix of jails and 
prisons. And the fact that providers that serve only jails have no 
prison minutes of use would ensure that their common costs would not be 
allocated to prisons. Does

[[Page 69691]]

this method more closely approximate the operational realities of the 
providers? Is it more effective in replicating cost causation in the 
industry? Does it have any disparate impacts on providers that only 
serve jails?
    56. We also examine and seek comment on a potential reallocation of 
providers' common costs based on providers' allocation of common costs 
to facility types (jails or prisons). This method accepts each 
individual provider's allocation of common costs between jails and 
prisons and then allocates those costs among facility and service types 
based on total minutes of use for each type of facility. This method 
shifts fewer costs to prisons and results in higher costs for jails 
than the total minutes of use allocation due to the reliance on the 68 
percent average allocation of common costs to jails by providers, as 
noted above. Is this method more appropriate because providers' initial 
allocations of common costs are more accurate? Alternatively, is this 
method's greater reliance on the accuracy of those allocations a 
potential vulnerability or flaw?
    57. The data provided by ICS providers also allocated costs to 
different subsets of facilities based on size of facility. This 
allocation resulted in a wider range of per-minute costs with some 
apparent anomalies, such as per-minute costs for certain facility size 
groups being well above the range of rate cap proposals submitted by 
any ICS provider, including those that exclusively serve purportedly 
higher-cost facilities such as jails. The cost data generated by 
facility size groups also resulted in some anomalies that raised 
questions about whether smaller facilities have higher costs than 
larger ones, and vice versa, as some commenters have asserted in this 
proceeding. Given confidentiality of the data, we cannot disaggregate 
all data for jails and prisons by size but we note that while the data 
indicate that smaller jails are most costly and the largest jails are 
less costly to serve, the data did not show the same correlation 
between size and cost for prisons. This raises questions about whether 
assumptions about facility size determining cost are accurate. Even if 
size were the appropriate measure, would the administrative burden of 
using rates tiered by size and type of facility outweigh the benefits 
of multiple rate tiers? Can rate caps for different types of services 
and facilities provide sufficient flexibility to ensure fair 
compensation short of resorting to size-based tiers? Does the 
Commission need to adopt such a regulatory approach?
    58. To the extent that particular facilities are more costly to 
serve than suggested by the rate cap proposals in the record, can the 
Commission more effectively ensure fair compensation and reduce 
administrative costs to providers by addressing such outliers through 
the use of the waiver process? We note that the Commission already 
granted a waiver of its interim rate caps to one ICS provider to 
address unique circumstances. Would using a waiver process be easier to 
manage than adopting and policing the multiple rate tiers the 
Commission would otherwise have to adopt?
    59. We also seek comment on other alternative methods of analyzing 
the ICS providers' cost data. For example, would evaluating jail data 
separately from prison data be useful? We seek comment on any other 
methods of evaluating the data that commenters may want to propose that 
may prove useful to the Commission in its analysis of this data to 
ensure just and reasonable rates and fair, not excessive, compensation.
    60. Previous Data Submissions in the Record. ICS providers have 
previously filed data in the record throughout this proceeding. In 
2008, seven ICS providers filed a cost study based on proprietary cost 
data for certain correctional facilities with varying call cost and 
call volume characteristics. The study indicated that the per-call cost 
for debit calls was $0.16 per minute and $0.24 per minute for collect 
calls. In response to the 2012 ICS NPRM, Securus filed data which 
showed, as discussed in the Order, ``an average per-minute cost for 
interstate calls from all facilities included in the report to be $0.12 
per minute with commissions and $0.04 per minute without them.'' Pay 
Tel filed financial and operational data for its ICS operations. The 
non-confidential cost summary included in the filing reported actual 
and projected 2012-2015 average total costs for collect and debit per-
minute calling of approximately $0.23 and $0.21, respectively 
(including the cost of an advanced security feature known as continuous 
voice biometric identification). Although CenturyLink did not file a 
cost study at that time, it did file summary cost information for its 
ICS operations. Specifically, CenturyLink reported that its per minute 
costs to serve state departments of corrections facilities (excluding 
site commission payments) averaged $0.116 and that its per-minute costs 
to serve county correctional facilities (excluding site commission 
payments) averaged $0.137. We seek comment on how to reconcile these 
data submissions with the data filed in response to the Mandatory Data 
Collection and the Commission's analysis of that data described above, 
and how these data should inform our selection of rate caps. We also 
seek comment on and updates to intrastate rate data currently in the 
record. And we seek updated comment on international ICS and the need 
for Commission reform focused on such services.
1. Proposals for a Unitary Rate
    61. Throughout this proceeding interested parties have filed in 
support of the Commission adopting unitary ICS rate caps for all 
intrastate and interstate debit/prepaid and collect calls in all 
facilities. We seek comment here on those proposals.
    62. Joint Provider Reform Proposal. The Joint Provider Reform 
Proposal supports a rate cap of $0.20 per minute for debit and prepaid 
interstate and intrastate calls, and a rate cap of $0.24 per minute for 
all interstate and intrastate collect calls exclusive of per-call or 
per-connection charges, exclusive of any facility cost recovery, and 
regardless of facility size. The providers that submitted this proposal 
assert that this ``simplified rate structure'' ``will make ICS charges 
more transparent for inmates and their friends and family,'' as well as 
``easy for ICS providers and correctional facilities to implement 
quickly, and will simplify oversight and enforcement.''
    63. Pay Tel and the Alabama PSC have raised concerns about the 
Joint Provider Reform Proposal for a unitary rate and urged the 
adoption of different rates for jails and prisons. For example, Pay Tel 
stated that the rate caps were ``excessively high for prisons.''
    64. We generally seek comment on the rate caps proposed by the 
Joint Provider Reform Proposal. We seek comment on how our data 
analysis described above reconciles with the rate caps proposed by the 
providers. As noted above, average debit and prepaid costs are lower 
than $0.20 per minute. Should we adopt the Joint Provider Reform 
Proposal's rate caps because any adopted rate caps will serve as a 
backstop to ensure that rates are just and reasonable? Would these 
rates enable the Commission to include a per-minute cost recovery of 
$0.005 for correctional facilities' cost recovery? We also seek comment 
on how ICS providers' earlier data filings reconcile with the rate caps 
suggested in the Joint Provider Reform Proposal.
    65. Current Interim Rate Caps. Some parties have supported making 
the interim rate caps permanent for all interstate and intrastate ICS 
calls.

[[Page 69692]]

CenturyLink asserts that it could ``support a unified cap approximately 
at the current interstate cap levels.'' NCIC asserts that collect ICS 
rates should be capped at $0.25 per minute and debit call rates at 
$0.21 per minute. We seek comment on these proposals in light of the 
data received in response to the Mandatory Data Collection.
    66. Wright Petitioners' Proposal. The Wright Petitioners previously 
proposed a $0.07/minute rate cap for all interstate ICS. We sought 
comment on this proposal in the FNPRM, particularly as it related to 
distance insensitive rate proposals. ICS providers suggested that the 
rate may jeopardize ICS security. Other commenters suggested that the 
Commission should adopt a $0.07/minute rate cap for all ICS and that 
current rates in states like New Mexico ($0.043/minute) and New York 
($0.048/minute) support this cap. We now seek comment on whether we 
should adopt this proposal. If the Commission were to adopt this 
proposal, would rate caps at this level preclude ICS providers from 
paying site commissions and therefore negate the need for the 
Commission to regulate site commission payments as discussed above? 
What level of rate cap do commenters believe would change what 
providers are able to offer correctional facilities? Do the data from 
the Mandatory Data Collection support this rate cap? What are the 
considerations associated with such an approach?
2. Tiered Rate Caps
    67. While we see certain benefits to a single set of rate caps such 
as administrative ease and avoidance of potential loopholes, some 
commenters recommend rates tied to the size or type of facility. In the 
FNPRM the Commission sought comment on the adoption of, and benefits 
of, tiered rates based on a facility's volume of minutes, type (i.e., 
jail versus prison) or size. Responses centered on the distinction 
between jails and prisons, with some commenters advocating for 
different ICS rate tiers for jails and prisons. These same commenters 
also point out that the differences between jails and prisons are not 
absolute, and acknowledge that some prisons ``are more costly to serve 
than jails and the range of costs of serving jails and prisons is very 
wide.'' The record indicates that jail administrators support a tiered 
rate instead of a flat rate because jails may face different costs than 
prisons as a result of their smaller size, higher turnover rate, and 
relative inability to take advantage of economies of scale. How do the 
data collected and reported herein impact our evaluation of these 
claims?
    68. Pay Tel Proposal. In its proposal Pay Tel recommends separate 
rates for jails and prisons. Pay Tel proposes an $0.08 per minute rate 
for all prisons regardless of population. Pay Tel also estimated a 
$0.067 per minute average rate for the eight state prison systems that 
barred site commissions. Pay Tel suggests a rate of $0.26 per minute 
for jails with 1-349 average daily population [ADP], a $0.22 per minute 
rate for jails with 350 plus ADP, and a $0.08 per minute rate for all 
prisons regardless of size. We seek comment on these proposed rate 
caps.
    69. Alabama recently adopted ICS rates tied to facility type. For 
example, the Alabama PSC has adopted per-minute rates of $0.30, 
decreasing to $0.25 over two years, for jails and $0.25, decreasing to 
$0.21 over two years, for prisons. We seek comment on this approach.
    70. Commenters suggest that rates tied to the type or size of 
facility would open loopholes in ICS reform and allow for gaming. Is 
this accurate? Recently, CenturyLink said it ``does not support complex 
or tiered rate caps.'' Other commenters contend that an insufficient 
record exists from which to develop rate tiers, and point to evidence 
that many jails house long-term inmates, which may indicate that costly 
account set-up fees are less of an issue than suggested. Do the data 
received in response to the Mandatory Data Collection assuage the 
concern regarding the sufficiency of the record? The data also suggest 
that certain ICS providers reported a large proportion of the costs of 
ICS as common costs, rather than direct or facility-specific costs. 
Does this further call into question the cost allocation methods used 
by providers in their data submissions to allocate common and direct 
costs? Or does it suggest that ICS providers did not use uniform 
standards to distinguish between direct and common costs? We seek 
updated comment on interested parties' opinions on tiered rates for 
different types of facilities. Specifically, if the Commission adopts a 
market-based approach of addressing site commission payments and 
allowing competition to drive rates closer to cost, should we consider 
rate tiers, or should we instead adopt common rate caps for all 
correctional institutions to accommodate any differences between jails 
and prisons? Would the adoption of tiered rates help promote 
competition among ICS providers and promote the widespread deployment 
of ICS--a form of payphone service--consistent with the goals of 
section 276? For example, would a lower rate cap for ICS in prison 
facilities promote additional usage, a potential means of promoting 
widespread deployment of payphone ICS service?
    71. The Commission seeks comment above on prohibiting site 
commissions to address the primary cause of the ICS market failure. If 
the Commission does not prohibit site commissions should we focus more 
on rates tied to facility size or type? If the Commission were to set 
tiered rates, we seek comment on defining a jail facility as a 
correctional facility operated by a political subdivision of a state or 
its agent and defining a prison facility as a state-run or federally-
run correctional facility. How would differences in tiered rate caps be 
administered? We seek comment on a simpler approach. Would a variety of 
rate caps cause confusion? We also seek comment on the administrability 
of cost on 4ICS providers on an approach that varies by size and type 
of facility. CenturyLink urges the Commission to exclude from ICS rate 
reform certain types of facilities that it considers high-cost, such as 
juvenile detention centers and secure mental health facilities. Do 
other commenters agree that these types of facilities are particularly 
high cost? If so, why? Are there other categories of facilities that 
the Commission should consider exempting because they are high cost? 
Would doing so be in keeping with our statutory mandate? How should the 
Commission regulate the provision of ICS at such facilities? Should it 
exempt such facilities from ICS rate reform? We seek comment on the 
appropriate definitions for juvenile detention facilities and secure 
mental health facilities.
    72. In the FNPRM, the Commission also sought comment on rate tiers 
based on facility size as measured by the average daily population of 
the facility. The Prison Policy Initiative suggested that the 
Commission could use the Census of Jail Facilities population data to 
capture facility size but could also use more recent data. Would 
following the Census numbers result in too few or too many tiers? We 
seek comment on what interested parties believe to be the appropriate 
inflection points, in terms of ICS providers' scalability of costs, 
with regard to possible tiered rates. Some states have recently adopted 
ICS rate tiering. We seek comment on the jail and prison rates adopted 
by the Alabama PSC or any other states.
3. Additional Considerations Related to ICS Rates
    73. Debit/Prepaid and Collect Calling. In the Order the Commission 
treated

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debit and prepaid ICS alike and collect ICS separately because ``[t]he 
record indicates that prepaid calling is generally less expensive than 
collect calling but can be about equal in rates to debit calling.'' 
Data from the Mandatory Data Collection suggest a difference in cost 
between collect ICS calling and debit/prepaid ICS calling. The data 
also show, however, that debit and prepaid ICS costs are very similar. 
Commenters have recommended higher rates for collect calls. The Alabama 
PSC adopted different rate caps for different types of service from 
prisons. Other commenters have opposed differentiated rate caps for 
different types of ICS. We seek comment on retaining this distinction 
and adopting a rate cap for debit and prepaid calls and a rate cap for 
collect calls. We also seek comment on the appropriate differential, if 
any, between the debit/prepaid cap and the collect cap.
    74. Per-Call or Per-Connection Charges. Per-call or per-connection 
charges are one-time fees often charged to ICS users at call 
initiation. We seek comment on banning the imposition of per-call or 
per-connection charges. In the Inmate Calling Report and Order and 
FNPRM the Commission noted several problems with per-call or per-
connection charges, including the level of some of the charges, their 
effect on the rate for short calls, and evidence of premature, non-
security related call terminations, and the assessment of multiple per-
call charges for what was, in effect, a single conversation. The 
Commission, recognizing that many different ways to address per-call 
charges exist, did not prohibit all per-call charges in the Order but 
sought comment in the FNPRM. In the FNPRM the Commission noted the 
flexibility it gave ICS providers to use a rate structure that included 
per call charges and sought further comment on the risks and benefits 
of allowing per call charges. Specifically, the Commission 
``express[ed] serious concerns about such charges.'' Some commenters 
suggested that the Commission eliminate per-call charges and that doing 
so would be beneficial because it ``would lead to significant 
reductions in customer complaints regarding charges associated with 
dropped calls and in the amount of time providers are required to spend 
analyzing and resolving such complaints.'' Is there continuing evidence 
of premature, non-security related call terminations since the 
Commission adopted the Order? The per-minute rate caps proposed by 
Joint ICS Providers do not contemplate the continued charging of a per-
call or per-connection fee.
    75. We seek comment on our legal authority to ban the imposition of 
per-call or per-connection charges, for both interstate ICS calls and 
intrastate ICS calls. More specifically, we seek comment on whether 
such fees are part of the rate for ICS and therefore subject to the 
section 276 mandate to ensure fair compensation. Alternatively, should 
the Commission consider per-call or per-connection charges an ancillary 
service as discussed in section 276(d)? Are there instances in which 
the correctional facility or some other third party assesses a per-call 
or per-connection fee? If so, we seek comment on our authority to ban 
such charges. Would the elimination of per-call charges allow for just 
and reasonable interstate and intrastate ICS rates and fair 
compensation for providers? Would pure per-minute rate caps at an 
appropriate level or levels ensure fair compensation for ICS providers? 
Section 276 specifically requires us to ``establish a per call 
compensation plan.'' We seek comment on whether section 276 gives the 
Commission the legal authority to ban per-call compensation. We seek 
comment on whether we should also rely on our section 201 authority to 
ban per-call charges for interstate calls. The record has not shown 
significant per-call costs that could not reasonably be recovered using 
per-minute charges. With one exception, ICS providers have successfully 
implemented the interim per-minute rate caps for interstate ICS 
mandated by the Order. We seek comment below on transitions and whether 
rate caps should be effective 90 days after the effective date of a 
Commission order. If the Commission continues to allow per-call 
charges, should it nonetheless disallow an additional per-call charge 
when a call has been reinitiated within one or two minutes of having 
been mistakenly disconnected? If states have conducted ICS reform, we 
seek comment on whether we should review the effective rates for 
consistency with the Commission's regulations based on the calculation 
of the cost of a 15-minute ICS call. Are there other considerations 
relating to per-call charges in the ICS context that the Commission 
should consider?
    76. Flat-Rate Charges. We seek comment on whether or not it is 
necessary to ban flat-rated charges for calls of a fixed duration to 
ensure rates are just and reasonable and fair. In the Order the 
Commission stated that ``a rate will be considered consistent with our 
rate cap for a 15-minute conversation if it does not exceed $3.75 for a 
15-minute call using collect calling, or $3.15 for a 15-minute call 
using debit, prepaid, or prepaid collect calling.'' Rule 64.6030 
mirrors this language and was intended to illustrate that a five-minute 
collect call would equal $1.25 and a five-minute debit or prepaid ICS 
call would equal $1.05, while a 30-minute collect call could equal no 
more than $7.50 and a 30-minute debit or prepaid ICS call could equal 
no more than $6.30. In the FNPRM the Commission sought comment on 
whether it should adopt an overall rate cap based on call duration, how 
such a rate cap might ensure that ICS rates are just, reasonable, and 
fair, and whether a per-minute cap is still necessary to ensure that 
shorter calls are reasonably priced. Commenters expressed concern that 
``consumers who make shorter calls would necessarily be penalized'' and 
that ``there is no principled basis for capping the amount that can be 
charged for a call.'' The Public Service Commission of the District of 
Columbia discussed the benefits of its $1.75 per-call cap regardless of 
call length.
    77. Subsequent to the FNPRM comment deadline, Securus sought 
additional guidance on whether the Order allows providers to use a 
flat-rated charge based on the interim rate caps for a 15-minute call 
regardless of call duration. We seek comment on this practice. Should 
we allow ICS providers to charge fixed call duration pricing for all 
interstate ICS usage regardless of call duration? Is this an 
appropriate interpretation and application of rule 64.6030 and the 
relevant discussion in the Order? We also seek comment on how we should 
address the use of flat-rate charges for ICS going forward and our 
legal authority to act on such charges. We seek comment on whether we 
should revise the existing rules to prohibit flat-rate charges or 
develop new rules prohibiting flat-rated charges. If not, how much 
flexibility should the Commission allow if flat-rate charges are 
permitted? How can we ensure that flat-rate charges allow for just and 
reasonable ICS rates to end users as well as fair compensation to ICS 
providers?
    78. One commenter asserts that correctional facilities seek such 
flat-rated charges. Is this the case and, if so, why? What impact would 
allowing this level of flexibility have on the effective per-minute 
rates end users pay? If the Commission adopted a lesser degree of 
flexibility, how would it work? Should such a flat rate be used only 
for calls 15 minutes in length? Will flat-rated charges, at the rate 
caps discussed above, for a 15-minute call duration

[[Page 69694]]

allow for just and reasonable ICS rates and fair compensation? In the 
Order, the Commission found that the record supported 15-minute average 
call duration. Data from the Mandatory Data Collection show that the 
average call length reported by respondents was below 13 minutes in 
2013. Is 15 minutes still a useful average call duration for purposes 
of discussing flat-rate charges? If not, what would be an appropriate 
average call duration?
    79. Waivers. The Order made clear that the Commission's standard 
waiver process applies to ICS, specifically, that ICS providers seeking 
a waiver of the interim rules must demonstrate good cause. The 
Commission delegated to the Bureau the authority to seek additional 
information necessary for evaluating waivers. Since release of the 
Order, the Bureau has processed three waiver requests. CenturyLink 
suggests that the Commission ``invite waivers where new rules conflict 
with state statutes, or where they would force ICS providers to offer 
service at a loss.'' The ICS providers that submitted the Joint 
Provider Reform Proposal suggest that the Commission ``permit an ICS 
provider to seek a waiver of the rate cap for a particular correctional 
facility if the ICS provider can demonstrate that the proposed rate cap 
does not allow the ICS provider to economically serve the correctional 
facility. However, such waivers should be permissible only on a 
facility-by-facility basis.'' We seek comment on these suggestions. 
Specifically, is such action necessary if the Commission preempts 
inconsistent state regulations pursuant to section 276(c) of the Act? 
We seek comment on how the Commission would determine that rates are 
below-cost in a waiver proceeding and how any adopted regulations 
should address this issue. We further seek comment on what information 
would be important for providers to demonstrate when seeking a waiver 
in the ICS context. We also seek comment on whether exempting a 
provider's highest-cost facilities from the final, adopted regulations 
would be a suitable remedy to a waiver request. Conversely, would such 
an exemption encourage ICS providers to focus on particular facilities 
so as to arbitrage our rules?

C. Reforms to Ancillary Charges

1. Background
    80. In addition to unreasonable rates, ICS providers typically 
assess a wide range of separate charges for services ancillary to the 
provision of ICS. These charges impose significant additional burdens 
on consumers and considerably inflate the effective price they pay for 
ICS. The record indicates that ancillary charges represent a 
significant proportion of the total expense of ICS to consumers. The 
Prison Policy Initiative estimated that ancillary charges represent 38 
percent of all consumer payments for ICS. Others have suggested that 
this estimate may be low. Fees to open, fund, maintain, close, and 
refund an ICS account represent just a few of a variety of ancillary 
charges assessed by ICS providers. The sheer number of ancillary 
charges, their varying nomenclature, and the variability of the amounts 
charged cause considerable customer confusion, let alone consternation.
    81. In the Order, the Commission ``question[ed] whether such 
charges are reasonable in and of themselves'' and noted that ``the 
levels of such charges do not appear to be cost-based.'' The Commission 
required that all interstate ancillary service charges be cost-based 
and reasonably and directly related to provision of ICS. The Commission 
concluded that it had the jurisdiction and authority to regulate 
ancillary service charges. The Commission also required ICS providers 
to file cost data about ancillary services as part of the Mandatory 
Data Collection, and in the FNPRM sought comment on additional steps 
the Commission could take to address ancillary service charges and 
ensure that they are cost-based. We now seek further comment on issues 
related to ICS ancillary charges.
    82. Since the release of the Order, evidence indicates that 
ancillary charges have increased, suggesting that any reforms limited 
to ICS rates could be circumvented through increased and new ancillary 
charges. As the Commission stated in the Order, ICS reform and ensuring 
just and reasonable rates to end users ``could not be achieved if 
ancillary charges were not also controlled.'' Given that ancillary 
charges are typically shielded from site commission assessments in 
correctional institutions' contracts with providers, ICS providers 
appear to have an incentive to assess additional ancillary charges as 
an alternative source of revenue to compensate for lowered ICS rates or 
for increasingly high site commission payments. We seek comment on the 
extent to which the proliferation of ancillary charges may be a result 
of the market distorting effects of site commissions.
    83. There is broad consensus in the record on the need for the 
Commission to reform ancillary charges. The Wright Petitioners and 
prisoner advocacy groups have recommended the regulation or elimination 
of ancillary charges. A number of ICS providers have made similar 
recommendations. For example, CenturyLink stated that ``the Commission 
should prohibit all or all but a very narrow class of ancillary fees. 
Ancillary fees are the chief source of consumer abuse and allow 
circumvention of rate caps.'' NCIC stated ``[a]lthough telecom 
companies don't normally welcome a regulation, we see the need for the 
FCC and state regulators to set a standard rate and fee structure.'' 
Pay Tel stated ``you ought to get rid of all of them except the fees 
where the consumer makes a choice.'' And Securus stated that it 
``offered, however, to cease passing through several types of fees and 
to cap its fees for optional, convenient payment methods for a period 
of five years.''
    84. Mandatory Data Collection. ICS providers submitted a 
significant amount of ancillary service cost and usage data in response 
to the Mandatory Data Collection. The ancillary services data provide 
some useful insight into the costs of ancillary services. For example, 
the data show that approximately 82 percent of total ancillary costs 
incurred by ICS providers pertain to the provision of bill processing 
services, particularly for the processing of credit and debit card 
transactions. Conversely, only about 10 percent of providers' ancillary 
costs pertain to ancillary services that are typically treated as 
normal utility overhead. Even so, the data have some limitations given 
providers' inconsistent approaches in assessing and labeling such fees, 
different allocation methodologies, and different ways of reporting 
those costs. The data, while mixed, also show that the per transaction 
cost of processing financial transactions point to the reasonable 
nature of the $3.00 caps for financial transaction processing fees set 
by the Alabama PSC. We seek comment on these general observations and 
on the ancillary charge data generally.
2. Legal Authority for Ancillary Charge Reform
    85. In the Order, the Commission asserted jurisdiction over 
interstate ICS ancillary charges, citing as sources of authority 
sections 201(b) and 276 of the Act. Given section 276's mandate of fair 
compensation ``for each and every completed intrastate and interstate 
call,'' and its inclusion of ``inmate telephone service'' and ``any 
ancillary services'' in the definition of ``payphone service,'' we seek 
comment on whether section 276 gives the Commission authority to 
regulate both interstate and intrastate charges for ICS ancillary 
services. While the Commission has

[[Page 69695]]

previously adopted a definition of ancillary charges, we have not 
adopted a definition for ``ancillary services'' and therefore seek 
comment on such a definition. Additionally, given the absence of any 
qualifying statutory language to the contrary, we seek comment on 
whether section 276 gives the Commission jurisdiction over charges that 
are ancillary to ICS to the extent such services are considered IP-
enabled services. Further, in the Order the Commission asserted in 
regard to ICS generally that ``[o]ur exercise of authority under 
sections 201 and 276 is further informed by the principles of Title I 
of the Act.''
    86. We seek comment on whether this assertion also encompasses the 
Commission's regulation of services ancillary to the provision of ICS 
to the extent that ICS may be considered an IP-enabled service. 
Additionally, to the extent that ancillary charges are assessed in 
connection with ICS provided through wireless phones, we seek comment 
on whether sections 276 and 332(c) confer jurisdiction on the 
Commission to reform such fees. We also seek comment on assertions that 
charges for ancillary services are primarily related to billing and 
collection and therefore may not be considered to be communications 
services subject to Commission regulation. Finally, we seek comment on 
whether regulation by the Commission of ICS ancillary services should 
be treated as a default federal framework, with states encouraged to 
adopt additional reforms to the extent they are consistent with the 
Commission's regulations. Regarding the jurisdictional nature of 
ancillary charges, the Alabama PSC stated that ``any schedule of 
ancillary fees applies to both the interstate and intrastate 
jurisdictions.'' Are ancillary charges inherently dual jurisdictional 
in nature? We seek comment on this assertion and its impact on our 
legal authority to regulate such charges.
3. Discussion
a. Prohibition of Certain Ancillary Charges
    87. The FNPRM sought comment on whether certain ancillary charges 
constituted unjust and unreasonable practices under section 201(b), or 
practices that would result in providers being unfairly compensated 
under section 276. We now seek comment on prohibiting separate charges 
for certain ancillary services that are basic requirements for 
consumers to gain access to ICS, and that are typically recovered 
through rates as part of normal utility overhead costs. We also seek 
comment on capping charges for certain other ancillary services such as 
payment processing for credit and debit card payments that enhance 
convenience for ICS consumers. We seek comment on whether this approach 
will promote the Commission's mandate of ensuring just and reasonable 
ICS rates and fair compensation for ICS providers, as well as promote 
competition and deployment in the ICS market.
    88. The record, including the discussion at the Commission's 2014 
ICS Workshop, supports the notion that the Commission should prohibit 
separate ancillary charges for services that represent normal utility 
overhead but allow other charges for services that represent an 
additional option or convenience for consumers. For example, the 
Alabama PSC workshop participant stated that its approach ``is first, 
establish a basic level of ICS service and what is included in that 
basic service at no additional charge to the customer. . . . Beyond 
that basic level, the Commission will consider fees.'' The Alabama PSC 
participant described its goal to be to ``[m]ake the rates a true 
reflection of cost for providing the service.'' Other commenters 
support making a similar distinction. For example, Pay Tel's President 
stated at the 2014 ICS Workshop ``what I characterize as ancillary fees 
are all these extra things that really should be incorporated into the 
cost of the call. . . . [T]he fees that should be separated are the 
ones that are driven by consumer choice.'' Securus similarly proposed 
``not to have any mandatory fees and to have only fees for optional, 
convenience-related payment methods.'' The Minnesota Department of 
Commerce stated that if an ancillary charge applies ``to all ICS end-
users at a facility, or cannot be avoided by a purchaser of ICS (e.g., 
in a situation in which a no-cost alternative is not offered), the 
ancillary charge or line-item fee should be incorporated in the per-
minute rate, and should be subject to the per-minute rate cap.''
    89. We seek comment on prohibiting separate ancillary charges for 
functions that are typically a part of normal utility overhead and 
should be included in the rate for any basic ICS offering. These 
functions should include account establishment by check or bank account 
debit; account maintenance; payment by cash, check or money order; 
monthly electronic account statements; account closure; and refund of 
remaining balances. Separate charges for such ancillary services can 
often represent unreasonable practices and result in unfair 
compensation. For example, the record indicates that GTL currently 
requires a minimum deposit of $25 to create a prepaid collect account 
for an inmate's family member. If the customer does not spend the $25 
in the account, GTL charges a $5 refund charge that is only triggered 
once the customer asks for a refund. If the account remains inactive 
for 180 days, the remaining funds become the property of GTL. We seek 
comment on prohibiting separate charges for these functions and on 
whether separate charges for other services should also be prohibited. 
Would such prohibitions help ensure just and reasonable ICS rates and 
fair, not excessive, ICS compensation?
    90. The Alabama PSC implemented such an approach to the regulation 
of ancillary charges in its Further Order. It defined basic utility 
overhead services as including account set-up, account maintenance, 
account funding, payment by check or money order, monthly electronic 
billing statements, and refunds, declining to authorize separate fees 
for these services. The Alabama PSC took other steps to address fees 
and practices, including barring payment limits for certain forms of 
customer payments, barring wireless administration fees for linking 
wireless numbers to an account, and requiring providers to include up 
to five pre-approved numbers on the call list for prepaid ICS at no 
charge. In contrast, it authorized, but capped, separate ancillary 
charges for other services, including debit/credit card payment, 
payment via live agent, bill processing for collect calls billed by a 
call recipient's local telecommunications service provider, third party 
payment services, inmate canteen/trust fund transfers, and paper 
billing statements. We seek comment on whether the Alabama PSC's 
approach to prohibiting certain fees and capping others is reasonable 
and would lead to just and reasonable rates and fair ICS compensation. 
We also seek comment on the approach taken by the New Mexico Public 
Regulation Commission, which adopted a similar but more proscriptive 
approach, barring all fees except payment processing fees for credit 
card or check by phone payments and a refund fee.
    91. We seek comment on other proposals in the record to reform ICS 
ancillary charges. The Wright Petitioners recommend prohibiting all 
ancillary charges but, if the Commission were to permit ancillary fees, 
it suggests adopting an approach similar to Alabama's and New Mexico's. 
The Prison Policy Initiative recommends ``ban[ning] all illegitimate 
fees.'' Several ICS providers also recommend

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reforming ancillary charges. Pay Tel recommends that ancillary charges 
be ``generally prohibited, subject to a narrow list of clearly-defined 
exemptions,'' particularly ``fees associated with the processing of 
payments.'' CenturyLink suggests similar treatment. Securus proposes 
eliminating all mandatory fees, bill statement fees, federal regulatory 
recovery fees and state cost recovery fees, and capping all convenience 
fees, including transaction funding fees, for five years.
    92. We also seek comment on the Joint Provider Reform Proposal, 
which includes a proposal ``that ancillary fees are limited to a 
specified list of permissible fees,'' proposing to eliminate a number 
of types of fees, including per call fees, account set-up fees, billing 
statement fees, account close-out and refund fees, wireless 
administration fees, voice biometrics and other technology fees, and 
regulatory assessment fees and the capping of rates for remaining fees. 
The Proposal also requires providers to offer free payment processing 
options such as payment by check or money order when offering single 
call payment options. The Alabama PSC raised concerns with the Joint 
Proposal, including its treatment of site commissions, proposed rate 
caps that purportedly overcompensate providers serving prisons, and 
proposed ancillary fees that it asserted would result in substantial 
net revenue increases for providers. Pay Tel also identified concerns 
with the Proposal, stating that it ``lacked legitimacy from a number of 
perspectives'' and ``would allow the Proposers . . . to continue to 
burden inmates and their friends and family with excessive fees and 
practices that significantly and unjustifiably increase the cost of 
ICS.'' The Alabama PSC's and Pay Tel's concerns are addressed at 
greater length below. Will the suggestions in the Joint Provider Reform 
Proposal result in just and reasonable rates for consumers and fair, 
not excessive, compensation? If the use of ancillary charges was driven 
by pressure from increasingly high site commissions and the Commission 
were to prohibit site commissions, is there continued justification for 
allowing providers to assess ancillary fees generally?
    93. If the Commission were to prohibit some ancillary charges, 
should ICS providers be required to seek prior Commission approval 
before assessing a new ancillary charge? If so, what should such an 
approval process involve and what information should providers file? 
Certain states already require prior approval of new ancillary charges. 
Should states continue to play such a role even if the Commission 
regulates ICS ancillary charges? In lieu of seeking approval, should 
ICS providers file a notice about a change such as 60 days before? If 
we take this approach, should the new fee be allowed to go into effect 
absent Commission or a state action? We seek comment on these 
approaches, including the administrability and relative burden 
associated with each approach.
b. Rate Caps for Ancillary Charges
    94. We seek further comment on whether the Commission should set 
rate caps for ancillary charges that it finds permissible to ensure 
those charges are just and reasonable and ensure fair compensation. 
Commenters, including some ICS providers, support the use of rate caps. 
Some commenters note with approval the Alabama PSC's Further Order that 
capped rates for ancillary charges it allows. For example, the Wright 
Petitioners support the use of rate caps for ancillary charges if the 
Commission decides to authorize them, and cites with approval the two 
states that already proposed taking such a step. Would either the 
Alabama PSC's or the New Mexico PRC's approaches to capping ancillary 
charges be appropriate models for the Commission to consider? If the 
Commission were to establish rate caps for ancillary charges it did not 
prohibit, what would be appropriate levels for such rate caps? We seek 
comment specifically on the Alabama PSC's rate caps for debit and 
credit card payment fees via the web, an IVR, or a kiosk ($3.00 
maximum) and for live operator assisted payments ($5.95 maximum). NCIC 
and Pay Tel expressly support ancillary charge rate caps at these 
levels, as other ICS providers reportedly have. How do these rate caps 
compare to providers' costs?
    95. In the alternative, we seek comment on whether we should 
prohibit separate ancillary fees and instead permit the recovery of 
such costs using a per minute rate cap. The data submitted by ICS 
providers on the cost of processing financial transactions yields a 
wide range of per-minute costs. We seek comment on establishing a per-
minute ancillary charge rate cap or safe harbors. If so, how should 
these charges be set and what level is appropriate? If so, what would 
permanent rate caps inclusive of such charges be?
    96. We also seek comment on the Joint Provider Reform Proposal 
which proposes to (1) cap deposit fees to fund prepaid and debit ICS 
accounts at $7.95 for three years, (2) allow providers to charge a 
$2.50 administrative fee to process payments made through third party 
payment processing companies such as Western Union and MoneyGram in 
addition to the fees they charge, (3) allow providers to charge a per 
call validation fee of eight percent to compensate providers for call-
specific security functions, and (4) cap fees for ``convenience or 
premium payment options'' for single call services at current rates for 
three years. The Alabama PSC generally opposes these fee proposals. 
AmTel agrees and asserts that the ``Proposal is very misleading and 
will not lower prices to inmate families.'' Pay Tel comments that the 
consumer benefits of the proposed ancillary fees' `reduction' are 
illusory. For example, Pay Tel suggested that ``[v]alidation is a 
legitimate expense, but one that is included in Pay Tel's normal cost 
of providing service. In no event does this expense rise to the level 
of 8% of gross call revenue.'' We seek comment on whether these 
proposals would ensure reasonable rates and fair compensation. How do 
these proposed caps compare with providers' costs? How do they compare 
with previous proposals made by ICS providers?
    97. The following table is provided as a means of facilitating 
comparison of several of the ancillary charge reform proposals 
referenced herein. The fees included in this table represent a non-
exhaustive list of fees addressed in the various proposals.

                                                    Table Two
----------------------------------------------------------------------------------------------------------------
                                                               Ancillary charge proposals
                                      --------------------------------------------------------------------------
                                         Alabama PSC further      ICS provider reform
                                                order                   proposal             Pay Tel proposal
----------------------------------------------------------------------------------------------------------------
Check/money order payment............  No charge..............  No charge..............  No charge.
Debit/credit card payment or deposit   $3.00 cap (web/IVR)....  $7.95 cap for 3 years..  $3.00 cap (web/IVR).
 fees.                                 $5.95 cap (live                                   $5.95 cap (live
                                        operator).                                        operator).

[[Page 69697]]

 
Single call/single payment services..  Sum of $3.00 cap on      Cap at existing fees     Jails (ADP 1-349):
                                        bill processing fee      (as high as $14.99       $6.12.
                                        plus capped per minute   billed to card, $9.99   Jails (ADP 350+):
                                        charge for a 12 minute   billed to cell phone)    $5.64.
                                        call.                    for 3 years.            Prisons: Prohibit
                                                                                          service.
Account set-up, maintenance, closure,  Prohibited.............  Prohibited.............  Not addressed.
 and refund fees.
Bill processing fee for collect calls  $3.00 cap..............  Not addressed..........  Not addressed.
 (by call recipient's carrier).
Bill statement fee...................  No charge for            Not addressed..........  No charge for
                                        electronic bill. $2.00                            electronic bill. $2.00
                                        cap for paper bill.                               cap for paper bill.
Money transfer fees..................  Fees above $5.95         Existing fees (as high   $5.95 cap (Western
                                        require affidavit and    as $11.95) plus an       Union).
                                        are subject to           additional              $5.65 cap (MoneyGram).
                                        investigation.           administrative fee      No additional fee.
                                                                 capped at $2.50.
Regulatory cost recovery fees........  State regulatory cost    Various regulatory cost  Not addressed (but pass
                                        recovery fees            recovery fees            through government
                                        prohibited.              prohibited (but          mandated taxes and
                                                                 ``federal and state      fees).
                                                                 regulatory fees''
                                                                 allowed).
Security fees........................  Allow separate security  Validation fee of up to  $0.02 per minute voice
                                        biometrics fee.          8% per call.             biometric fee (only
                                                                 Prohibited fees          where deployed; lower
                                                                 include VINE, location   in prisons).
                                                                 validation fees, voice  Vendors may apply for
                                                                 biometrics fees, and     new technology fees.
                                                                 technology fees.
----------------------------------------------------------------------------------------------------------------

c. Charges for Other Services
    98. Single Call Services. ICS providers also make available so-
called single payment or single call services. These services enable 
the billing of ICS collect calls through third party billing entities 
on a call-by-call basis to parties whose carriers refuse to bill 
collect calls. The Alabama PSC addressed single call services in its 
Further Order, asserting jurisdiction over intrastate single call 
services and capping the rates ICS providers may charge for them. By 
some accounts, the use of single call services has increased 
dramatically, particularly since the adoption of the Inmate Calling 
Report and Order and FNPRM. One commenter stated that such services 
have recently been estimated to account for as much as 40 percent of 
provider revenues. We seek further comment on the prevalence of the use 
of single call services in the ICS industry. Have such services become 
more prevalent in the market since the Commission's Order? If so, why? 
Are such services effectively an end run around the Commission's rate 
caps or are customers fully apprised of the higher costs and select 
such services for convenience or value? We also seek comment on how 
significant a role such services play in the ICS market today and what 
usage trends for such services are likely to be.
    99. While ICS providers appear to offer single call services under 
a variety of names, they appear to be generally two types. The first 
involves a one-time credit or debit card payment to enable the 
completion of a single collect call to a wireline phone. Examples of 
this type of single call service include Securus' ``Pay Now'' and GTL's 
``Collect2Card'' services, both of which are priced at a flat rate of 
$14.99 per call, substantially higher than the Alabama PSC's proposed 
interim intrastate rate caps. A second type of single call service 
involves a similar payment arrangement for the completion of a single 
collect call to a wireless phone, the charge for which is confirmed by 
a text message to the called party's wireless phone. Examples of this 
type of single call service include Securus' ``Text2Collect'' and GTL's 
``collect2phone'' services, both of which are priced at a flat rate of 
$9.99 per call, also well above the Alabama PSC's intrastate rate caps, 
as well as the Commission's interstate rate caps. Do charges for such 
services circumvent or violate either set of rate caps or are such 
services sufficiently distinct from collect ICS to warrant separate 
pricing? Both types of single call services are charged on a flat rate 
basis, regardless of call duration, further distorting the effective 
per-minute charge consumers pay and raising concerns about multiple 
charges in the case of inadvertent call disconnection. Consumers using 
these services may be unaware that they could dramatically reduce the 
charges for ICS simply by establishing an account with an ICS provider. 
Some ICS providers have been successful in educating consumers on lower 
cost options. We seek comment on whether these rates are just and 
reasonable and whether they ensure fair and not excessive compensation 
for providers. We also seek comment on whether ICS providers incur 
additional costs in providing single call services, and if so, what 
they are.
    100. Providers have challenged the Alabama PSC's jurisdiction over 
both types of single call services. In the case of single call services 
to wireline phones, ICS providers disputed the Alabama PSC's authority 
to regulate such services, citing interference with their contractual 
relationships with third party billing and payment processing entities 
which typically contract with ICS providers to provide the service. The 
Alabama PSC characterized these entities as ``third party billing 
aggregators'' which performed the ``the billing and delivery functions 
for ICS calls.'' We seek comment on the nature of these services and 
the types of functions such entities provide. For example, do these 
third parties perform functions analogous to those performed by third 
party billing entities used by local exchange carriers? Do the third 
parties actually contribute any facilities or services used to provide 
these services? The Alabama PSC also noted that ICS providers advertise 
and provide these services in their own name and bills refer consumers 
to an ICS provider Web site. The Alabama PSC determined that it had 
``jurisdiction over the charges for collect calls originating from 
Alabama confinement facilities regardless of any intermediaries the ICS 
provider chooses to include prior to call termination.'' We seek 
comment on whether Commission regulation of single call services would

[[Page 69698]]

not impermissibly infringe on such contractual relationships.
    101. In the case of single call services to wireless phones, ICS 
providers have asserted that such services are not subject to state 
commissions' authority since they entail the use of a text message to 
confirm the source and charges for the call and involve calls to 
wireless phones, the rates for which are not subject to state 
jurisdiction. We seek comment on the concept that neither the fact that 
such calls are preceded by a text message nor the fact that the called 
party uses a wireless phone alters the nature of the ICS provided. If, 
however, the Commission were to determine that either of these factors 
is relevant to determining the nature of the ICS, we seek comment on 
whether the Commission's section 276 jurisdiction over all forms of ICS 
give it authority to regulate such services.
    102. The Alabama PSC set a rate cap for single call services at a 
flat rate amount that included a billing or payment charge capped at 
$3.00 per call and a usage charge derived from its per-minute rate 
caps. We seek comment on this approach. Should the Commission adopt a 
rate cap for single call services? Should ICS providers be required to 
charge a per-minute rate on the basis of actual call duration? Should 
the rates for such calls reflect the per-minute charge for collect 
calls along with an appropriate bill or payment processing fee? Should 
there be a transition period to allow providers to adapt their single 
call service offerings? Are ICS providers required to publish on their 
Web sites their charges for single call services and notify consumers 
of the option of establishing an account to obtain a more reasonable 
rate? Alternatively, should these services be considered ancillary 
services?
    103. Money Transfer Services. The FNPRM sought comment on fees 
assessed by third parties such as Western Union and MoneyGram to 
process debit and prepaid account payments for ICS. The Prison Policy 
Initiative previously noted that third party payment processing fees 
for the provision of ICS are typically higher than such fees in other 
industries and suggested that ICS providers were receiving compensation 
from such third party service providers. We seek comment, data and 
other evidence on how prevalent the use of third party money transfer 
services is and what percent of account funding is accomplished through 
such services. We also seek comment on the Alabama PSC Proposed Order 
which acknowledges that money transfer ``fees are set by these 
financial services but [the PSC] is also aware that agents hosting such 
services are paid a portion of the fee.'' The Alabama PSC Proposed 
Order states that ``ICS providers are prohibited from receiving any 
portion of fees paid by their customers to third-party financial 
services.'' It also proposed a rate cap of $5.95 per transaction, above 
which providers would face an investigation of their rates and 
potential refund liability. Similarly, CenturyLink suggests that 
``[c]ertain consumer-optional third party fees such as Western Union 
charges should be allowed, but without mark-ups, revenue sharing 
arrangements or volume rebates.'' In contrast, the Joint Provider 
Reform Proposal suggested adding an additional administrative fee of a 
maximum of $2.50 per transaction on top of existing money transfer 
fees. We seek further comment on these proposals and on whether ICS 
providers' receipt of payments from payment processing companies in 
connection with their provision of ICS represents an unreasonable 
practice under section 201(b) or results in unfair compensation under 
section 276.
    104. We seek comment on how the Commission should ensure that money 
transfer service fees paid by ICS consumers are just and reasonable and 
represent fair compensation. Are money transfer services ancillary 
services under section 276(d)? Are they a practice that causes unjust 
rates or unfair compensation? Are such charges encompassed by the 
definition of ``ancillary charges'' in the Commission's rules? To the 
extent they involve charges placed by a third party on a call 
recipients' phone bill, are they analogous to third party fees that are 
the subject of our ``cramming'' rules? To ensure just and reasonable 
rates and fair compensation, should the Commission prohibit ICS 
providers from entering into revenue sharing arrangements with money 
transfer services, receiving payments from such services, or including 
the costs of such services in their rates? To enforce a similar 
prohibition, the Alabama PSC proposes to require ICS providers 
operating in the state to report the payment transfer fees third 
parties charge their customers. It also proposes to require providers 
to justify fees over $5.95, and subject such fees to investigation and 
potential refund liability. Should the Commission adopt a similar 
enforcement mechanism? Should it allow states to enforce such a 
mechanism? What impact would any such requirements have on contracts 
between ICS providers and third party money transfer services? The 
Alabama PSC notes that, according to its research, contracts between 
ICS providers and Western Union may be cancelled on 30 days' notice. It 
also notes that Western Union contracts with providers include a 
provision requiring vendor compliance with all regulatory requirements 
and laws. Do commenters' experiences confirm the Alabama PSC's 
observations? Are there other approaches to enforcement that the 
Commission should consider?
    105. Regulatory Recovery Fees. Commenters have previously 
highlighted ICS providers' use of fees to recover the cost of 
regulatory compliance. The amount of such fees industry-wide can be 
quite substantial. The Alabama PSC noted that ``[s]everal ICS providers 
presently absorb regulatory costs electing not to charge consumers a 
separate recovery fee'' and barred separate intrastate regulatory fees, 
stating that their rate caps were ``sufficient to recover reasonable 
regulatory costs incurred by the provider.''
    106. A number of ICS providers have also opposed the use of 
regulatory recovery fees. The Joint Provider Reform Proposal recommends 
eliminating various types of regulatory recovery fees and does not 
include such a fee among the fees it proposes to retain. Pay Tel, in 
its advocacy before the Alabama PSC, stated ``these expenses are a cost 
of doing business reflected in the overall average cost per minute. Pay 
Tel supports the prohibition of such fees.'' Securus proposes to 
eliminate its Federal and State regulatory recovery fees. We seek 
comment on whether the cost of regulatory compliance should be 
considered a normal cost of doing business and as such should be 
recovered through basic ICS rates, not additional ancillary fees. In 
the alternative, if the Commission permits the separate recovery of 
regulatory fees, should it require that they be broken out as a line 
item on an ICS end users' billing statement?
    107. Security Fees. Some ICS providers suggest that the Commission 
allow fees to recover new security technology expenses for correctional 
institutions. The Joint Provider Reform Proposal proposed the 
elimination of three or four types of fees likely related to security 
and the retention of a single technology-related fee. However, as part 
of its comprehensive proposal, Securus suggests that providers be 
allowed to charge ``incremental product pricing above rate caps if 
necessary'' for ``safety and security features'' and proposes such 
charges ``be filed with [the] FCC for approval.''

[[Page 69699]]

    108. We seek comment on whether security costs represent a core 
function in the provision of ICS, the costs of which should be included 
in rates and not as ancillary fees. The Commission's interim interstate 
rate caps were based on ICS providers' cost data that included the 
costs incurred in developing, deploying and provisioning security 
features. The Order also expressly accounted for the cost of continuous 
voice biometrics in its debit and prepaid rate cap it adopted. Pay 
Tel's Proposal suggests that a voice biometric fee of $0.02 per minute 
be applied to its proposed rates. If the Commission were to allow 
providers to assess customers separate ancillary charges for such 
services, how would it evaluate providers' claims regarding the need 
for such functions or their cost? How would it ensure that ICS 
providers were not recovering the cost of security features twice--once 
through their rates and again through an ancillary charge--short of a 
full analysis of the provider's costs? If the Commission were to allow 
separate fees to recover security costs, should it require prior 
approval or 60 days' notice for such charges?
d. Consumer Disclosures
    109. We also seek comment on how to ensure that rates and fees are 
more transparent to consumers. We therefore seek comment on the 
requirement that ICS providers notify their customers regarding the ICS 
options available to them and the cost of those options. One ICS 
provider underscores the importance of ``educating the consumer, giving 
them the choice, what's the most economical way if they want to get 
money on an account and do it quickly.'' The same provider states that 
when it advertises on its Web site the most economical way to fund ICS 
calls, a substantial percent of its customer base uses that method, 
reducing consumer expense significantly. ICS providers that offer 
interstate toll service are already required to post their rates on 
their Web sites and, to the extent they offer inmate operator services, 
their live agents are already required to make certain notifications to 
customers. Should providers' Web sites, automated IVRs, and live agents 
be required to offer in a more prominent fashion no-cost or lower-cost 
options available to consumers before offering other, higher-priced 
optional services? To what extent would any such regulation implicate 
the First Amendment? Should the Commission take other steps to ensure 
consumers are aware of lower-priced service options?
    110. The Joint Provider Reform Proposal acknowledged existing 
requirements to publish ancillary fee rates on providers' Web sites and 
offered a detailed proposal regarding notification requirements for 
financial transactions, including:
     The ICS provider shall fully inform customers of all 
payment methods available (including the no-charge option), the payment 
processing charges associated with each payment method, and the 
estimated time required to establish service applicable to each payment 
option.
     The ICS provider shall clearly and conspicuously identify 
the required information. The information should be presented clearly 
and prominently so that it is actually noticed and understood by the 
customer.
    [cir] The ICS provider shall provide a brief, clear, non-
misleading, plain language description of the required information. The 
description must be sufficiently clear in presentation and specific 
enough in content so that the customer can accurately assess each of 
the available payment methods.
    [cir] An ICS provider shall clearly and conspicuously disclose any 
information the customer may need to make inquiries about the available 
payment methods, such as a toll-free number, email address, or Web site 
address by which customers may inquire or dispute any charges. An ICS 
provider shall include any restrictions or limitation applicable to 
each payment method available.

In its proposal Pay Tel suggests that:

     Vendors must post facility-specific rates and fees for all 
services, to be visible to inmates on-site and to consumers on the 
Vendor Web site prior to setting up an account.
     Vendor Web sites must provide a link to the FCC 
Enforcement Bureau Web site and the applicable State Regulatory Agency 
Web site.
     Posting/Notice Must Include:
    [cir] Call rates and transaction fees (at time of call, printed 
material available at facility, Automated IVR, Live Agent & Web site).
    [cir] Refund instructions (Web site).
    [cir] Terms and conditions for service (Web site).
    [cir] Cost information for calls, email and messaging services, 
video visitation and any other communication services offered (Web 
site).

We seek comment on these proposals as they relate to ICS financial 
transactions and more generally to ICS practices in general. We also 
seek comment on alternative proposals to make rates and fees more 
transparent to inmates, their families, friends and other users of 
inmate calling services.
e. Other Issues
    111. Some ICS providers impose additional policies beyond their 
assessment of ancillary fees that further restrict consumers' access to 
ICS. In regard to such policies, CenturyLink expresses the concern that 
``policies such as funding minimums and maximums, prepaid account 
refund requirements, and account expiration policies must be tightly 
controlled to avoid gaming.'' We seek comment on whether we should 
prohibit ICS providers from these and similar practices that 
effectively limit end users' ability to access and use ICS. What other 
types of limiting practices should we prohibit or restrict to preclude 
such gaming?
    112. GTL asserts that the Commission's Truth-in-Billing rules give 
providers flexibility to recover their costs either through rates or 
other line item charges. The Minnesota Department of Commerce asserts 
that ancillary charges that exceed a provider's costs are inherently 
deceptive and violate the Commission's Truth-in-Billing rules. We seek 
comment on whether it would be necessary to harmonize Commission 
regulation of ICS ancillary charges with its Truth-in-Billing rules. To 
the extent that such fees are not commensurate with providers' costs, 
does existing precedent support the view that those fees violate the 
Truth-in-Billing rules, or should we clarify that the fees are 
considered misleading and a violation of the Commission's Truth-in-
Billing rules, unreasonable under section 201(b) or unfairly 
compensatory under section 276? Should the Commission clarify that 
pursuant to section 276, Truth-in-Billing rules apply to all ICS 
providers, including any that may claim they provide VoIP services?

D. Additional Ways To Promote Competition

    113. Over the last 30 years, real competition, as opposed to rate 
regulation, has been the preferred method to advance consumer 
protection, lower rates, increase feature and functionality of 
equipment and services, reduce the government involvement and costs, 
and improve the overall consumer experience. To date, however, 
correctional facilities generally have not permitted competition for 
consumers within the ICS market.
    114. As an alternative to the ideas explored in this item to reduce 
inmate calling rates, we continue to explore whether the advent of 
competition within the inmate facilities may provide

[[Page 69700]]

a different course of action. The 2013 Inmate Calling Report and Order 
and FNPRM sought comment on how to promote competition within the 
correctional facilities, but the Commission received insufficient 
information in response to the questions posed, so we seek to provide 
more targeted questions in order to solicit further responses. 
Accordingly, we seek further comment on ways to remove barriers to 
entry and promote competition in the ICS market. Aspects of the current 
ICS market appear to contribute to the market failure. One is the 
practice of site commission payments, and we seek comment above on 
whether, and under what authority, the Commission should restrict such 
payments. Another is the fact that correctional facilities award ICS 
providers exclusive contracts and therefore do not permit competition 
within the facilities. The Commission previously sought comment on the 
impact of exclusive contracts and whether they should be prohibited. 
While some commenters opposed the idea due to security and cost 
concerns, another commenter suggested that the Commission revisit 
whether those concerns continue to justify exclusive contracts in light 
of technological advances. We seek additional comment on these views. 
Moreover, some commenters have questioned whether facilities incur any 
additional costs for the provision of ICS and we seek comment above on 
quantifying these costs. If facilities do not incur costs when there is 
one provider, what additional costs are incurred by introducing 
multiple providers? We ask commenters to specify and quantify any 
additional costs.
    115. We also seek comment on whether there are other barriers and, 
if so, what steps we should take to address them and under what 
authority. For example, are there ways to allow greater competition 
within ICS without banning exclusive contracts? Are providers willing 
to compete on price, quality of voice and/or video service, service 
disruption and outage rates, and other factors that would be applicable 
with multiple providers? Would multiple providers be willing to serve 
an inmate facility if there is already an established provider? What 
impact could new technologies have on competition within inmate 
facilities?

E. Harmonization of State Regulations Under Section 276(c)

    116. In this section, we seek comment on how state reform of ICS 
may be harmonized with any federal framework we may adopt and on the 
continuing roles states should play in advancing ICS reform. In the 
FNPRM, the Commission ``tentatively conclude[d]'' that section 276 
``affords the Commission broad discretion to . . . preempt inconsistent 
state requirements.'' In response, some commenters opposed state 
preemption, while others supported it as crucial to the Commission's 
reform efforts. While we seek comment on whether it is necessary to 
have a comprehensive framework for interstate and intrastate ICS, we 
nonetheless seek comment on how consistent state regulation of ICS 
could be harmonized with our framework. For example, should we 
establish guidelines regarding what a state would have to do on ICS 
reform to not be preempted? What would those guidelines include? Should 
we include reform of site commission payments, rate caps, actions 
addressing state prisons, as well as county or city jails?
    117. We recognize the substantial ICS reform already accomplished 
in a handful of states such as Alabama, New Jersey, New York, and New 
Mexico. Such states have provided important leadership in the effort to 
reform ICS. In the FNPRM, the Commission commended such states and 
``encourage[d] more states to eliminate site commissions, adopt rate 
caps, disallow or reduce per-call charges, or take other steps to 
reform ICS rates.'' In her opening remarks at the 2014 ICS Workshop, 
Commissioner Clyburn urged states to ``follow the FCC's lead, grab the 
baton, and enact their own reforms.'' Some states have taken steps to 
advance ICS reform since the release of the Order. New Jersey, for 
example, has set lower rates for ICS. Alabama has recently proposed 
comprehensive regulation of intrastate ICS. However, the vast majority 
of states have not taken up our repeated calls for ICS reform. In 
addition, states have inconsistently addressed site commission 
payments. For example, while the Order noted seven states that had 
eliminated site commissions for intrastate ICS, by implication the vast 
majority have not. We again encourage states to act on ICS in their 
jurisdictions and note that state action that is consistent with the 
regulations that the Commission ultimately adopts would not be subject 
to preemption. We also recognize, however, that most states either 
cannot or will not act and the Commission must adopt a nationwide 
framework to apply in these states to ensure that ICS rates are just, 
reasonable and fair.
    118. We seek more focused comment on section 276(c), which states 
in reference to payphone regulation that ``[t]o the extent that any 
State requirements are inconsistent with the Commission's regulations, 
the Commission's regulations on such matters shall preempt such State 
requirements.'' We believe that the Commission has broad discretion to 
find that a particular state requirement, or category of state 
requirements, is either consistent or inconsistent with Commission ICS 
regulations under section 276(c). We also seek comment on the whether 
preemption is self-effectuating under section 276(c) and will occur 
automatically as a consequence of the inconsistency.
    119. If preemption is not self-effectuating, and there is no 
Commission decision defining the scope of any inconsistency between 
federal and state requirements, how would states and other parties know 
that a particular state requirement had been preempted because it was 
inconsistent under section 276(c)? In the absence of a prior Commission 
decision, should any disputes regarding the inconsistency of a state 
requirement be resolved by the Commission on a case-by-case basis: 
e.g., through declaratory ruling or the section 208 complaint process? 
Are certain types of state requirements inherently ``inconsistent''? 
Other preemption provisions in Title II of the Act require the 
Commission to make certain decisions before a state law can be 
preempted, whereas section 276(c) does not directly address the issue.
    120. Exemptions to Preemption. To encourage states to reform ICS, 
the FNPRM also sought comment on possible exemptions to preemption, 
asking whether ``the Commission [should] only take action to reform 
intrastate ICS rates in states that have not reformed rates to levels 
that are at or below our interim safe harbor.'' We expand on this 
concept here. What specific types of state actions to reform ICS should 
the Commission interpret as consistent with its regulations? Should, 
for example, the Commission list scenarios in which state regulations 
would be presumed to be consistent with the federal framework, such as 
when states address site commissions and reform ancillary charges? If 
so, what should the Commission consider ``reform'' or ``partial 
reform'' in this context? For example, we note that the Alabama PSC 
proposes capping ancillary fees but maintaining site commission 
payments. If the state regulates ICS rates in a manner that is 
consistent with Commission regulations, but regulates ancillary 
services in a manner inconsistent with Commission regulations, would 
all state regulations be viewed as preempted, or

[[Page 69701]]

would just the regulation of ancillary services be treated as 
preempted? To the extent the question would depend on how the 
Commission crafts its regulations, should the Commission design them in 
a way that makes inconsistency regarding one dimension severable from 
consistency regarding other dimensions? If so, how?
    121. One FNPRM commenter suggests a ``cooperative federalism'' 
approach that would allow ``states to regulate intrastate rates 
provided that the regulatory framework complies with the core 
principles contained in the Order.'' We seek further comment on this 
and other approaches to harmonizing federal and state ICS reform. Some 
states have adopted laws that effectively require intrastate ICS rates 
to be provided at below-cost rates, with the difference presumably to 
be recouped by charging interstate rates that are set significantly 
above costs. Would any such state laws that require below-cost 
intrastate ICS rates be consistent with a Commission cap on intrastate 
ICS rates, even if the state rate was more ``aggressive'' than the 
Commission cap? For example, if the Commission adopts a per-minute cap 
on ICS rates, should states be free to regulate the level of per-call 
and per-minute charges for intrastate ICS so long as the resulting 
charge for a call of a particular duration is within the Commission's 
cap? Should states have other flexibility as it relates to site 
commission payments, ICS rates, charges for ancillary services, or 
other ICS regulation? If so, how can the Commission craft its 
regulations so that such state ICS reforms are interpreted as being 
consistent with its regulations? Should the Commission be concerned 
that some state reform actions could undercut the market-based approach 
that we seek comment on herein? How would the Commission then balance 
the benefits of encouraging state reform efforts with the need to 
ensure just and reasonable rates and fair compensation for ICS, as 
required by sections 201 and 276 of the Act?
    122. If the Commission's final ICS rules are silent on certain 
issues (for example, arguendo, quality of service regulation), we seek 
comment on how the Commission should interpret state rules. Does the 
Commission have broad authority to enforce section 276(c) on a case-by-
case basis even in situations where it has not previously adopted an 
applicable rule or provided relevant guidance? If a state commission 
has an active ICS proceeding, is it consistent with section 276(c) to 
permit the state commission a reasonable period of time to complete its 
proceeding prior to a Commission determination of whether such state 
reform is consistent with Commission reform? What might constitute such 
a reasonable period of time?

F. Existing Contracts

    123. Background. The Wright Petitioners previously discussed the 
possibility of a one-year fresh look period, essentially a one-year 
period during which existing ICS contracts may be revised regardless of 
terms within the contracts that may prohibit such action. The 
Commission sought comment on this proposal in the 2012 ICS NPRM.
    124. In the Order, the Commission did not directly override 
existing contracts between correctional facilities and ICS providers. 
Rather, the Commission noted that if ``any particular agreement needs 
to be revisited or amended . . . such result would only occur because 
agreements cannot supersede the Commission's authority to ensure that 
the rates paid by individuals who are not parties to those agreements 
are fair, just, and reasonable.'' The Commission acknowledged that 
``[t]o the extent that the contracts contain `change of law' 
provisions, those may well be triggered by the Commission's action 
today.''
    125. Discussion. We seek comment on the implementation of the 
requirements adopted in the Order and their impact, if any, on ICS 
contracts. The record indicates that the interim rates were implemented 
with little to no contract renegotiation. The record also indicates 
that several ICS providers have unilaterally made decisions about site 
commission payments without initiating contract renegotiations or 
cancellations. Is this accurate? We seek comment on any challenges 
associated with these practices. To the extent that commenters suggest 
alternatives to the regulatory approaches discussed above that could 
modify or otherwise affect existing agreements, we seek comment on the 
Commission's authority to take such action, why it should exercise such 
authority, and how any modification or other effect on existing 
agreements should be implemented.
    126. We seek comment on a transition period for comprehensive ICS 
reform. Given the transition that we seek comment on herein, we seek 
comment on whether we should retain the approach in the Order and allow 
for change-of-law provisions to govern changes or whether we should 
take an alternative approach with respect to existing contracts. Should 
we allow for a ``fresh look'' to enable providers to renegotiate 
contracts or do most contracts include change-in-law provisions so a 
fresh look is not warranted? If the Commission adopts a transition 
period for existing ICS contracts, should it stagger the transition 
period as previously suggested by Telmate? Specifically, Telmate 
suggests that ``[s]taggering the fresh look window among the many 
thousands of ICS contracts nationwide . . . [is] the only practical way 
to harmonize the existence of long-term contracts and the unreasonable 
burden on smaller ICS providers in competing for correctional facility 
business at thousands of locations at the same time nationwide.'' If 
so, should the Commission stagger any transition period based on 
contract expiration dates or some other metric?
    127. Alternatively, we seek comment on whether we should abrogate 
ICS contracts or modify particular terms of such contracts. Will 
abrogation of contracts that are focused on site commission payments 
better enable the market-based approach described herein to be 
implemented? In the Order the Commission concluded that it has the 
authority to abrogate or modify contracts. We seek comment on our legal 
authority to do so. In the alternative, should the Commission 
grandfather existing ICS contracts for some period of time and then 
allow them to expire? Given that ICS contracts are often multiple years 
in duration, is it consistent with the statute's requirement that ICS 
rates be just, reasonable and fair if we allow such rates to continue 
for an extended period of time? Are there ways the Commission could 
mitigate the possible disadvantages of a grandfathering approach? We 
seek comment on these issues, including our legal authority for each 
approach.

G. Transition Periods

    128. In the Order, the Commission delayed the effective date of the 
new rules until 90 days following publication in the Federal Register 
to give parties ``time to renegotiate contracts or take other 
appropriate steps.'' The FNPRM sought further comment on ``how the 
Commission should proceed in establishing ICS rates for interstate and 
intrastate ICS.'' Comments were mixed. Several commenters requested 
that, if the Commission takes further steps toward ICS reform, it 
implement a transition period ``that is sufficiently long to enable 
correctional facilities to revise budgets and find replacement sources 
of funding.'' Conversely, one commenter opined that rate changes 
pursuant to the interim Order may have been accomplished through a 
simple notification letter from ICS providers to correctional 
facilities.

[[Page 69702]]

    129. Discussion. The ICS providers that submitted the Joint 
Provider Reform Proposal suggest that ``[t]he new rate caps should 
become effective 90 days after adoption, along with any site commission 
reductions and ancillary fee changes outlined below.'' The providers 
that submitted the Proposal assert that ``[t]his period for 
implementation should ensure ICS providers and correctional facilities 
have adequate time to implement the new rate caps and any corresponding 
reductions in site commissions, including any contract amendments or 
adjustments that may be necessary.'' Pay Tel suggests a 90-day, after 
final order publication transition period for transaction fees, third 
party money transfer service fees, and ancillary fees and an 18-month 
transition period for jail and prison rate caps. Commenters advocating 
for a transition to the new rate caps should identify the appropriate 
transition and the justification for doing so.
    130. We seek comment on whether 90 days after the effective date of 
the order is the appropriate transition to comply with all new 
requirements, including any rate caps, elimination of per-call charges, 
and ancillary fee changes for existing contracts. We also seek comment 
on whether any new ICS contracts entered into after adoption of an ICS 
reform order must comply with the terms of the order immediately after 
the effective date of the order.
    131. In addition, we seek comment on a two-year transition period 
or at least one state or state subdivision budget cycle to transition 
away from site commission payments to allow facilities and states time 
to adjust. If we adopt a cost recovery amount for facilities, how 
should the transition be implemented in a manner that does not delay 
comprehensive reform? How would the transition work if the Commission 
gave a 90-day transition for rates to be at or below the cap, while 
allowing two years for site commissions to be eliminated? Would a 
period of two years allow sufficient time for correctional facilities 
to prepare for forthcoming ICS reform and its effect on their budgets? 
Or should we consider a longer transition such as a three year 
transition? Should the transition be shorter to minimize the potential 
for abuse? If so, should the transition be one year, the same as the 
90-day transition to rate caps, or something else? The record suggests 
that site commission payments make up less than five-tenths of a 
percent of facilities' operating budgets. Securus suggests that site 
commissions should be completely eliminated by January 1, 2016 and rate 
reform should also be accomplished by that date. We seek comment on 
these proposals.
    132. If the Commission adopts a two-year transition to the 
elimination of site commission payments, how should the payments be 
reduced? Should they be reduced in equal increments over two years, or 
should we align the reductions to state or state subdivision budget 
cycles? How have other states that reduced or eliminated site 
commissions implemented this change? Did they adopt a transition plan 
or implement the change immediately? We seek comment on whether any new 
contracts that include any potential cost recovery payments to 
facilities and a ban on site commissions that are entered into after 
the adoption of the final order be required to comply with the order. 
Should there be exceptions to a transition period based on whether 
interstate or intrastate rates are already below the prescribed rate 
level?

H. Accessible Inmate Calling Services

    133. Our goal with ICS reform is to ensure that ICS is accessible 
to all inmates and their families at just and reasonable rates that 
represent fair compensation to ICS providers. Below, we seek focused 
comment on several disability access issues raised in the Inmate 
Calling Report and Order and FNPRM that merit further inquiry.
    134. Background. In the Order, the Commission highlighted the 
telecommunications challenges faced by inmates who are deaf and hard of 
hearing, as well as by inmates communicating with family members or 
friends who are deaf and hard of hearing, such as extremely high rates 
for calls placed via the Telecommunications Relay Service (TRS). In the 
Order, the Commission ``clarif[ied] that ICS providers may not levy or 
collect an additional charge for any form of'' telecommunications relay 
services (TRS) call because ``such charges would be inconsistent with 
section 225 of the Act.'' However, the record indicates continuing 
problems, such as, for example, ``nearly half of deaf inmates surveyed 
did not have access to TTY at their facilities.''
    135. In the FNPRM, the Commission sought comment on a number of 
questions to ensure that ICS is accessible. The Commission also 
tentatively concluded that inmate calling service rates per-minute for 
TTY calls should be set at 25 percent of the safe harbor rate for 
inmate calls, and sought comment on this proposal. The Commission 
sought comment on how ICS providers should recover the costs of 
providing such discounted TTY calls, and on the possibility of allowing 
ICS providers to recover the cost of a TTY call from the 
Telecommunications Relay Service Fund. In the Joint Provider Reform 
Proposal, the providers ``commit to continue to comply with their 
existing obligations'' under applicable laws, and ``also will work 
closely with correction facilities `to ensure that deaf and hard of 
hearing inmates are afforded access to telecommunications that is 
equivalent to the access available to hearing inmates.' '' Pay Tel's 
Proposal states that ``ICS Vendors will work with confinement 
facilities where requested to enable video relay services,'' ``[c]omply 
with all existing obligations and laws regarding service people with 
disabilities,'' and ``[r]equire that deaf and hard of hearing inmates 
will have full access to TDD/TTY services at no additional charge.'' We 
seek comment on these proposals.
    136. Discussion. In the Order, the Commission noted commenters' 
general agreement with the Commission's statement in the 2012 ICS NPRM 
that TTY-to-voice calls take at least three to four times longer than 
voice-to-voice conversations to deliver the same conversational 
content, not including the time it takes to connect to the operator. In 
the FNPRM, the Commission tentatively concluded that ICS per-minute 
rates for TTY calls should be set at 25 percent of the interim safe 
harbor rate for standard ICS calls, and sought comment on this 
proposal. CenturyLink asserts that ``a discounted rate of 25% of the 
interstate safe harbor rate for TTY calls . . . is far too low. In 
CenturyLink's experience, TTY calls can take up to two times as long as 
regular calls, not the three or four times suggested by some 
commenters.'' HEARD, however, asserts that the proposed discounted rate 
is insufficient, as it ``does not account for varying literacy rates of 
deaf prisoners many of whom use sign language as their primary or only 
method of communication.'' HEARD urges a greater discount, based on the 
assertion that ``prison TTY telephone calls are typically at least six 
to eight times longer than a hearing phone call.'' We seek specific 
comment on the actual relative length of TTY-to-TTY and TTY-to-voice 
calls as compared to voice-to-voice calls. Given the wide range of 
assertions in the record, we request that comments be backed by data on 
the actual lengths of TTY-to-TTY, TTY-to-voice, and voice-to-voice 
conversations. Commenters should describe the methodology they used to 
collect the information with specificity.
    137. The Commission has observed that, in implementing section 276 
of the Act, section 276(b)(1)(A) exempts TRS

[[Page 69703]]

calls from the per-call compensation requirement, and it requires 
payphone service providers to provide free access to connect to TRS. 
However, if the outgoing portion of a TRS call is a long distance call, 
a caller is required to pay for that portion. Is it the case that no 
ICS provider charges inmates for voice-to-TTY or TTY-to-voice calls 
because the ``interexchange company holding the [state] TRS contract 
carries the call to the called party?'' If so, should final reduced ICS 
per-minute rates for TTY calls be applicable only to TTY-to-TTY calls, 
as those calls are indistinguishable from standard voice calls because 
the inmate is dialing the called party directly, using the called 
party's terminating phone number, and thus the call data looks 
identical to the call data from a typical voice call?
    138. With respect to TTY-to-voice and voice-to-TTY calls, we seek 
comment on AT&T's request for clarification that the ``manner in which 
it handles operator-assisted collect calls from inmates via TRS'' is 
``subject to the rate requirements set out in the order in WC Docket 
No. 12-375.'' AT&T describes the issue as follows:

    Pursuant to contract with state authorities, AT&T provides TRS 
service in eight states plus the District of Columbia. Often times, 
but not always, the TRS Communications Assistant (CA) can see that 
the call has originated from a detention facility. For security, 
operator services practices limit inmate calling to collect calls. 
Upon receiving the call, the inmate can direct the CA to forward the 
call to any interexchange carrier on the carrier of choice list. The 
CA in the states where AT&T provides the service is an AT&T 
employee. If the inmate selects AT&T as the IXC for the call, the CA 
then functions as the operator service provider and the called party 
will be charged at the tariffed rate for the call, which is higher 
than the rate cap for a collect call specified in the ICS order. 
AT&T interexchange collect calling toll services are not limited to 
inmates only; anyone making the same type of TRS collect call will 
be treated and charged in the same manner.

    139. Section 64.6000 of our rules defines ICS as ``the offering of 
interstate calling capabilities from an Inmate Telephone;'' and Inmate 
Telephone as ``a telephone instrument or other device capable of 
initiating telephone calls set aside by authorities of a correctional 
institution for use by Inmates.'' We seek comment on whether AT&T and 
other entities that provide TRS are providing ICS for TRS calls placed 
by inmates. Is it relevant that ``TRS [communications] assistants may 
place only [operator assisted] collect calls on behalf of inmates using 
TRS?'' Would it be relevant if inmates are not charged for calling TRS, 
but only for the long distance component of a TRS call?
    140. We seek further comment as to whether the rates and charges 
levied for operator-assisted collect calls from inmates via TRS are 
subject to the rate requirements set out in the Order. Does the fact 
that an inmate ``can direct the CA to forward the call to any 
interexchange carrier on the carrier of choice list'' indicate that the 
interexchange portion of the call is no longer ICS, and therefore not 
subject to our rate requirements?
    141. TTYs are only one form of accessible equipment, and TTY relay 
is only one form of TRS, and commenters to the FNPRM, as well as some 
2014 ICS Workshop participants, decry correctional facilities' 
continued reliance on TTY equipment, as well as their failure to make 
newer equipment technology such as videophones for Video Relay Service 
(VRS) and point-to-point video communications, devices for Internet 
Protocol Relay Service (IP Relay) and Internet Protocol Captioned 
Telephone Services (IP CTS), available to inmates. We seek comment on 
the availability of these technologies as well as any other advanced 
technologies that meet persons with disabilities communication needs in 
correctional facilities. Should all correctional facilities be required 
to install a certain type or types of equipment for inmates with 
disabilities, such as videophone equipment, IP CTS devices or other 
assistive technologies? Should they do so upon the request of an inmate 
with a disability? We seek comment on our authority to regulate 
correctional facilities in this manner. If correctional facilities are 
required to provide such equipment, how should the facilities recover 
the costs of purchasing and installing the necessary equipment, and how 
should ICS providers recover the costs of the calls? In the 
alternative, are ICS providers responsible for providing any 
communications equipment needed to meet the communications demands of 
all inmates regardless of ability? How would such a requirement fit 
into the Commission's section 225 authority? Do ICS providers meet 
criteria as a common carrier for offering telecommunications relay 
service eligible for cost recovery from the TRS Fund? Why or why not? 
And, if not, is there a justification for different treatment in this 
industry? Will ICS providers or facilities incur costs to install 
equipment for use by any inmate with a disability? What is the impact 
of such approaches on ICS providers? Should providers be able to 
recover any additional costs if they are unable to do so through the 
TRS Fund?
    142. The Commission has imposed differing registration requirements 
for users of the various types of TRS. We seek comment on how the 
Commission's evolving relay service registration requirements can be 
met in an institutional setting where more than one user will be 
utilizing equipment. We also seek comment about security issues related 
to IP telephone technologies, such as VRS, IP-captioned telephone 
service, and IP Relay. Do these types of advanced technologies pose a 
security risk in a correctional setting? If so, what is the nature of 
such risk? Is the risk greater or lesser than that associated with 
traditional telecommunications and interconnected VoIP services 
utilized by ICS providers?
    143. What are just, reasonable and fair per-minute rates for end 
users and ICS providers for forms of TRS other than traditional TTY TRS 
that will allow service to be accessible to all inmates regardless of 
ability? HRDC suggests that, consistent with section 225 of the Act, 
the rates for accessible communications technology from correctional 
facilities should be no more than calls made from traditional 
telephones. Would it be appropriate to discount the per-minute rate for 
ICS calls made using other accessible equipment or other forms of TRS, 
such as Speech to Speech relay services or Captioned Telephone Service, 
as previously proposed for TTY calls? Would different rate setting 
methodologies be appropriate given the differing nature of TTY and 
other forms of TRS?
    144. TRS Reporting Requirements. In the FNPRM the Commission asked 
whether ICS providers should be required to submit TRS usage data and 
report on user complaints. Commenter HEARD asserts that ``nearly half 
of deaf inmates surveyed did not have access to TTY at their 
facilities'' and suggests that correctional facilities begin to track 
and report to the Commission the number of relay calls being made. We 
seek further comment on this proposal. Should ICS providers be required 
to report to the Commission the number of disability-related calls they 
provide, the number of problems they experience with such calls, or 
related complaints they receive? Or should any such data collection be 
more narrowly tailored as suggested by the Federal Bureau of Prisons? 
Should such data be part of the periodic review we seek comment on 
below?

I. Advanced Inmate Communications Services

    145. We seek comment on newer technologies and services available 
for

[[Page 69704]]

inmate communications. We believe that our core goals for inmates and 
their families remain the same regardless of the technologies used--
ensure competition and continued widespread deployment of ICS and the 
societal benefits that they bring. We expect that new technologies 
available in correctional settings--like new technologies available to 
consumers in the general public--should offer improvements and 
innovations that benefit users and thus serve our goals for ICS reform. 
In this section we seek comment on these newer technologies, on whether 
there are any pertinent differences that justify any differences in 
rules, and on the legal considerations that may need to be addressed.
    146. Background. In the FNPRM, the Commission sought comment on 
``the impact of technological advancements on the ICS industry.'' The 
Commission also invited comment on the Commission's legal authority to 
regulate the rates for services provided over newer technologies. In 
response, Pay Tel states that ``[t]here is no question that new 
technologies will continue to emerge that will affect and improve 
provision and quality of, and security related to, ICS.'' The Prison 
Policy Initiative suggests that there are benefits to advanced 
technologies in correctional settings such as video visitation systems 
(VVS), but cautions that there is ``clear evidence that the video 
communications market is currently driven by the same perverse 
incentives that caused market failure in the correctional telephone 
industry.''
    147. At the Commission's 2014 ICS Workshop, MeshIP discussed its 
``secure prison cell phone solution that gives detainees highly 
customized cell phones with all the security and control features of 
prison payphones.'' JLG Technologies described for the audience voice 
biometrics technology, the second generation of voice biometrics, known 
as continuous voice identification, and next generation voice 
biometrics technology currently under development. GTL believes the 
biggest technological trends in inmate communications will be access to 
wall-mounted, multiservice kiosks, which offer more frequent and better 
contacts with the inmates' families and friends and then a shift to 
hand-held devices.
    148. Discussion. We seek a greater factual understanding of the 
availability of these and other services. What kinds of services are 
available? Are they available commonly in most facilities, or only in 
certain ones? What is the demand for these services and what rates and 
fees are charged? What additional functionalities do they offer? Do 
they provide any greater benefits to inmates, their families, or 
others, than traditional services? What are ICS providers' rates for 
other services such as email, voicemail or text messaging? The record 
indicates that some ICS providers offer tablet computers and kiosks 
that allow inmates to access games, music, educational tools, law 
library tools and commissary ordering. What is the compensation 
mechanism for access to these offerings?
    149. Are there additional costs to ICS providers in developing, 
provisioning, or offering these services? Participants at the 2014 ICS 
Workshop suggest that there are ``huge challenges in anticipating and 
funding costs associated with developing, implementing, and maintaining 
these new systems and services.'' GTL noted that ICS providers bear the 
costs of the ``development for the kiosk, to put that device on the 
wall . . . to provide the additional bandwidth, to develop and do the 
software development research for the applications that go in that 
device, for the additional maintenance and support to support the 
device once it's on the wall.'' We seek comment on the costs of these 
services in general. We also seek comment on the rates and fees charged 
for their use.
    150. We seek comment on whether there is a similar market failure 
for service provided by new technology as described above for existing 
ICS. For instance, in response to evidence of unreasonable rates, the 
Alabama PSC capped VVS rates at $0.50 per minute and VVS recorded 
message download at ``$1.00 for the first minute and $0.50 for each 
additional recorded minute.'' Do commenters consider these just and 
reasonable rates and fair compensation for VVS? We seek comment on Pay 
Tel's proposal that the Commission establish a discrete mechanism by 
which providers may seek approval for a separate ancillary charge 
related to some type of advanced technology. How would such a charge 
function in the context of the proposed reform of ancillary charges 
discussed above? Securus also suggests that the Commission allow for 
``incremental product pricing above rate caps if necessary'' for 
``[p]roduct [e]xceptions.'' Is such a separate mechanism necessary? If 
so, how do proponents of such a mechanism suggest that it function? 
Will advanced ICS technologies continue to be developed and deployed 
without a separate and discrete recovery mechanism? Finally, if the 
Commission were to adopt regulations for advanced technologies like 
video visitation and video calling, what is the best way to harmonize 
our approach with that of the states?
    151. In the Order, the Commission found that the application of 
section 276 is not restricted to any one form of communications 
technology and made clear that reforms apply to ICS regardless of 
technology used to provision the service, such as IP-based and TDM-
based provisioning. Some ICS providers are developing wireless options. 
We therefore seek comment on whether ICS provisioned through wireless 
technology will also be subject to any final reforms adopted by the 
Commission under section 276. We also seek comment on whether advanced 
services like video visitation service and video calling services 
constitute ``inmate telephone service'' within the meaning of the term 
in section 276. Given the technologically neutral nature of section 276 
and the fact that video calling shares many of the attributes of 
traditional ICS, including the fact that it is a pay per use service 
involving real time, two-way voice communications, are these services 
``inmate telephone service''? Does the Commission's recognition of 
video relay service as a reimbursable relay service under section 225 
of the Act (defining the video service as ``functionally equivalent'' 
to traditional TRS) provide analogous support for including video 
calling as an inmate telephone service? To the extent any 
communications services available to inmates fall outside the statutory 
definition of ``inmate telephone service,'' what other sources of 
authority provide the Commission with the ability to ensure that rates 
are just and reasonable? Could such services be regulated pursuant to 
sections 201 and 202 to ensure the rates, charges, and practices 
associated with those services are just, reasonable, and not 
unreasonably discriminatory? Could regulation of these services be 
supported through the use of the Commission's ancillary authority? For 
example, the record shows that some correctional institutions have 
eliminated all in-person visitation and replaced it with video 
visitation. What if providers were to eliminate all payphone calling in 
favor of video calling and charged rates for those services far in 
excess of the Commission's rate caps? Would such a shift effectively 
void the section 276 requirement of fair compensation and preclude the 
Commission from discharging its statutory mandate?

J. Periodic Review

    152. We seek comment on whether a periodic review of how the 
reforms we seek comment on above are impacting

[[Page 69705]]

ICS rates, demand, ancillary charges and site commission levels is 
essential to ensure that our adopted reforms are creating and 
maintaining the proper incentives to drive end user rates to 
competitive levels. We seek comment on the benefits of establishing a 
periodic review process.
    153. In the Order the Commission adopted an Annual Reporting and 
Certification Requirement that included the submission of interstate 
and intrastate ICS rate and demand data as well as the average duration 
of calls. In the FNPRM the Commission sought further comment on 
adjusting ICS rates over time. In response, the Wright Petitioners 
suggested that the Commission ``adopt rules to review the interim rates 
no later than 180 days after the ICS providers have submitted their 
second round of data collected under Section 64.6060 of the 
Commission's rules.''
    154. The ICS providers that signed on to the Joint Provider Reform 
Proposal suggest that ``ICS providers should be required to provide 
certain information to the Commission annually for three (3) years to 
ensure the caps on per-minute rates and any admin-support payments 
adopted are implemented as required.'' Specifically, they suggest that 
``[s]uch information should include a list of the ICS provider's 
current interstate and intrastate per-minute ICS rates, the ICS 
provider's current fee amounts, the locations where the ICS provider 
makes admin-support payments, and the amount of those admin-support 
payments.'' We seek comment on this portion of the Proposal. In 
addition to the information suggested by the ICS providers, we suggest 
that providers also be required to file demand and call duration data. 
Finally, we seek comment on whether any information gathered for an 
annual review must be certified as accurate by an officer of the 
reporting company.

K. Enforcement

    155. In the Order, the Commission described its standard 
enforcement authority as it relates to ICS. The Commission also made 
clear, and we remind interested parties, that the Commission's general 
section 208 complaint procedures apply.
    156. The Commission also made clear that penalties or failure to 
comply with the Commission's rules may result in monetary forfeitures 
of up to ``$160,000 for each violation or each day of a continuing 
violation, up to a maximum of $1,575,000 per continuing violation.'' We 
seek comment on how to interpret ``violation'' for use in the ICS 
context in light of the reforms discussed herein. For example, would 
each non-compliant ICS rate charged by a provider be a single 
violation? Would the continued payment of site commissions to a 
correctional facility constitute a single violation? Would the 
imposition of one ancillary charge over any cap or caps ultimately 
adopted by the Commission to one consumer constitute a single 
violation?
    157. Securus has urged the Commission to require that the CEO, CFO, 
and General Counsel of each ICS provider all certify to the companies' 
compliance with the Commission's ICS rules and regulations. In the 
Order, the Commission also adopted an Annual Reporting and 
Certification Requirement that required ``an officer or director of 
each ICS provider annually to certify the accuracy of the data and 
information in the certification, and the provider's compliance with 
all portions of this Order.'' We note that this rule was stayed by the 
D.C. Circuit so we have not evaluated the effectiveness or impact of 
such a certification. Should the Commission adopt such a requirement? 
How does such a certification requirement function with the proposed 
periodic review requirement we seek comment on above?
    158. We seek comment on whether states should continue to exercise 
enforcement functions with respect to any state requirements that are 
consistent with the Commission's regulations. We seek comment on 
whether states should continue to exercise their enforcement functions 
with respect to any final rules that the Commission may adopt as part 
of comprehensive ICS reform. Should the Commission expressly allow 
states to exercise such enforcement authority, e.g., to be carried out 
through their complaint resolution process, or some other role in the 
oversight process of state commissions? If the Commission did so, what 
if any oversight role should the Commission adopt with respect to state 
proceedings involving the enforcement of Commission rules? Would our 
authority to provide for such a state role apply regardless of whether 
certain state laws have been found to be inconsistent with any ICS 
rules governing intrastate ICS?

L. Cost/Benefit Analysis of Proposals

    159. Acknowledging the potential difficulty of quantifying costs 
and benefits, we seek to determine whether each of the proposals above 
will provide public benefits that outweigh their costs. We also seek to 
maximize the net benefits to the public from any proposals we adopt. 
For example, commenters have argued that inmate recidivism decreases 
with regular family contact. This not only benefits the public broadly 
by reducing crimes, lessening the need for additional correctional 
facilities and cutting overall costs to society, but also likely has a 
positive effect on the welfare of inmates' children. On the other hand, 
commenters have argued that eliminating site commissions would directly 
affect jail revenues and lead to a reduction in recreational and 
rehabilitation services provided to inmates by facilities. Such a 
reduction could produce its own wave of negative aftereffects that 
offset some of the purported benefits. Accordingly, we seek specific 
comment on the costs and benefits of the proposals above and any 
additional proposals received in response to this Second Further 
Notice. We also seek any information or analysis that would help us to 
quantify these costs or benefits. 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. Additionally, we 
ask that parties consider whether the above proposals have multiplier 
effects beyond their immediate impact that could affect their interest 
or, more broadly, the public interest. 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 recognize that 
the costs and benefits may vary based on such factors as the 
correctional facility served and the ICS provider. We request that 
parties file specific analyses and facts to support any claims of 
significant costs or benefits associated with the proposals herein.

IV. Procedural Matters

A. Filing Instructions

    160. Pursuant to sections 1.415 and 1.419 of the Commission's 
rules, 47 CFR Sec. Sec.  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 Second FNPRM must be filed in WC 
Docket No. 12-375.
     Electronic Filers: Comments may be filed electronically 
using the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.

[[Page 69706]]

     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

    161. This proceeding shall be treated as a ``permit-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. Memoranda must contain a summary of the substance of 
the ex parte presentation and not merely a list of the subjects 
discussed. More than a one or two sentence description of the views 
arguments presented is generally required. If the oral 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 rule 1.1206(b). In proceedings governed 
by rule 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. Paperwork Reduction Act Analysis

    162. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. 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, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

D. Initial Regulatory Flexibility Analysis

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

V. Ordering Clauses

    164. Accordingly, it is ordered that, pursuant to sections 1, 2, 
4(i)-(j), 201(b), 276, and 332 of the Communications Act of 1934, as 
amended, 47 U.S.C. 151, 152, 154(i)-(j), 201(b), 276, and 332, this 
Second Further Notice of Proposed Rulemaking is adopted.
    165. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Second Further Notice of Proposed Rulemaking, including 
the Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.
    166. It is further ordered, that pursuant to sections 1.4(b)(1) and 
1.103(a) of the Commission's rules, 47 CFR 1.4(b)(1) and 1.103(a), that 
this Second Further Notice of Proposed Rulemaking shall be effective 30 
days after publication of a summary thereof in the Federal Register.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Appendix

Initial Regulatory Flexibility Analysis

    1. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA) the Federal Communications Commission (Commission) has 
prepared this Initial Regulatory Flexibility Analysis (IRFA) of the 
possible significant economic impact on a substantial number of 
small entities by the policies and rules proposed in this Second 
Further Notice of Proposed Rulemaking (Second Further Notice). 
Written 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 Second Further Notice. The Commission 
will send a copy of the Second Further Notice, including this IRFA, 
to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA). In addition, the Second Further Notice and 
IRFA (or summaries thereof) will be published in the Federal 
Register.

A. Need for, and Objectives of, the Notice

    2. In today's Second Further Notice the Commission seeks comment 
on additional measures it could take to ensure that interstate and 
intrastate inmate calling service (ICS) are provided consistent with 
the statute and public interest and the Commission's authority to 
implement these measures. The Commission believes that additional 
action on ICS will help maintain familial contacts stressed by 
confinement and will better serve inmates with special needs while 
still ensuring the critical security needs of correctional 
facilities of various sizes. Specifically, the Second Further Notice 
seeks comment on:
     Limiting site commission payments;

[[Page 69707]]

     Final interstate and intrastate ICS rate cap reform;
     Limiting ancillary charges;
     Harmonizing inconsistent state regulations pursuant to 
Section 276(c) of the Communications Act of 1934, as amended;
     Treatment of existing ICS contracts;
     Appropriate transition period;
     Accessible inmate calling services;
     Advanced inmate communications services;
     Periodic review of the industry;
     Enforcement; and
     Cost/Benefit analysis of proposals.

B. Legal Basis

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

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

    4. 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 rules, if adopted. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' In addition, the term ``small 
business'' has the same meaning as the term ``small-business 
concern'' under the Small Business Act. A ``small-business 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.
    5. Small Businesses. Nationwide, there are a total of 
approximately 28.2 million small businesses, according to the SBA.
    6. 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. According to Census Bureau data for 2007, there were 
3,188 firms in this category, total, that operated for the entire 
year. Of this total, 3,144 firms had employment of 999 or fewer 
employees, and 44 firms had employment of 1,000 employees or more. 
Thus, under this size standard, the majority of firms can be 
considered small.
    7. 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. According to 
Commission data, 1,307 carriers reported that they were incumbent 
local exchange service providers. Of these 1,307 carriers, an 
estimated 1,006 have 1,500 or fewer employees and 301 have more than 
1,500 employees. Consequently, the Commission estimates that most 
providers of local exchange service are small entities that may be 
affected by our action.
    8. 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. 
According to Commission data, 1,307 carriers reported that they were 
incumbent local exchange service providers. Of these 1,307 carriers, 
an estimated 1,006 have 1,500 or fewer employees and 301 have more 
than 1,500 employees. Consequently, the Commission estimates that 
most providers of incumbent local exchange service are small 
businesses that may be affected by our action.
    9. 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. 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. We have therefore 
included small incumbent LECs in this RFA analysis, although we 
emphasize that this RFA action has no effect on Commission analyses 
and determinations in other, non-RFA contexts.
    10. 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. 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 and 186 have more than 
1,500 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. In addition, 72 carriers have 
reported that they are Other Local Service Providers. Of the 72, 70 
have 1,500 or fewer employees and two have more than 1,500 
employees. 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 our action.
    11. 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. According to 
Commission data, 359 companies reported that their primary 
telecommunications service activity was the provision of 
interexchange services. Of these 359 companies, an estimated 317 
have 1,500 or fewer employees and 42 have more than 1,500 employees. 
Consequently, the Commission estimates that the majority of 
interexchange service providers are small entities that may be 
affected by our action.
    12. 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. According to Commission data, 213 carriers have 
reported that they are engaged in the provision of local resale 
services. Of these, an estimated 211 have 1,500 or fewer employees 
and two have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of local resellers are small entities 
that may be affected by our action.
    13. 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. According to Commission data, 881 carriers have 
reported that they are engaged in the provision of toll resale 
services. Of these, an estimated 857 have 1,500 or fewer employees 
and 24 have more than 1,500 employees. Consequently, the Commission 
estimates that the majority of toll resellers are small entities 
that may be affected by our action.
    14. 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. According to 
Commission data, 284 companies reported that their primary 
telecommunications service activity was the provision of other toll 
carriage. Of these, an estimated 279 have 1,500 or fewer employees 
and five have more than 1,500 employees. Consequently, the 
Commission estimates that most Other Toll Carriers are small 
entities that may be affected by our action.
    15. Payphone Service Providers (PSPs). Neither the Commission 
nor the SBA has developed a small business size standard 
specifically for payphone 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. According to 
Commission data, 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 1,500 employees. 
Consequently, the Commission estimates that the majority of payphone 
service providers

[[Page 69708]]

are small entities that may be affected by our action.

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

    16. In this Second Further Notice, the Commission seeks public 
comment on options to reform the inmate calling service market. 
Possible new rules could affect all ICS providers, including small 
entities. In proposing these reforms, the Commission seeks comment 
on various options discussed and additional options for reforming 
the ICS market.

E. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    17. 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.''
    18. The Second Further Notice seeks comment from all interested 
parties. The Commission is aware that some of the proposals under 
consideration may impact small entities. Small entities are 
encouraged to bring to the Commission's attention any specific 
concerns they may have with the proposals outlined in the Second 
Further Notice.
    19. The Commission expects to consider the economic impact on 
small entities, as identified in comments filed in response to the 
Second Further Notice, in reaching its final conclusions and taking 
action in this proceeding. Specifically, the Commission will conduct 
a cost/benefit analysis as part of this Second Further Notice and 
consider the public benefits of any such requirements it might 
adopt, to ensure that they outweigh their impacts on small 
businesses.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    20. None.

[FR Doc. 2014-26922 Filed 11-20-14; 8:45 am]
BILLING CODE 6712-01-P